This article was originally published on 12 July 2013 in The New Age, and is part of a series on offshore companies set up by Bangladeshi businessmen and politicians in the British Virgin Islands (The link to the article on the New Age website is not working)
To see the main page on offshore companies, click here
Legality of offshore companies, bank accounts
The legal foundation for the rules relating to how Bangladesh residents can remove money from the country for personal or business use is set out in the Foreign Exchange Regulation Act 1947.
Section 5 of the Act sets out a blanket restriction on residents from making payments to people resident outside Bangladesh – though the same section allows Bangladesh Bank to make both ‘general or special’ exemptions to this rule.
In particular since 1994, when the Bangladesh taka was declared convertible for current account transactions, Bangladesh Bank has granted a long list of exemptions which are set out in its document titled ‘Guidelines for Foreign exchange Transactions’
These allow, for example, individuals to pay for education and medical costs abroad, and allow commercial companies to undertake ordinary business transaction with foreign companies.
However, as Sheela Rahman, a lawyer who specializes in providing advice on banking, commercial, and corporate law in Bangladesh makes clear the exemptions circumscribe the limits.
“If you do not fall in the general exemptions, you will have to seek specific permission from Bangladesh bank. Otherwise your use of foreign exchange is not lawful.’ she says.
One of the general exemptions contained in the guidelines allows businessmen to establish branches of their companies outside Bangladesh – though this must be reported to Bangladesh Bank within a month and a maximum of $30,000 is allowed to be remitted to meet the company’s running costs.
‘This is a specific exemption to the general rule that Bangladesh companies can not set up companies abroad,’ Sheela stated.
Again, the general rule is that Bangladesh residents cannot hold bank-accounts abroad, though there is an exemption if someone has had a job abroad and during the time of employment set up a bank account.
‘That kind of account can be kept,’ Sheela Rahman stated. ‘However bank accounts linked to offshore companies would not fall within this exemption.’
She also points out that the establishment of these companies will cost foreign currency and the use of money for this purpose would not be allowed, unless it comes from a foreign account established with the prior permission of Bangladesh Bank.