How to Setup Electronics & Accessories Business in Bangladesh

Fire License – Taking into consideration the environment and also to ensure the safety of the establishment along with the workers engaged in the business, it is mandatory for buildings and business organizations to obtain fire license. The Fire Service and Civil Defense (FSCD) authority operating under the Ministry of Home Affairs, Bangladesh issues it. 

The documents which are required to be submitted to obtain a fire license are as follows :-

1. Prescribed application form;

2. Layout of the establishment;

3. Annual valuation certificates;

4. Deed of agreement;

5. Memorandum and Articles of Association, in case of company;

6. Registration certificate;

7. Trade license;

8. No objection certificate;

9. Clearance certificate from the FSCD office;

10. Deposit slip/treasury challan. 

BIDA Registration (Local and Foreign Investment Projects)

If it is a manufacturing company, either local or foreign, have to be registered with the BIDA in order to obtain various monetary and non-monetary benefits from the Government of Bangladesh. 

The following documents are required for registration with BIDA for local investment projects: -

1. Prescribed application form;

2. Background of directors or partners;

3. Project profile;

4. Memorandum and Articles of Association;

5. Certificate of incorporation;

6. Trade License;

7. Deed of proposed land;

8. Pay order or bank draft of registration fee;

9. TIN Certificate.

The documents required for registration with BIDA for foreign investment projects comprise of: -

1. Prescribed application form;

2. List of shareholders/directors;

3. Project profile;

4. Memorandum and Articles of Association;

5. Encashment Certificate;

6. Certificate of incorporation;

7. Deed of proposed land;

8. Joint Venture Agreement;

9. List of machinery;

10. Trade License;

11. Pay order or bank draft of registration fee;

12. TIN Certificate.

Certification Mark from BSTI - There are 27 electronic products which are under the compulsory Certification Marks (CM) scheme of BSTI which in other words means that marketing of any of these items needs conformity certificate of Bangladesh Standard from the BSTI and there 10 Electronic Products, which if imported, shall require mandatory certification before customs clearance. 

The documents required to obtain Certification Mark as follows:

1. Trade license (in favour of Factory premises)

2. Premises license (Sanitary license)/ Environment Clearance Certificate (where necessary)

3. TIN Certificate

4. Trade mark Registration

5. Registration from BIDA/BSCIC (if any)

6. Calibration Certificate of measuring equipments

7. Factory layout

8. Process flow chart

9. List of manufacturing machineries

10. List of testing equipment

11. Quality Control Plan/Scheme

12. Product Label/ Packet

LEGAL ISSUES

Annul General Compliances of the business entities- The entities are required to comply with the annual filing requirements, such has updating trade license at the respective city corporation, renewal of chamber membership, renewal of IRC & ERC, filing taxes, updating the annual filings at the RJSC for limited liability companies and renewing branch office permission at BIDA after it expires.

Implication of Contract Law – The entities’ relationship with dealers/vendors is quite an integrate part who provides products or services for the business. There should be a presence of dealership/vendor Agreement while selling products to dealers or receiving any goods and/or services from the vendors. Vendor Agreements can cover a diverse area comprising software, professional services, office supplies, technology services, event planning, marketing, consultants and many others. In the time of dispute, in additional to the applicable laws, the agreement plays a vital role to resolve the disputes, hence it is very important to safe guard one’s the interest while drafting the agreements. 

The franchise agreement is also an important aspect in this sector as a lot of entities brings the product of international bands on franchisee- franchisor basis. It is crucial that such agreement is drafted clarifying all the legal aspect specially in compliance with the foreign exchange guidelines of Bangladesh Bank. This shall be helpful while remitting the royalty by banking channel to the franchisor.  In addition to the royalty payment, the foreign shareholders can also remit the dividend after deducting the applicable taxes. 

Requirements Labour laws – The entities need to ensure that its relation with the employees are coordinated with the labour laws of Bangladesh. The employees shall have an appointment letter which shall duly mention their job title, job description, salary, benefits and welfare, applicable working hours and leaves etc. It is to be noted that the employer cannot, by contract or appointment letter, provide anything less than that is provided by the labour laws. It is also the employer’s duty to provide a safe and healthy environment for the employees.   

Foreign Exchange regulations– The entities with foreign investors shall need to ensure that the initial investment are made via proper banking channel, eg.  at the time of company incorporation or buying shares of an existing company, the foreign investors should be remitting the share capital amount from their foreign bank account Company’s bank account with a note ‘investment in the share capital of the (Name of the Company)”. This will show that the investment has been made via proper channel and while remitting the profit such initial investment documents/information shall allow a smooth transection as per Bangladesh Bank guidelines.  

Certification Marks from BSTI - Standards Catalogue 2018 of BSTI provides a list of 166 products which are under the compulsory Certification Marks (CM) scheme of BSTI.  In other words that means that marketing of any of these items needs conformity certificate of Bangladesh Standard from the BSTI. Among those 27 items are electrical and electronic products from number (Number 140-166 in the product list of BSTI). BSTI also provided a list of Imported 55 Products brought under mandatory certification before customs clearance among those 10 items are electrical & electronic products from number (Number 40-49 in the list of imported products) 

Customs Clearance – The entities which are importing electronics products shall require a clearance from Customs. The following documents require to be submitted with the declaration for all types of imports: (i) Letter of Credit (L/C), (ii) Invoice, (iii) Bill of Lading/AWB/Truck Receipt/Railway Receipt, (iv) Packing List, (v) “Country of Origin” Certificate, (vi) Insurance policy/cover note and (vii) VAT/BIN Certificate (Bangladesh Customs 2017). The importer (or his C&F agent) pays duties and taxes, once the duties and taxes are assessed by Customs. Customs issues release order for clearance on payment of duties and taxes assessed. Thereafter, completion of port formalities, goods are cleared. 

Trademark Laws------ In order to protect trademark and other IP related matters, after the registration of the entity, it can apply to the Department of Patents, Designs and Trademarks (DPDT) for registering its trademarks and/or any other Intellectual Property. In order to register a trademark, an applicant has to file application to the Trademark Registry Wing of the DPDT.

An application for the registration of a trademark must consist of the following-

• the Mark /Logo

• Name of the Applicant.

• Detailed Address of the Applicant

• Nationality of the Applicant.

• Status of the applicant i.e. Manufacturers /Service Providers/Merchandisers / 

• Specification of Goods 

• Specification of Class.

• Whether the mark is in use or proposed to be used in Bangladesh - User date of the mark

• The requirement of general/specific power of attorney

• Application fee

Acceptance or Rejection of Trademark:

Once the application is made and the documents are verified and accepted by the Registrar, the same shall be provided to the journal publication to find out whether there is any objection against such mark. If there is an objection, the same shall be decided by the Registrar, based on the documents submitted by both the parties.  

However, if there is no opposition, DPDT will inform the applicant to pay certification fees and subsequently provide the registration certificate of the trade mark.  It usually takes 3 to 5 years to obtain the final trademark registration certificate. In the meantime, the entity can start using the mark. Generally, starting from the date of filing, a registered trademark is valid for an initial period of seven (7) years.  Thereafter, renewable for successive periods of Ten (10) years.

INTRODUCTION OF FMA AND ITS SERVICES

As a full-service law firm, FM Associates, provides all types of legal and financial services with its experienced and skilled teams.

Entity registration and licenses: FM Associates provide the services for establishment of entities, i.e. sole proprietorship, partnership business and/or limited liability company, in Bangladesh, and obtaining the required licenses from the relevant government authority. The services include drafting relevant documents, forms and providing the required document list and procedure and subsequently file the application with the relevant documents to the relevant government office and liaising with them throughout the verification process and obtain the necessary certified documents.

Drafting, vetting agreement: The entities, as mentioned above, requires drafting of various types of agreements, eg, vendor, employment, franchises agreement, which are require to be drafted as per the applicable laws of the Bangladesh and at the safe time is requires to safe guard their interest in order to use these agreements for their favour in relation to any future disputes. 

Legal Opinion and/or dui diligence report: FM Associates provides legal opinion to the clients, in relation to implication of laws and its impact in various matters which enables them to take informative business steps by considering the legal aspect.

Additionally, FM Associates also provides due diligence report to the interested clients for their entities which flags out all the legal requirements which are required to be followed and also non – compliances, if any, which needs to be fixed. 

Litigation services: FM Associates has a very strong litigation team which assist and represent the clients to defend/file disputes at court or tribunals in relation to all types of litigation. 

COVID-19 IMPACT ON BUSINESS

Earlier to the COVID-19 pandemic, Bangladesh was a country with modest growth rate in the electronics industry. However, due to the pandemic, consumer electronics segment is expected to be most affected due to the impact of coronavirus pandemic, closely followed by industrial & automotive sectors. 

The production conveniences of the electronics parts have been stopped due to the logistics slowdown and unavailability of the workforce across the world. On the other hand, various e-commerce companies have discontinued the delivery of non-essential items which include most of the electronics products, as a result it is affecting the electronics industry in Bangladesh.

Bangladesh imports various electronics input supplies that are principally used to manufacture finished electronic goods. The disruptions to supply chains, causing shipment delays for electronics manufacturers. 

In this difficult time medical electronic devices are in highly demand. Factories are closed down so even if there is lots of scope of business, due to Covid-19 it has become very difficult to fulfill the obligation.

Remote monitoring electronic devices are allowing companies to continue working during lockdown. Additionally, tracking and logistics are busier than ever, and food packaging companies are barely able to keep up with increased demand.

Companies should get themselves prepared for the pandemic and circumstances where the outbreak brings an adverse impact on business generally and, more significantly, on the performance of commercial contracts. Particularly, companies should consider their entitlement to invoke force majeure under the contracts, and thereby defer the performance of their contractual obligations without penalty.

A force majeure event is an extraordinary event or circumstance which is beyond the control of the contracting parties. These events include an act of God (like a natural calamity) or events such as a war, strike, riots etc. Generally, the parties get relieved from their respective contractual obligation and/or liability if a force majeure clause can be invoked successfully. A force majeure clause does allow a party's non-performance wholly, but only suspends it for the duration of the force majeure event. If properly drafted, the force majeure clause may provide that where a force majeure event continues for more than a stipulated period then either party may, at its own choice, terminate the contract without any financial consequences to each other.

Its dependence is primarily based on the parties' agreement and the respective terms of the contract entered into between the contracting parties, since the doctrine of force majeure does not have any direct statutory basis under the laws of Bangladesh, 

All contracts are regulated by the Contract Act 1872 (the "Act of 1872") which are governed by Bangladeshi law. The doctrine of frustration is protected in Section 56 of the Act of 1872 which provides that a contract becomes void when it becomes impossible to perform or, by reason of some event, it becomes unlawful after it was entered into. Therefore, if the contract becomes impossible to perform for reason of Corona, provided that the defaulting party did not know, or with reasonable diligence, could not have known that the contract would be so frustrated, it shall be treated as void under the laws of Bangladesh. In simple terms, the effect of a void contract is that it cannot be enforced by law and the parties are relieved from their respective obligations.

It can be outlined that, the parties in Bangladesh may have the option of relying on the existing provisions of Bangladeshi law -  mainly, Section 56 of the Act of 1872 - in order to excuse itself from the timely performance of their respective obligations under the contract, in the absence of an appropriately worded force majeure clause in a contract,

Furthermore, government of Bangladesh has announced package of BDT 50000 million to revive the economy from recession which may follow due to the effect of pandemic. The business entities are hopeful that if this sector provide its fair share from the above package, then this sector can provide a boost to the local economy and play its part in overcoming the recession.

Taxation

General rate of tax is 32.5% currently in the laws of Bangladesh. Nominal requirements for a limited company formed locally includes a number of reporting to be done to NBR, such as: Opening a TIN, Monthly Tax deduction statement, Half Yearly Withholding Tax statement, Yearly statement related to tax return submission of its employees, Yearly statement related to salary disbursed from company to its employees, Quarterly Advance tax deposition, Yearly Tax return submission, attending appeal/hearing session as required on behalf of the company, Monthly VAT return etc. FMA can advise and assist to satisfy all regulatory compliances to enable the company to run smooth and hassle free.  

CONCLUSION:

The Industry of Electronic and accessories in Bangladesh is a blooming industry with continuous demand. There is a great scope in manufacturing sector as the local demand of electronic products are increasing every now and then. It has become very tough to fulfill the demand by the local investors in sector of manufacturing products, hence there is potential market for the foreign investors to invest in this market. 

EXECUTIVE SUMMARY

The Electronic and accessories market in Bangladesh has a huge potential as the demand of the local market is continuously growing. Though a major portion of current local market is dependent on importing products and/or raw materials from foreign countries, an increase in both local and foreign investment has allowed Bangladesh to manufacture various product in Bangladesh.  

To become a part of this Electrical industry there are various options of entities, Sole Proprietorship, Partnership Business, Branch Office and Private Limited Company are available for investors. To create a business friendly environment, BIDA has now open up a one stop services center for investors where all the services from incorporation of entities to post incorporation licenses are available 

FM Associates is a full-service law firm – it provides all sort of legal and financial assistance starting from registering entities to obtaining required licenses; drafting agreements and notices to providing annual compliances and litigation services. FM Associates is enriched with experienced Barristers and Advocates who have expertise in different legal sectors which enables to provide the required services with high standard and the clients can obtain all the essential and ancillary legal services under one umbrella.  

Due to Corona Virus Pandemic electronic industry is facing serious problem as all the borders are closed down and our industry is mostly relied on import and export sector. There is an increased demand in the Medical electronic sector due to Covid-19 pandemic. However, due to lock down of many important countries which export parts for products business has come to a halt and factories are closed down. 

Nonetheless, it is expected that, as the epidemic starts to decline, business shall resume and with the support of the financial aid declared by the government, this sector shall find its steady growth in a short period of time.