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How to Setup Glass Business in Bangladesh
Glass is an inorganic solid material, which is hard, brittle substance, usually transparent or translucent, used in a wide variety of applications in our daily lives. Glass is made of ordinary and plentiful raw materials, such as silica/white sand, soda ash and limestone. These materials are melted at a very high temperature to produce glass materials, such as- tempered, flat, sheet, Laminates, wired etc. which are used to make mirrors, drinking containers, jars, bulb, windows/doors bottle and other articles.
In Bangladesh glass manufacturing business is very popular and several major industries, such as-Usmania Glass Sheet Factory Ltd, Nasir Group of Industries, Bengal Glass, PHP etc. have played enormous role in bringing development in this sector. These industries hire thousands of workers and thus reducing unemployment rate in the country and also accelerating economic growth. Glass manufacturing industries in Bangladesh aims to deliver quality products with a competitive price. The main raw materials for glass manufacturing are available in Bangladesh and thus only small portion of raw materials has to be imported from outside. This makes glass, highest value-addition to the industrial sector in Bangladesh. Moreover, a huge amount of foreign exchange is earned by exporting high-quality glass products to Asia, Africa and Middle Eastern countries. In recent years, the demand of float glass has also increased drastically due to rabid urbanization and industrialization. Bangladesh currently produces huge amount of glass per month and a little amount is being imported to meet the local demand.
Bangladesh has continued to be an attractive destination for foreign companies to do business due to its lower production cost, available resources, growing demands, geographical location and labour wage compared to other Asian countries. In addition to this, the demand for glassware is increasing steadily with changes in lifestyles of people. In recent times, New buildings, hotels, restaurants are being constructed which are mostly made of glass, which is raising the demand for glass business day by day in the country.
In order to catch the eyes of the foreign investor the Government of Bangladesh has establish several dedicated Export Processing Zones (EPZ) under the Bangladesh Export Zones Processing Authority. The main purpose of establishing these zones is to provide the necessary facilities to start the business in a single with all required facilities, such as utility connection, required land, office space etc. Besides these, the investor of EPZ areas also entitled to enjoy some other tax benefits and incentives. Furthermore, there are also some dedicated economic zones (EZ) under both private and government management. Some of the EZs are allotted to a particular field of business or investor from particular countries. The key statutes in this perspective are The Bangladesh Export Processing Zones Authority Act 1980 and Bangladesh Economic Zones Act 2010.
License and Registration process:
In Bangladesh, glass industry business can be operated through forming a company:
Company:
A Company duly registered in Bangladesh may engage in any business activities as per the Object Clause of the Company, set out in the Memorandum of Association of the Company. In Bangladesh, a company can be either public or private. To form a public company minimum seven shareholders shall be required. On the other hand minimum two shareholders are necessary to incorporate a private company. Private company cannot any issue invitation to the public to subscribe for its shares, while, public company can offer general public to acquire its shares. In practice, private company is the most popular form of company to foreign and local entrepreneurs. For foreign direct investment, there is no limitation pertaining to foreign equity participation, i.e. 100 percent foreign equity is allowed. Foreign investment enjoys full protection and security in Bangladesh, like other Locally Invested Companies. The laws of Bangladesh guarantees non-discriminatory treatment between foreign and local investment, and repatriation of proceeds from sales of shares and profit.
The following steps needs to follow to form Company:
1. A Name Clearance for the proposed Company needs to be obtained from Registrar of Joint Stock and Companies.
2. Drafting and signing the following:
• Memorandum and Articles of Association of the company;
• Form I: Declaration On Registration Of Company;
• Form VI: Notice Of Situation Of Registered Office;
• Form IX: Consent of director to act;
• Form X: List of Personal Consenting to be Directors;
• Form XII: Particulars of the directors, manager and managing agents.
3. Opening a temporary bank account for the Proposed Company in any scheduled Bank in Bangladesh.
4. Remit the paid up capital amount from the account of each foreign shareholders to the Bank Account of the Proposed Company in Bangladesh.
5. Obtain encashment certificate for each foreign transactions from the Bank of the Proposed Company.
6. Submit all the required to the Company House.
7. Pay the Govt Fees for the registration.
8. Obtain the registration certificate from the Company House.
Required Documents for forming a Company:
a) Copy of Valid Name Clearance for the proposed company;
b) Executed copy of Memorandum and Articles of Association of the Company.
c) Executed copy of Form I: Declaration On Registration Of Company;
d) Executed copy of Form VI: Notice Of Situation Of Registered Office;
e) Executed copy of Form IX: Consent of director to act;
f) Executed copy of Form X: List of Personal Consenting to be Directors;
g) Executed copy of Form XII: Particulars of the directors, manager and managing agents;
h) Copies of National ID of shareholders and directors (for Bangladeshi Nationals);
i) Copies of TIN Certificate of shareholders and directors (for Bangladeshi Nationals);
j) Copies of passport of shareholders and directors (for Foreign Nationals);
k) Passport size photos of shareholders and directors;
l) Bank Encashment Certificate with respect to each foreign shareholder;
m) Receipt of payment of the governmental fees.
Apart from setting up the above respective format a 100% foreign owned company can also register as Branch Office to initiate glass business. Though, Branch office can only perform the function envisaged by the parent company by taking prior approval from Bangladesh Investment Development Authority. After setting up the respective company, some additional license or permissions may be required, depending on the expansion/scope of the business.
Additional Licenses
The additional licenses required for establishing a glass industry are mentioned below:
I. Trade License;
II. TIN Certificate;
III. VAT Registration Certificate;
IV. Registration of Industrial Investment Project;
V. Factory Layout Approval;
VI. License of Factory;
VII. Membership Certificate;
VIII. Import Registration Certificate (applicable for Import Business);
IX. Export Registration Certificate (applicable for Export Business);
X. Environment Clearance Certificate;
XI. Fire License;
XII. Registration of Trademark.
The process to obtain the additional licenses has been specified below:
Trade License:
In order to start up a business in Bangladesh, the most important requirement is acquisition of a trade license. It is compulsory for every business entity to obtain Trade License from the respective local governmental authority. In order to obtain the Trade License an application enclosed with necessary documents needs to be submitted to the concerned local governmental authority (i.e. City Corporation/Municipal Corporation/Union Parishad).
TIN Certificate:
The Government of Bangladesh provides a TIN Certificate, to individual or company to track tax payments. The National Board of Revenue (NBR) is the sole authority to provide TIN Certificate. In order to obtain the TIN Certificate an online application needs to be submitted to the NBR.
VAT Certificate:
Every Business in order to operate is required to have a Business Identification Number (BIN). A BIN can be obtained by VAT registration process to the National Board of Revenue. Every business entity must obtain a VAT registration certificate. In order to obtain the VAT Certificate an online application along with necessary documents needs to be submitted to the NBR.
Registration of Industrial Investment Project:
The Industrial enterprises in Bangladesh, either local or foreign, have to be registered with the Bangladesh Investment Development Authority (BIDA). In order to Registration of Industrial Investment Project an application along with necessary documents needs to be submitted to the BIDA.
Factory Layout Approval:
Before use, change or expansion of any houses, building or premises as factory, an approval in writing from the Department of Inspection for Factories and Establishments (DIFE) shall be taken. In order to get the approval of the layout an application along with necessary documents needs to be submitted to the DIFE.
License of Factory:
Each of the owners or occupiers shall have to submit an application with necessary documents to the Department of Inspection for Factories and Establishments (DIFE) for registration and license of factory within 30 (thirty) days before start of work for factories.
Membership Certificate:
After setting up the respective business, the entrepreneur needs to be a member of a local Chamber of Commerce and Industry or relevant Trade Association. The application form to be a member is available at the office of the concerned Chamber of Commerce or Trade Association.
Import Registration Certificate and Export Registration Certificate:
An importer having Import Registration Certificate (IRC) and an Exporter having Export Registration Certificate (ERC) can Import & Export any permissible item without any value and quantity restrictions and without obtaining any permission from any authority. The Office of the Chief Controller of Imports and Exports (CCI&E) issues Import Registration Certificate and Export Registration Certificate to the desired applicant. In order to obtain the IRC or ERC an online application along with necessary documents needs to be submitted to the CCI&E.
Environment Clearance Certificate
Environment Clearance Certificate (ECC) is one of the vital approvals in order to initiate an industrial unit or project in Bangladesh. In order to obtain such Certificate, the concerned entrepreneur of the industrial unit or project need to make an application to the Department of Environment along with the necessary documents.
Fire License
Considering the environment and 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. It is issued by the Fire Service and Civil Defense (FSCD) authority operating under the Ministry of Home Affairs, Bangladesh. In order to obtain such license, the concerned entrepreneur of the industrial unit or project need to submit an application to the FSCD along with the necessary documents.
Registration of Trademark
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), operated under the Ministry of Industries, for registering its trademarks and/or any other Intellectual Property. An applicant in the prescribe manner has to file with necessary documents for the registration of a trademark to the Trademark Registry Wing of the DPDT.
Legal Issues:
Foreign Investment Law:
Foreign entities or individuals who are considering investing in Bangladesh can get generous opportunities for investment under its liberalized Industrial Policy and export-oriented, private sector-led growth strategy. All sectors are open for private investment in Bangladesh except for some restricted sectors. Glass sector is open to 100% foreign investment. The aim of the government is to serve as a facilitator to help create an enabling environment for the expansion of private investment, both domestic and international. The policy framework for foreign investment in Bangladesh is based on 'The Foreign Private Investment (Promotion & Protection) Act 1980, which ensures legal security for foreign investment in Bangladesh against nationalization and expropriation. This also ensures non-discriminatory treatment between international and local investment and the repatriation of proceeds from the selling of shares and income.
Apart from the above Act, the following Acts also deals with the foreign investment: Foreign Exchange Regulations Act 1947, The Bangladesh Export Processing Zones Authority Act 1980, Bangladesh Private Export Processing Zone Act 1996, Bangladesh Economic Zone Act 2010, and Bangladesh Investment Development Authority Act 2016.
Employment Law: The employment law in Bangladesh is mainly governed by the Labour Act, 2006. Apart from this Statute there are other rules and regulations in regards to this issue, the Labour Rules 2015, National Labour Policy 2012, Bangladesh Labour Welfare Foundation Act 2006, Bangladesh Labour Welfare Foundation Rules 2010, National Occupational Health and Safety Policy 2013, Domestic Workers Protection and Welfare Policy 2015 and National Child Labour Elimination Policy 2010. The Labour Act of 2006 deals with employment of labour, relation between employers and employees, payment of wages and compensation for injuries to workers, leaves, benefits, formation of trade unions, settlement of industrial disputes, welfare, health, safety and working condition in the establishment etc. Maternity benefits are also provided for a female employee. It should be noted, if the company is establish in an EPZ then, Bangladesh EPZ Labour Act 2019 shall be applicable.
The government has declared the minimum wages for the glass and silicate industry workers in accordance power vested under 140(1) of the LaborAct 2006. In this regards a gazette dated 25th May 2019 has been published by the Ministry of Labour and Employment. The wages determined by this gazette is applicable for all Glass and Silicate industrial sector and no employee shall be paid less than the prescribed wages as mentioned in the gazette. The probation period of the worker shall be 3 months but it could be increased 3 months more to determine the quality of the work. The wages of a worker in probation shall be 6500 taka. The minimum monthly wages for the workers and employees of glass and silicate industry shall be 8500 and the maximum wage shall be 16500. The Board will decide the wages, taking into account the cost of living and the paying ability of the factory owners.
Contract Law: Contractual agreement is the heart of the commercial world. It sets out the duties and responsibilities between the parties relating to the subject matter of the contract. A contract binds both parties of its all agreed and stipulated clauses, for example, what would be the party’s liability in the event of committing breach of contract and how far shall it cover the losses of the opposite party. It is advisable that, to take highest care during stipulating the terms and conditions of the contract so that it expresses the real intention of the parties. Every contract in Bangladesh is governed by the Contract Act, 1872.
A force majeure event means an unusual occurrence or situation beyond the control of the contracting parties, such as an act of God, war or a natural calamity. An effective application of the force majeure clause usually relieves the parties of their respective contractual obligations and/or liability. A force majeure provision does not completely justify the non-performance of a faction, but only suspends it for certain period. In Bangladesh, the Contract Act 1872, contains the doctrine of frustration, which is provided in Section 56 of the Act of 1872. As per this doctrine, a contract becomes void when it becomes impossible to perform due to occurrence of an event, it becomes unlawful after it was entered into.
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, reporting to Bangladesh Bank, NBR etc.
Property Law: In order to complete the registration of the lease or purchase of the land, the laws in regards to property shall also be applicable. The key statutes in these areas are Land Reform Act 2014, East Bengal Tenancy Rules 1954, The Survey Act 1875, The Non-Agricultural Tenancy Act 1949, Registration Act 1908, and Transfer of Property Act 1882.
Introduction of FMA and its services
FM Associates (FMA), is a full-service corporate law firms, which aims to offer a comprehensive range of services to the clients rather than focusing on just one specific area of law. It is one of the largest and well reputed law firms in Bangladesh offering clients, legal advice that meets needs and expectations of both domestic and International clients. FMA provides all range of services related to Company Incorporating, Sole Proprietorship business, Partnership Business, Foreign Company Registration etc. FMA law firm has legal experts who can assure smooth legal process and assist in obtaining Certificates or License needed for Company Incorporation, such as VAT Certificate, IRC/ERC, Name Clearance, Factory/Fire/Environmental License, TIN, Trade License and other types of certificates.
In Order to set up Glass Business in Bangladesh, the services FMA can provide are as follows:
FMA has an excellent and competent team who can proceed in setting up glass business smoothly and efficiently. The legal advisors of FMA can assist the clients through consultations and meetings and provide them guidelines on any type of business incorporation.
In order to incorporate any type of business, several deed, agreements and documents are required to be drafted. FMA legal team can assist the clients in preparing and drafting those documents.
In order to establish a business entity, it is essential to select a suitable land first. FMA can provide service to the client by searching for a preferable location for business establishment for the client. Moreover, FMA can assist in drafting lease agreement, Land vetting from respective land registry office, preparation for purchase of land including registration etc.
FMA can also assist in making necessary payments of Government fees to the concerned authority, such as BIDA or RJSC and liaise with them to obtain relevant documents for business incorporation. FMA, legal experts have good working relation with government offices; which makes it easier to obtain any certificate/license.
In order to incorporate a business, sometimes Trademark/Copyright/Patent registration is required for getting protection against infringement, to add value to the company and to strengthen legal protection. FMA assists its clients by obtaining registration for
Trademark/Copyright/Patent from the Department of Patents, Designs and Trademarks (DPDT) and thus securing the company’s legal protection.
FMA also provides services of obtaining or renewing any type of License, for conducting glass business, several licenses are required to be obtained. FMA legal team can assist in getting those licenses and if necessary, renew them at the right time.
FMA provides services related to labour matters, such as drafting of employment agreements, solving labour related disputes, providing legal opinion on labour law etc. to the clients.
FMA can advise and assist to satisfy the regular legal compliances to smooth the regular run of the company.
COVID-19 impact on Business
The coronavirus (Covid-19) has caused havoc all over the world and lockdown policy has resulted in border closures, travel bans, restaurant closures, community quarantines, supply chains and trade disturbances that have greatly Industrial sector in Bangladesh.Covid-19 have also affected glass industries of Bangladesh due to closure of factories, restriction of export, import, temporary shutdown of production, restrictions of free movement, shortage of workers, higher controls on cargo vessels which is aimed at
avoiding the further spread of the virus.
However, the Government in order to mitigate the impact of the coronavirus on the country’s economy has announced a bailout/stimulus package of Tk 5,000 crore for export-oriented industries indicating that the money from the package could only be disbursed in the form of salaries for employees of those establishments. Management of export-oriented companies or factories have to provide salary sheets, workers’ lists and their mobile banking accounts to banks so that salaries for April can be directly disbursed to the employees.
Moreover, Tk 300 billion has been provided for working capital loan to the affected industries and service sectors with 9.0 per cent interest, out of which half will be borne by the facility enjoying entity and other half will be paid by government as subsidy. Export Development Fund (EDF) will be enhanced by an additional amount of Tk 127.50 billion and a new credit facility of Tk 500 billion as 'Pre-shipment Credit Refinance Scheme' will be introduced by the central bank with 7.0 per cent interest.
Further, four fresh financial stimulus packages of Tk 67,750 crore was also announced by the government. The four programs under the plan which includes, increasing public expenditure, formulating a stimulus package, widening social safety net coverage and increasing monetary supply. The Government policies were adopted as per, sections 12 and 16 of the Bangladesh Labour Act 2006.
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 Increasing socio-economic development coupled with rapid urbanization has resulted in significant growth in the manufacture and importation of glass products. The glass business has so far played role in accelerating economic growth. Bangladesh could be a favorable location to set up glass business due to cheap labour, market value and availability of raw materials. Glass industries could be an essential source of earning foreign exchange, crating employment opportunities thus enhancing countries overall growth. However, there is no explicit policy guideline of the government for this important sector. Through policy support and discouraging importation of glass from other countries can flourish the glass manufacturing industry in the international market.
Executive Summary:
Glass is an inorganic solid material which is hard, brittle substance, usually transparent or translucent, used in a wide variety of applications in our daily lives. The main raw materials for glass manufacturing are available in Bangladesh and thus only small portion of raw materials has to be imported from outside. A huge amount of foreign exchange is earned by exporting high-quality glass products to Asia, Africa and Middle Eastern countries. The demand for glassware is increasing steadily with changes in lifestyles of people. In recent times, New buildings, hotels, restaurants are being constructed which are mostly made of glass, which is raising the demand for glass business day by day in the country.
In order to proceed with glass business in Bangladesh, it is important to take permission from the concerned authority or department. A glass business could be done through company incorporation or partnership. Licenses such as fire, Environment, Factory, IRC/ERC and Trademark shall also be obtained to incorporate a business.
Covid 19 in recent time has made a huge hindrance on the economic sector and so in glass industries. The Industry owners are finding it difficult to pay salaries to the employees working in different establishments, Lay-off workers are moving to the villages creating shortage of workers, shutdown of industry is causing unemployment and thus huge impact on the economic condition of the country. To make glass business more profitable concerned government departments, development partners, researchers and non-government organizations can play important role in advancement of the glass industries as well as mitigating Covid 19 impact on our economy.
In Bangladesh development of glass business can play a huge role in boosting up the overall economic condition of the country. In order to establish glass business and industries, FMA legal team can provide various services related to business incorporation. FMA has an excellent and competent team who can proceed in setting up business in this sector efficiently.
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How to Incorporate a Business in Bangladesh
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