The firm provides all the legal advice and service related to setting up business in Bangladesh which includes drafting Memorandum and Articles of Association, advising on director’s duties, corporate governance, shareholders’ disputes, takeovers, mergers and acquisitions, corporate reconstructions and schemes of arrangement, etc. It has been advising its retainers on various issues such as incorporation, vetting, section 12, 43, 228-229, 233 of the Companies Act, 1994, share transfer, RJSC issues, etc.

The firm has also a very strong base and provides all sorts of legal services regarding laws relating to international trade, documentary credits, insurance, and admiralty matters, etc. The firm has expertise in the area of banking law and allied matters. Our services include providing assistance to local and multinational banks and international financial institutions with all types of securities, documentation, drafting, and perfecting of the securities including insurance and marine insurance, as well as the litigations on all sorts of matters relating thereto, including drafting and reviewing of loan and security documents of all types of borrowers and other financial institutions; preparation of notices for the defaulting borrowers; drafting of banking and commercial documents and agreements, viz.

All sorts of Syndicated Loan Agreements and related documents, Master Franchise Agreements, Loan Agreements, Security Sharing Agreements, Agreements relating to online banking and electronic bill payments, etc.; giving legal opinion on banking and commercial issues and matters in relation to documentary credits. It also deals with litigation, arbitration, negotiation, mediation, and all sorts of settlements arising out of the aforesaid matters. Our team has advised and assisted multinational banking companies in their amalgamation, acquisition, reorganizing, and restructuring processes, and frequently advises banking companies on their internal management and employment issues. As part of our litigation work, members of our firm provide representation in loan recovery cases in specialized money loan courts.

Business Formation and Corporate Governance

Company Incorporation in Bangladesh

Incorporating a company in Bangladesh is a multi-step process governed by the Companies Act, 1994. The incorporation process must adhere to specific legal procedures and formalities, which ensure that the business operates in compliance with Bangladesh’s corporate laws.

Registrar of Joint Stock Companies & Firms (RJSC) plays a central role in this process. RJSC is the government body responsible for registering all types of businesses, including companies, partnerships, and societies. Before a business can legally operate, it must be incorporated with RJSC to obtain legal recognition. Once registered, a company can engage in business activities, enter contracts, and own property in its corporate capacity.

Memorandum of Association (MOA) and Articles of Association (AOA) are two key documents required for company registration. The MOA outlines the objectives and scope of activities the company intends to pursue. It also includes important details such as the company’s registered office address, liability of members, and share capital. The AOA, on the other hand, defines the rules governing the internal management of the company. This document outlines the rights and duties of directors, shareholders, and officers and provides the framework for decision-making processes within the company.

Tax Identification Number (TIN) is another crucial element for incorporating a business in Bangladesh. Issued by the National Board of Revenue (NBR), the TIN is necessary for corporate tax filings, obtaining a trade license, and conducting other business activities. Without a TIN, businesses are unable to comply with tax regulations and face penalties.

Trade License is another mandatory requirement for business operation in Bangladesh. The trade license is issued by the local municipal authorities and ensures that the business is legally registered and complies with local regulations. Failure to obtain a valid trade license can result in legal consequences and penalties. Businesses must submit proof of their incorporation, MOA, AOA, and TIN when applying for this license.

The incorporation process not only legalizes the business but also provides access to various legal protections, such as limited liability, and enhances credibility with investors, suppliers, and clients.

Director’s Duties and Corporate Compliance

Directors play a pivotal role in ensuring that a company adheres to legal and ethical standards. In Bangladesh, directors have a fiduciary duty to act in the best interest of the company and its shareholders. This means that they must prioritize the company’s interests over their personal interests and act with honesty, fairness, and transparency. Directors must avoid conflicts of interest and disclose any material interests in company transactions. Failure to fulfill fiduciary duties can lead to legal action from shareholders or the government, which may result in penalties or disqualification from serving as a director.

Corporate governance refers to the systems, processes, and practices that ensure the company is managed in an ethical and transparent manner. Bangladesh’s legal framework requires that companies adhere to Bangladesh Securities and Exchange Commission (BSEC) guidelines for corporate governance. This includes maintaining transparent financial reporting, appointing qualified directors, and ensuring that the company’s operations comply with local laws and regulations. Proper corporate governance enhances the company’s credibility, fosters trust with stakeholders, and helps mitigate risks.

In addition to fiduciary duties and governance standards, directors must also ensure that the company complies with shareholder rights and minority shareholder protection. The Companies Act, 1994 includes provisions designed to protect minority shareholders from oppression or unfair treatment by majority shareholders. For example, if minority shareholders feel their rights are being violated, they can approach the courts to seek remedies. This includes filing a lawsuit for wrongful dismissal, exclusion from decision-making processes, or unfair dilution of their shares.

One of the legal obligations of companies is the Annual Return Filing with RJSC. This is a detailed report that provides updates on the company’s financial performance, changes in directors, shareholding structure, and any significant business decisions. Failure to file the annual return may result in fines, suspension, or deregistration of the company.

Corporate compliance does not only pertain to internal governance but also requires compliance with external regulations. Companies must adhere to tax regulations, labor laws, environmental laws, and industry-specific standards. Non-compliance with regulatory requirements can lead to significant fines, legal disputes, and reputational damage.

Banking Laws and Financial Regulations

Banking Law and Allied Matters

The legal framework governing the banking sector in Bangladesh is a vital component of the country’s financial system. The Bank Company Act, 1991 is the primary legislation that regulates the establishment, operations, and functioning of banks in Bangladesh. This law ensures that banks operate in a manner that promotes financial stability and protects the interests of depositors and creditors.

Banking Licenses are issued by the Bangladesh Bank, the central bank of the country. The Bangladesh Bank is responsible for overseeing the banking sector, regulating the conduct of commercial banks, and maintaining monetary stability. Banks operating in Bangladesh must meet the minimum capital requirements as stipulated by the Bank Company Act. The capital adequacy ratio (CAR) is a key requirement that ensures that banks have sufficient capital to absorb potential losses and remain solvent during economic downturns.

Banks must also adhere to risk management guidelines, including the identification, assessment, and mitigation of various risks such as credit risk, market risk, operational risk, and liquidity risk. The guidelines provided by the Bangladesh Bank require banks to implement robust internal controls and to maintain reserves to cover potential risks. Additionally, banks are required to conduct stress tests to evaluate how their financial health would withstand adverse economic conditions.

Loan Security Agreements are another critical component of banking law in Bangladesh. These agreements govern the relationship between banks and borrowers in securing loans. The agreement outlines the terms and conditions under which the loan is provided, including collateral requirements, repayment schedules, and interest rates. For lenders, securing loans with collateral provides protection in case of default. For borrowers, these agreements outline their responsibilities and rights, as well as the consequences of failing to repay the loan as agreed.

In large-scale lending scenarios, syndicated loans are often used. A syndicated loan is a loan provided by a group of banks or financial institutions, which share the risk associated with lending to a borrower. This financing structure is typically used for large-scale projects, such as infrastructure development, where a single lender may not be able to provide the full financing. Syndicated loans allow borrowers to access larger amounts of capital, while also reducing the risk for individual banks involved in the lending process.

Money Loan Recovery is an essential aspect of banking law in Bangladesh. Specialized courts, known as Money Loan Courts, handle cases involving defaulted loans and debts. These courts expedite the legal process for recovering unpaid loans, ensuring that banks and financial institutions can efficiently enforce loan agreements. In the event of default, the lender may seek legal recourse by filing a suit in a Money Loan Court to recover the debt. The courts may issue orders for asset seizure or auction to recover the unpaid amounts.

Banking and Commercial Documents play a vital role in the day-to-day operations of financial institutions. These documents include loan agreements, security sharing agreements, syndication agreements, and various forms of credit instruments. Properly drafted and executed banking documents are essential for safeguarding the interests of all parties involved in the transaction.

Additionally, the Bangladesh Bank mandates that banks conduct regular audits to ensure the accuracy and legitimacy of their operations. Auditors examine financial statements, assess compliance with regulations, and verify the bank’s internal controls to ensure financial stability.

Legal Implications of Non-Compliance in Banking Laws

Non-compliance with banking regulations in Bangladesh can have severe consequences. For banks, failure to adhere to capital adequacy requirements or other regulatory guidelines can result in penalties, loss of banking licenses, or even closure. Non-compliance can also lead to reputational damage, which can diminish customer confidence and affect the bank’s ability to attract deposits or secure future lending opportunities.

For borrowers, failing to honor loan agreements can result in legal actions, including the seizure of assets, imposition of penalties, and increased interest rates. In severe cases, the defaulting borrower may be barred from securing future loans or conducting business with banks in Bangladesh.

Regulatory bodies such as the Bangladesh Bank, Bangladesh Securities and Exchange Commission (BSEC), and National Board of Revenue (NBR) play a vital role in ensuring that both banks and borrowers comply with legal and regulatory requirements. These institutions regularly review the financial activities of businesses and banks and have the authority to take corrective actions when needed.

International Trade and Admiralty Law

Laws Relating to International Trade

International trade plays a critical role in Bangladesh’s economy, as it allows businesses to access new markets, acquire foreign goods, and expand their reach. The legal framework surrounding international trade in Bangladesh is governed by a combination of national laws, international conventions, and bilateral agreements. This framework ensures that businesses engaged in cross-border transactions comply with established standards, including customs, taxation, and dispute resolution.

Customs Act, 1969 is the primary legislation regulating the import and export procedures in Bangladesh. It outlines the customs duties, regulations for clearance of goods, and procedures for declaring goods for customs purposes. The act provides guidelines for the classification of goods, valuation, and collection of duties, taxes, and other charges on imported goods. Customs duties are imposed on imported goods to protect local industries, regulate the flow of goods, and ensure that the country receives appropriate revenue from foreign trade.

The National Board of Revenue (NBR) is responsible for implementing the Customs Act, 1969, and overseeing the import and export operations in Bangladesh. NBR ensures that businesses comply with tax regulations, tariffs, and rules related to international trade. Importers and exporters must file declarations with NBR and pay any applicable duties and taxes. Failure to comply with these requirements may lead to penalties, delays in shipments, or even confiscation of goods.

Another key instrument in international trade is the Documentary Credit system, commonly known as a Letter of Credit (LC). A Letter of Credit is a financial guarantee issued by a bank on behalf of a buyer to assure the seller of payment. This mechanism reduces the risk for sellers, as the buyer’s bank guarantees payment upon fulfillment of the terms specified in the credit. It is widely used in international trade transactions to facilitate payment and ensure trust between trading partners. The use of LCs is common in Bangladesh, especially for large-scale transactions involving goods imported from or exported to foreign countries.

Marine Insurance is another critical aspect of international trade law. In the context of shipping goods internationally, marine insurance provides coverage for goods transported by sea, protecting them from loss, damage, or theft during transit. The Marine Insurance Act, 1963 governs the principles and terms of marine insurance contracts in Bangladesh. Businesses involved in the import and export of goods must secure marine insurance to mitigate the risks associated with transporting goods across international waters. This type of insurance is essential for protecting the financial interests of both exporters and importers, as it ensures that they can recover the value of lost or damaged goods.

A Bill of Lading is an important document in international shipping and trade. It serves as a receipt issued by the carrier (such as a shipping company) for the goods being shipped, a contract for transportation, and a document of title to the goods. The bill of lading indicates that the carrier has received the goods for transport and outlines the terms and conditions of the shipping arrangement. In the event of a dispute or claim, the bill of lading can serve as crucial evidence of the terms agreed upon between the buyer, seller, and carrier. It is essential for the release of goods at the destination port.

Dispute Resolution in International Trade

In international trade, disputes are inevitable due to differences in laws, business practices, and contractual obligations. When disputes arise between trading parties, there are various methods for resolving these issues.

Arbitration is a commonly used method for resolving international trade disputes. It involves the submission of a dispute to a neutral third party, known as an arbitrator, who makes a binding decision. Arbitration offers several advantages, such as confidentiality, efficiency, and flexibility, and is particularly preferred for resolving cross-border disputes. The Arbitration Act, 2001 governs the arbitration process in Bangladesh, which provides a framework for resolving disputes outside of the traditional court system.

The International Centre for Settlement of Investment Disputes (ICSID) is another important institution for resolving disputes between foreign investors and states. ICSID provides arbitration and conciliation services to resolve conflicts in international trade and investment, offering a neutral forum for parties involved in disputes. This is particularly relevant for investors engaging in trade in countries with complex legal systems or where access to local courts may be limited.

In addition to arbitration, mediation is another method for resolving international trade disputes. Mediation involves the use of an impartial third party to facilitate negotiation and help the parties reach a mutually agreeable resolution. Unlike arbitration, mediation does not result in a binding decision but rather assists the parties in reaching a settlement voluntarily. Mediation is typically faster and less costly than litigation or arbitration and is often used as a first step before resorting to more formal dispute resolution methods.

Another important consideration in international trade is the Foreign Exchange Regulation Act, which governs the flow of foreign currency into and out of Bangladesh. This law regulates the exchange of foreign currencies and ensures that businesses comply with the guidelines for cross-border payments, remittances, and other international financial transactions. Businesses involved in international trade must adhere to these regulations to avoid penalties or violations related to foreign exchange transactions.

Customs and Import Regulations

Customs regulations in Bangladesh are essential for controlling the flow of goods entering and leaving the country. Under the Customs Act, 1969, all goods imported into Bangladesh must be declared to the customs authorities. The declaration includes providing details about the goods, their value, origin, and classification, which helps determine the applicable customs duties and taxes. Customs duties are calculated based on the value of the goods, and the NBR is responsible for assessing and collecting these duties.

To facilitate smooth international trade, Bangladesh has entered into several international agreements, including trade treaties and customs unions with neighboring countries. These agreements help reduce barriers to trade, simplify customs procedures, and promote economic cooperation. The implementation of these agreements has helped Bangladesh become a more attractive destination for foreign trade and investment.

In conclusion, the legal framework surrounding international trade in Bangladesh is designed to ensure that businesses comply with national laws and international conventions. By adhering to these legal requirements, businesses can mitigate risks, ensure smooth trade operations, and avoid legal issues related to customs, tariffs, and payment mechanisms. Bangladesh’s commitment to enforcing international trade regulations allows it to participate actively in the global economy and provides businesses with the legal protections necessary to engage in cross-border transactions.

Corporate Disputes and Their Resolution

Share Transfer and RJSC Matters
Corporate disputes often arise when there are disagreements over share transfers, management issues, and shareholder rights. In Bangladesh, share transfers are governed by the Companies Act, 1994 and require careful attention to the legal framework. A Share Purchase Agreement (SPA) is a crucial document in the process of share transfer. It outlines the terms of the transfer, including the price, rights, responsibilities, and warranties of both the buyer and the seller.

The SPA ensures that both parties understand their obligations, and the transaction is legally enforceable. Additionally, a Valuation Report is often prepared to determine the fair value of a company’s shares. This report is particularly essential in mergers, acquisitions, and large share transactions where determining the correct price is critical for all involved parties.

A Company Bench Case refers to legal disputes relating to corporate governance, director misconduct, or shareholder rights that are handled by the High Court’s Company Bench. This court specializes in corporate matters and can issue orders regarding the enforcement of shareholder rights, corporate structures, and other matters pertaining to company operations. Furthermore, minority shareholders have legal protection under the Companies Act. If they are being oppressed or unfairly treated, they can file a Minority Oppression Claim, seeking legal remedies for actions such as unfair dilution of shares, exclusion from decision-making, or other forms of exploitation by majority stakeholders.

Legal Advisory for Mergers, Acquisitions & Corporate Restructuring

Takeovers, Mergers & Acquisitions
In today’s fast-paced business world, companies often seek growth through mergers and acquisitions (M&A). The process of Due Diligence is essential before any merger or acquisition, where the buying company thoroughly evaluates the financial, operational, and legal status of the target company. This ensures that there are no hidden liabilities or risks associated with the acquisition. The M&A process itself involves companies joining forces to expand their business operations, gain market share, or acquire new technologies that may be critical for future growth.

The Bangladesh Securities and Exchange Commission (BSEC) plays a significant role in overseeing mergers and acquisitions, especially for public companies. The BSEC ensures that all transactions follow regulatory guidelines and that the process is transparent. One common scenario in corporate takeovers is the Hostile Takeover, where one company acquires another without the approval or consent of its board of directors, often by purchasing a controlling interest in the target company’s shares from the stock market.

Corporate Reconstruction and Schemes of Arrangement
Corporate restructuring becomes necessary when a company faces financial distress or needs to adjust its operations to remain competitive. Debt Restructuring is a key process used to address financial issues, where a company negotiates with creditors to revise its debt obligations to improve its financial stability. In cases where restructuring is not feasible, a company may have to go through Liquidation, which involves selling its assets and distributing the proceeds among creditors and shareholders.

A Court-Supervised Arrangement may also be sought, where the court oversees the restructuring process, including modifications to the company’s corporate structure, shareholder rights, and debt repayment terms. Additionally, a Winding Up Petition can be filed by creditors or stakeholders, seeking the dissolution of a company due to insolvency or non-compliance with legal requirements.

Litigation, Arbitration & Mediation

Dispute Resolution Mechanisms
The resolution of corporate disputes in Bangladesh can take various forms, including litigation, arbitration, and mediation. Litigation is a formal process where parties present their case before a court. In business-related disputes, this may involve cases such as breach of contract, shareholder disputes, or directorial misconduct. Arbitration, as outlined in the Arbitration Act, 2001, offers a more flexible, private alternative to litigation, where an independent arbitrator makes a binding decision.

This method is often favored for commercial and contractual disputes. Another alternative is Mediation, where a neutral third party facilitates discussions between the disputing parties, helping them reach a mutually agreeable solution. Mediation is particularly useful in maintaining ongoing business relationships. In international investment disputes, the International Centre for Settlement of Investment Disputes (ICSID) plays a critical role in resolving conflicts between foreign investors and states through arbitration and mediation, ensuring fairness and transparency in investment-related matters.

Regulatory Compliance & Legal Opinions

Compliance Services for Businesses
Regulatory compliance is a crucial aspect for businesses in Bangladesh, as they are required to adhere to various laws, regulations, and filing requirements. One of the most important obligations for companies is Corporate Tax Filing, where businesses must submit their annual tax returns to the National Board of Revenue (NBR), ensuring that all tax calculations are accurate and that taxes are paid on time. In addition, businesses must comply with Labor Law, which governs employee rights, including minimum wage laws, workplace safety, and employee benefits.

Failure to comply with labor laws can result in significant penalties and legal action. Companies are also required to make Regulatory Filings, updating authorities like the Registrar of Joint Stock Companies & Firms (RJSC) and the BSEC with their financial statements and operational details. Any failure to comply with corporate regulations may result in penalties, suspension of business operations, or even legal action.

Legal Opinions on Banking & Trade Matters
In the context of international trade and banking, companies often seek Legal Opinions to ensure compliance with regulations governing cross-border transactions. Foreign Investment Compliance is a critical area, as foreign investors must adhere to Bangladesh’s Foreign Direct Investment (FDI) policies, including sectoral restrictions and licensing requirements. Companies engaging in international business must also navigate Cross-Border Transactions, which are governed by foreign exchange regulations and trade laws to ensure that international transactions are legally compliant.

E-Commerce Regulation has become increasingly important with the growth of online businesses in Bangladesh. E-commerce businesses must comply with laws regarding consumer rights, data protection, and taxation. Similarly, the regulation of Electronic Payment Systems ensures the security of online transactions, mobile banking services, and digital payments, safeguarding businesses and consumers alike from fraud and security breaches.

Conclusion

Bangladesh’s legal landscape for businesses is complex and requires a deep understanding of various regulations and legal frameworks. From company formation and corporate governance to international trade and dispute resolution, businesses must navigate these laws carefully to ensure compliance and avoid legal pitfalls. The Justice Corner offers expert legal guidance in areas such as business formation, mergers and acquisitions, corporate disputes, banking laws, and regulatory compliance. With a wealth of experience in both national and international legal matters, The Justice Corner helps businesses thrive in an ever-changing legal environment, ensuring that they remain compliant and well-positioned for long-term success.