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Protecting Foreign Equity Investment in Bangladesh Acquiring and Exiting Shares in Listed and Non-Listed Companies

Introduction

Foreign equity in Bangladesh is protected by statute, by treaty and by a growing body of court decisions, but that protection only works for investors who structure their entry and exit correctly. The investor who loses value usually does so not through expropriation, but through a missing encashment certificate, an unregistered share transfer or a valuation the central bank will not accept.

2026 has changed the landscape significantly. Bangladesh Bank issued a new master circular on unlisted share transfers in March, eased repatriation from stock-market accounts in May, and the Invest Bangladesh Act brought a single investment authority into force in August.

This article explains how the law protects foreign equity, what the courts and international tribunals have said about that protection, and the step-by-step procedure for acquiring and disposing of shares in both listed and non-listed companies.

The legal framework protecting foreign equity

Five layers of law protect a foreign shareholder in Bangladesh: a statute, investment treaties, the arbitration regime, the company law and the foreign exchange rules.

The Foreign Private Investment (Promotion and Protection) Act, 1980

The 1980 Act remains the statutory foundation. Its key guarantees are:

Fair and equitable treatment and full protection and security for foreign private investment.

Stability of sanction. The terms on which the Government sanctioned or licensed an undertaking with foreign investment cannot be changed unilaterally to the investor's detriment.

National treatment. Foreign investment may not be treated less favourably than similar investment by Bangladeshi citizens.

No expropriation without compensation (section 7). Foreign investment may not be expropriated or nationalised, or subjected to measures having that effect, except for a public purpose and against adequate compensation, paid promptly and freely transferable abroad.

Market-value compensation. Adequate compensation means the market value of the investment immediately before the taking (UNCTAD text).

Repatriation (section 8) of capital, profits and liquidation proceeds.

The Act's weakness is that it contains no dispute-resolution mechanism of its own (TBS). Investors therefore rely on treaties and on arbitration clauses in their own contracts.

Bilateral investment treaties and ICSID

Bangladesh has ratified the ICSID Convention and has bilateral investment treaties with many capital-exporting states. A treaty claim gives an investor a route to international arbitration directly against the State, as the Saipem case below shows. Holding an investment through a company in a treaty partner state is therefore a deliberate structuring choice, not an afterthought.

The Arbitration Act, 2001

Bangladesh acceded to the New York Convention in 1992, and the Arbitration Act, 2001 implements it (Chambers). A foreign award is enforced by the District Judge's Court in Dhaka as if it were a decree of a Bangladeshi court (section 45).

The Companies Act, 1994

A foreign shareholder has the same rights as a local one. Section 233 lets members who meet the section 195 threshold (generally 10% of issued shares) ask the High Court Division for relief against oppression or prejudicial conduct (Daily Star). Rights negotiated in a shareholders' agreement should also be written into the Articles of Association so they bind the company.

Foreign exchange law and the new Invest Bangladesh Act

The Foreign Exchange Regulation Act, 1947 and Bangladesh Bank's Guidelines for Foreign Exchange Transactions (GFET) 2018 govern how equity comes in and how proceeds go out. Every protection above depends on a clean record of the original inward remittance.

The Invest Bangladesh Act, 2026 came into force on 20 August 2026. It merged BIDA, BEZA and the PPP Authority into a single Invest Bangladesh Authority under the Prime Minister's Office and repealed the BIDA Act 2016, the Economic Zones Act 2010, the PPP Act 2015 and the One Stop Service Act 2018. Registrations and approvals formerly handled by BIDA now go to Invest Bangladesh. The 1980 Act's protections are unaffected.

Judicial decisions on the protection of foreign investment

The leading decision is international: in Saipem v Bangladesh an ICSID tribunal held that the conduct of Bangladesh's own courts amounted to an expropriation of a foreign investment. Domestic decisions since then have generally moved toward supporting foreign investors' arbitration and enforcement rights.

Saipem S.p.A. v People's Republic of Bangladesh (ICSID Case No. ARB/05/7, award of 30 June 2009)

Facts. Saipem, an Italian company, built a gas pipeline for Petrobangla. A dispute went to ICC arbitration seated in Dhaka. Petrobangla obtained injunctions from the High Court Division, and the court revoked the ICC tribunal's authority. The tribunal continued and made an award in Saipem's favour. The High Court Division then refused to set the award aside on the basis that, the tribunal's authority having been revoked, the award was legally non-existent and could neither be set aside nor enforced (Kluwer Arbitration Blog).

Decision. Saipem claimed under the Italy–Bangladesh BIT. The ICSID tribunal held that the Bangladeshi court actions substantially deprived Saipem of the benefit of the ICC award and were tantamount to taking its residual contractual rights as crystallised in that award. It found an unlawful indirect expropriation and awarded Saipem the value of the ICC award plus interest (BDJLS; UNCTAD ISDS database).

The limit. The tribunal made clear that setting aside an award does not by itself amount to expropriation. To be expropriatory, the court action must also be illegal, for example an abuse of the power to supervise arbitration (Kluwer).

Why it matters. Saipem is cited worldwide as the foundation of the doctrine of "judicial expropriation". For investors it confirms three things:

A contractual right to arbitrate, and the award it produces, is itself a protected investment.

The acts of a State's courts are attributable to the State under a treaty.

A treaty-protected holding structure gives a remedy where domestic courts fail.

The decision has also been criticised in Bangladesh as an overreach of the concept of indirect expropriation (Daily Star).

Domestic decisions

Another ICSID case is also instructive. In Chevron v Bangladesh (ICSID Case No. ARB/06/10), Bangladesh succeeded on the merits but was ordered to pay costs because of its dilatory conduct in the proceedings (Chambers).

Acquiring and disposing of shares in non-listed companies

A foreign investor can buy into a private or unlisted public company in two ways: by subscribing for new shares or by buying existing shares. Since 8 March 2026, most exits no longer need Bangladesh Bank's prior approval, provided the price is supported by the prescribed valuation.

The governing instrument is Bangladesh Bank's FEID Circular No. 01 of 8 March 2026, a master circular that consolidates the rules and repeals all earlier circulars on unlisted share transfers.

Acquisition by subscription for new shares

Check the sector. Confirm the business is not in a reserved sector and identify any sectoral licence needed (banking, insurance, telecom, broadcasting and similar).

Prepare the company. Pass board and, where needed, shareholder resolutions to increase authorised capital and allot the shares. Amend the Articles to include the investor's negotiated rights.

Remit the money properly. The subscription money must come from abroad in freely convertible currency through the banking channel. Obtain the encashment certificate from the AD bank.

Allot and file. Issue the shares and file the return of allotment (Form XV) and updated particulars with the RJSC. No Bangladesh Bank permission is needed to issue shares to non-residents in a bona fide existing company (Bangladesh Bank FEID portal).

Report. The issuance must be reported to Bangladesh Bank's Foreign Exchange Investment Department through the AD bank within 14 days (Bangladesh Bank FAQ).

Register. Register the investment with the Invest Bangladesh Authority (formerly BIDA), or with BEPZA or the Hi-Tech Park Authority if the company is in one of their zones.

These filings are not formalities. At exit, the AD bank must confirm that every earlier issuance and transfer involving a non-resident was properly reported before it releases any money.

Acquisition by purchase of existing shares

Where a foreign investor buys from a resident, or from another non-resident, no prior Bangladesh Bank approval is needed. The transfer must be at fair value. A valuation report is required once the deal value exceeds BDT 10 million; below that, a statement jointly signed by buyer and seller justifying the price is enough. The resident seller gives the valuation report and the share purchase MoU to its AD bank when it encashes the foreign currency received.

Disposal: non-resident selling to a resident

The AD bank can repatriate the sale proceeds without Bangladesh Bank's prior approval in three cases. Above BDT 1 billion, prior approval is required.

The previous approval-free ceiling was BDT 10 crore, so the March 2026 circular raised it tenfold (Mahbub & Co.).

Rules that apply to every transfer

Valuation methods. Fair value may be based on net asset value, market multiples or discounted cash flow, or a justified weighted average of the three. For technology and start-up companies the circular points to price-to-sales multiples and DCF.

Who may value. Only a BSEC-licensed merchant banker, or a chartered accountant listed with Bangladesh Bank or BSEC to audit banks, financial institutions and listed companies. The valuer must be independent and stays liable for errors even after the report is accepted.

Fresh accounts. The audited accounts relied on must be no more than six months old at the date of the MoU; otherwise interim audited accounts are needed.

Timetable. The transfer must be completed within 45 days of the MoU or of Bangladesh Bank's approval, whichever is later. The AD bank should repatriate within five working days if there are no discrepancies, or refer the file to Bangladesh Bank.

Price consistency. The transfer value must be consistent with any share issue price within the past year.

The funds-received cap. A foreign investor may transfer shares only up to the value of foreign funds actually received, converted at the exchange rate on the date of receipt.

Tax and stamp duty. The non-resident must pay capital gains tax and stamp duty with funds brought from abroad. The target company may not pay them.

Reporting. Within 14 days of transfer, the AD bank reports to Bangladesh Bank with the RJSC-endorsed transfer instrument (Form 117), an updated Schedule X, the encashment certificate, the valuation report and the MoU.

Reassessment. Bangladesh Bank or the AD bank may reassess the value if assets appear overvalued or liabilities undervalued.

Company law and tax steps

Transfer restrictions. A private company's Articles must restrict transfer. Comply with any pre-emption right, board approval or consent requirement before signing.

Instrument and registration. Execute the transfer instrument (Form 117), pay stamp duty, lodge it with the company, record it in the register of members, and file with the RJSC. As the High Court Division held in May 2026, a transfer that does not comply with the Companies Act and the Articles may not give the buyer the status of a shareholder.

Capital gains tax. Companies, funds and trusts pay 15% on capital gains. Individuals pay 30% on unlisted shares held up to five years and 15% beyond that (RegFollower). A transfer cannot be registered until the tax due on it has been paid (Deloitte). A double tax treaty may reduce or remove the charge.

Competition. The Competition Act, 2012 requires approval of combinations, but in practice the Competition Commission acts only on complaint until its merger regulations are finalised (Chambers).

Acquiring and disposing of shares in listed companies

Foreign investors can buy listed shares through the trading system as portfolio investors, or take a strategic stake through a negotiated transaction. Both routes are regulated by the Bangladesh Securities and Exchange Commission (BSEC), and the money must flow through a Non-Resident Investor's Taka Account (NITA).

Route 1: Portfolio investment through the market

Non-residents, including non-resident Bangladeshis, may buy shares and securities listed on the Dhaka and Chittagong stock exchanges against foreign currency remitted from abroad through the banking channel. Dividends and sale proceeds then pass through a NITA (Bangladesh Bank FEID portal).

Acquisition

Open a foreign currency account and a NITA with an AD bank in Bangladesh.

Open a beneficiary owner (BO) account with a depository participant of the Central Depository Bangladesh Limited (CDBL), and appoint a licensed stockbroker.

Remit foreign currency from abroad, convert it into Taka in the NITA, and buy shares through the broker. NITA balances may be used freely for listed shares and IPOs (GFET Chapter 14). Banks may not lend against a NITA.

Disposal and repatriation

Sell through the broker on the exchange. Settlement is through CDBL.

Under FEID Circular No. 02 of 20 May 2026, the AD bank credits sale proceeds directly to the NITA and withholds any capital gains tax itself before repatriation. The former requirement for an auditor's certificate on every transaction has been removed (The Business Standard via LankaBD).

Dividends, net of tax, are also credited to the NITA. Balances can be repatriated or reinvested.

No Bangladesh Bank valuation or prior approval is needed for this route, because the exchange price is the market value.

Route 2: Strategic acquisition of a substantial stake

A foreign strategic investor buying a significant block of a listed company faces three additional layers.

Takeover rules. The BSEC (Substantial Acquisition of Shares and Takeovers) Rules, 2018 allow substantial acquisitions through on-exchange purchases and through negotiated deals inside or outside the exchange's trading system. Crossing the Rules' thresholds triggers disclosure to the company, the exchanges and BSEC, and at higher levels a public announcement and an offer to other shareholders. Confirm the current thresholds and offer-price rules against the gazetted text before signing.

The 30% sponsor-director rule. BSEC requires sponsors and directors of a listed company to hold at least 30% of paid-up capital jointly, and each non-independent director at least 2% individually (Daily Star). A deal that would take the sponsor-director holding below 30% needs BSEC approval (Chambers). A foreign investor who wants a board seat must meet the 2% holding requirement.

Sponsor and director dealings. Sponsors and directors who buy or sell must declare the transaction in advance through the stock exchange, so the timetable for buying from them must allow for the declaration period.

The acquirer's money still comes in through the banking channel and the NITA. Shares bought from sponsors in a negotiated block are transferred through CDBL rather than by a paper instrument.

Exit through an IPO

A private equity investor in an unlisted company may exit through a public offering. Pre-IPO shareholders are subject to BSEC lock-in periods under the public offer rules, so the investment agreement should allocate the lock-in risk and specify what happens if the listing is delayed.

Tax on listed shares

Gains on listed shares are taxed at 15% for companies, funds and trusts and 15% for individuals (RegFollower). For NITA investors, the AD bank now withholds the tax at source before repatriation. A double tax treaty may reduce the charge.

A practical checklist for foreign investors

Most problems at exit are created at entry. Before investing, an investor should be able to answer yes to each of these:

Structure. Is the investment held through a jurisdiction with a bilateral investment treaty and a double tax treaty with Bangladesh?

Paper trail. Has every taka of equity come in through the banking channel, with an encashment certificate, and has every issuance and transfer been reported to Bangladesh Bank within 14 days?

Articles of Association. Are the board seats, reserved matters, pre-emption, tag-along, drag-along and anti-dilution rights in the Articles, not only in the shareholders' agreement?

Exit pricing. Does the agreement accept that the exit price must meet Bangladesh Bank's fair-value rules, with a fallback if the AD bank or Bangladesh Bank reassesses the value?

Disputes. Is there a foreign-seated arbitration clause with security arrangements that do not depend on interim relief from Bangladeshi courts?

Listed targets. Have the takeover-rule thresholds, the 30% sponsor-director rule and the advance declaration period been built into the timetable?

Tax. Has capital gains tax been computed and funded from abroad, so that registration of the transfer is not held up?

How The Justice Corner can help

The Justice Corner advises foreign investors, private equity funds and Bangladeshi companies at every stage of the equity cycle:

structuring inbound investment and treaty protection;

due diligence on the target's RJSC, Bangladesh Bank and tax records;

drafting investment, shareholders' and share purchase agreements, and the matching Articles of Association;

Bangladesh Bank, BSEC, RJSC and Invest Bangladesh filings and approvals;

exit planning, valuation coordination and repatriation;

shareholder disputes under section 233 of the Companies Act, and arbitration and award enforcement before the Supreme Court and the District Court.

Mohammad Imam Hossain (Tareq) Advocate, Supreme Court of Bangladesh Barrister-at-Law (Middle Temple) Head of Chamber, The Justice Corner, Dhaka

This article is for general information and reflects the law as of October 2026. It is not legal advice on any particular transaction. Regulatory thresholds change frequently; please contact the chamber for advice on your specific matter.