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How to Setup Security Business in Bangladesh
Security services are an important section to keep people safe in private and public places. In Bangladesh the private security sector started its journey in 1988 with Securex Limited being the first company to be set up . The entities in this sector provides mainly provide services in Banks, commercial buildings, private offices, government offices, schools, colleges, universities, Hospitals, shopping Malls, Restaurants, residential apartments etc. The security service providers make us feel safe and help to run all the work smoothly. With the increased rate of crime, threat of terrorism, criminalization and prevailing threat of kidnapping, extortion and homicide by criminals, deteriorating law & order situation, people are ready to invest more to ensure their safety by hiring these professionals. The demand of security services is increasing day-by-day. The demand of this business sector is on the rise and it is undoubtedly a convenient business for investors.
The responsibilities of security guards are to protect people and property of his employer or contracted clients. The job of Security guards is quite similar to Police, however there is a distinct difference between both. Police usually take action after the offence has been occurred as it is not possible to be at every place. However, security guards are appointed to present at a particular place to prevent any sort of crime which can affect the people of that particular place. Their main role is not to react to crime threats without law enforcement, but to deter it just by being present. It’s less likely that criminals will target an area with an engaged, active security personnel. The security guards have the training to intervene with the criminals until the police arrive. However, as per the laws the security
Various security services can be provided such as:
• On-site guarding
• Special guarding
• Electronic security
• Fire and safety
• Corporate risk management
• Close protection officer/Body Guard
LICENSE AND REGISTRATION PROCESS
There are several ways by which an investor can invest into security service industry, eg. Sole Proprietorship, Partnership Business, and Private Limited Company. The first two options are not available for foreign investors.
SOLE PROPRIETORSHIP
In Bangladesh, a Sole Proprietorship does not constitute a separate legal entity, therefore, it is not distinct from the owner/ proprietor. During the course of business if any liability arises, the business owner will be personally accountable for all liabilities. Any Bangladeshi citizen of a minimum age of 18 years is eligible for a sole proprietorship.
Registration Procedure
In order to set up a sole proprietorship business in Bangladesh, the following steps need to be followed:
Step 1- Proposed business name
Step 2- Obtaining Trade License.
General Licenses
Trade License – It is the basic requirement for proprietorship. This can be obtained by making an application to the respective City Corporation/local government along with the lease/rent document of the office space of the business.
TIN Certificate -- The application needs to be made through online portal of National Board of Revenue (NBR).
VAT certificate -- The application needs to be made through online portal of National Board of Revenue (NBR).
PARTNERSHIP BUSINESS
Registration Procedure
A partnership business need to be registered with Registrar of Joint Stock Companies and Firm of Bangladesh (“RJSC”).
STEP 1- CHOOSING THE PARTNERSHIP NAME
A Name Clearance for the proposed name of the Partnership Business, must be obtained from the Registrar of Joint Stock Companies And Firms (RJSC).
STEP 2 – PREPARE A PARTNERSHIP DEED
The Partnership Deed should be written on a stamp paper in accordance with the Stamp Act and all partners should sign it and subsequently be notarized.
STEP 3- REGISTER PARTNERSHIP DEED WITH RJSC
The partnership deed along with filled up Form I should be filed with RJSC. The officials of the RJSC will review the documents shall issue a Certificate of Registration.
Timeline – It usually takes around two weeks to obtain the Certificate of Registration from RJSC after the submission of the documents as per STEP 3.
General Licenses
TIN Certificate --- The application needs to be made through online portal of National Board of Revenue (NBR).
Trade License -The application needs to be made, along with the appropriate government fees, to the relevant city corporation office/ local government office along with the business documents and the lease/rent deed of the office space of the Business. Entities which shall operate in commercial sector and the entities which shall operate in industrial sector shall have to apply for commercial trade license and industrial trade license respectively.
VAT certificate ---- The application needs to be made through online portal of National Board of Revenue (NBR).
PRIVATE LIMITED COMPANY
Procedure for company setup:
The procedure of setting up a company are as below:
Company Incorporation:
STEP 1 - A Name Clearance for the proposed name of the Company, must be obtained from RJSC.
STEP 2 – Drafting and signing the following:
• Memorandum and Articles of Association of the company;
• Filled in Form IX: Consent of director to act;
• Filled in Form XII: Particulars of the directors, manager and managing agents.
STEP 3 – Opening the bank account for the Bangladeshi Company and remitting the share capital amount of the foreign shareholders (not required for local shareholders)
STEP 4 – Bank to issue encashment certificate of such foreign remittance (not required for local shareholders)
STEP 5 – The signed documents, as mentioned in step 2, shall be required to be submitted to the RJSC along with the encashment certificate and the government fees for the incorporating the company.
STEP 6 – RJSC shall verify the documents and provide the certified incorporation documents.
Timeline – It usually takes 3 to 4 weeks, after submitting the documents as per Step 5, for RJSC to issue the certificates.
General Licenses:
TIN certificate ------ In order to obtain the certificate, an online application needs to be made after the company has been duly formed. Additionally, a local phone number and registered office address are required to complete the application.
Trade License --------- The application needs to be made, along with the appropriate government fees, to the relevant city corporation office along with the company documents and the lease/rent deed of the office space of the Company. Entities which shall operate in commercial sector and the entities which shall operate in industrial sector shall have to apply for commercial trade license and industrial trade license respectively.
VAT certificate - The application needs to be made through online portal along, with Company documents.
Specific licenses/approvals
License to establish and operate Private Security Service ----
The District Magistrate in the case of the concerned district and the Commissioner of Police in the case of the metropolitan area shall be the licensing authority.
Step 1 -
Any person wishing to establish and operate a private security service organization may apply for a license to the Licensing Authority in the manner and form prescribed by rules.
Step 2 -
After the application is made for a license, the licensing authority verify the same
Step 3 –
The officer directed shall inspect the place mentioned in the application in person and after examining the information obtained and inquiring into all matters, submit a full report thereon to the licensing authority.
Step 4 -
After reviewing the report, the licensing authority-
• if it is satisfied that the applicant has fulfilled the conditions prescribed for the establishment and operation of a private security service, the licensing authority shall issue a license to the applicant within thirty days after collecting the deposit, license fee, etc. prescribed by the applicant; or
• if it is deemed that it is expedient to grant the applicant the opportunity to meet the prescribed conditions, the Licensing Authority shall give the applicant a maximum of fifteen days to meet the above conditions;
grant the license to the applicant within the next fifteen days after being satisfied that the applicant has been able to comply with all the conditions mentioned in that period; Or
if the applicant fails to meet the required conditions within that period, the application shall be rejected and the applicant shall be informed; Or
If the applicant is of the opinion that the applicant has not been able to fulfill most of the conditions laid down and the applicant is not likely to be able to fulfill the remaining conditions within the time given, then the applicant's application Directly reject and inform the applicant within fifteen days.
Step 5 -
If the Licensing Authority rejects any application for not satisfying the conditions, the applicant may appeal to the Government within thirty days from the date of receipt of the said rejection order and the decision of the Government on the appeal shall be final.
Legality
Implication of Private Security Service Act 2006 –
This act aims at establishing, operating and controlling private security services to ensure the provision of security services at the private level and to ensure quality of service. Any person after obtaining license can establish and run a private security service business.
Eligibility and Disqualification of Licensing –
No person shall be deemed eligible to obtain a license under this Act if-
• He is not a citizen of Bangladesh;
• he is not twenty-five years of age or older;
• if he has been declared bankrupt by an appropriate court, the bankruptcy has not been terminated;
• he is not of sound mind;
• he does not register his name in the concerned department as a payer of income tax and value added tax;
• if he has been convicted of a criminal offense and has been sentenced to imprisonment for a term not exceeding two years, not less than five years have elapsed since his release;
• he has been dismissed from service of any government or statutory body for any misconduct or corruption; And
• He has become a defaulter of any bank or financial institution
No company shall be deemed eligible for license under this Act if such company-
• is not registered in Bangladesh under the Companies Act, 1994 (Act No. 18 of 1994) or any other law in force;
• if the bankruptcy has been declared by an appropriate court, the said bankruptcy has not been terminated;
• does not register his name in the concerned department as a payer of income tax and value added tax;
• if the owner, chairman, managing director, director, manager, secretary or any other officer or employee or representative of the company has been convicted of a criminal offense and sentenced to imprisonment for a term not exceeding five years after his or her release. Is done; And
• is declared a defaulter by any bank or financial institution
Conditions of License ---
• No person may employ any other person as an agent to provide security services under his license.
• No alteration of the licensee's rights or organizational structure may be made without the prior approval of the Licensing Authority.
• Every licensee shall hang a photocopy of the license in the most visible place of his head office and in every branch office.
• If the licensee is interested in providing security services in any other district or metropolitan area outside the licensing authority of the concerned district or metropolitan area, he cannot provide security service without informing in writing to the licensing authority of the intended area with a copy of the license attested by the first class magistrate
• The Licensing Authority shall record such notice by the Licensee in a register in the concerned district or, as the case may be, in the Metropolitan Area and notify the Licensee in writing.
• In addition to the conditions applicable under this Act and the rules made thereunder, the licensing authority may include in the license such conditions as it deems fit and such conditions must be complied with.
Provisions related to weapons etc. used by private security service organizations -
For the purpose of this Act, no license may be issued to any person or private security service organization for any firearm, weapon or ammunition and ammunition used therein. The Director General, Ansar and VDP or any officer empowered by him to carry out the cash transfer of any commercial bank, financial institution and other institution or in the case of static duty of such institution shall appoint armed Ansar in accordance with the rules made under this Act.
Offence and Punishment –
• No person shall establish or operate a private security service without obtaining a license
• A person who operate a private security service without obtaining a license, shall be deemed to have committed a punishable offense and shall be liable to imprisonment for a term not exceeding three years or a fine not exceeding five lakh rupees and not more than one million rupees, or both.
• Any person violates the provisions of eligibility and disqualification to obtain licnese, appointment of security guards in private security service organizations, rules for security guard’s dress and identity shall be deemed to have committed a punishable offense and shall be liable to imprisonment for a term not exceeding six months or a fine not exceeding fifty thousand rupees or both.
• If the license of any license is suspended or revoked, the licensee shall not be able to provide security services until the said revoked or revoked order is revoked by the Government. Any person who violates the provision, shall be deemed to have committed a punishable offense and shall be liable to imprisonment for a term not exceeding three years or a fine not exceeding five lakh rupees and not exceeding one million rupees, or both.
Offence committed by the Company
• If any person violating any provision under this Act is a company, then the owner, chairman, managing director, director, manager, secretary or any other officer or employee or representative of such company shall be deemed to have violated the provision unless he can prove that, the violation has taken place without his knowledge or he has tried his best to prevent the violation.
• In the case of an offence, a court of competent jurisdiction shall be the court of competent jurisdiction over the place from which the company's operations are usually conducted or where the crime is committed or where the offender is found, unless the company has a registered office or head office or such office.
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.
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.
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. An applicant has to file application for the registration of a trademark to the Trademark Registry Wing of the DPDT.
An application for the registration of a trademark shall include the following-
• the Mark /Logo
• Name of the Applicant.
• Full Address and nationality of the Applicant.
• Status of the applicant i.e. Merchandisers / Manufacturers /Service Providers
• Specification of Goods and Class.
• User date of the mark (whether the mark is in use or proposed to be used in Bangladesh).
• General/specific power of attorney may be required.
• 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. A registered trademark is valid for an initial period of seven (7) years from the date of filing and renewable thereafter for successive periods of Ten (10) years.
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.
INTRODUCTION OF FMA AND ITS SERVICES
FM Associates, as a full service law firm, 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 due 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
Covid-19 pandemic break out is wrecking the whole economy of the world and Bangladesh is not indifferent from it. Like all the other businesses this business is also facing a difficult time due to Coronavirus breakout.
Though this industry is did not yet received the direct impact of the lockdown which has been undertaking by the government to reduce the spread of the epidemic, as a lot of closed offices and shopping malls are still requiring the security services in this lockdown period in order to safeguard their properties. However, if the current situation continues, the economy will slip further into the recession, as a result a lot of the customers of this industry will focus on cost reduction and subsequently terminate such professional security service and provide a negative impact on this industry.
Entities 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. In particular, companies should consider whether they are entitled 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 entirely, 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 option, terminate the contract without any financial consequences to each other.
Its reliance is based primarily 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 enshrined 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, it shall be treated as void under the laws of Bangladesh, provided that the defaulting party did not know, or with reasonable diligence, could not have known that the contract would be so frustrated. 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 is intermittent that, to attract the doctrine of frustration, the performance of the contract must become absolutely impossible due to the happening of some unforeseen event such as Corona Virus pandemic.
It can be summarized that in the absence of an appropriately worded force majeure clause in a contract, the parties in Bangladesh may have the option of relying on the existing provisions of Bangladeshi law - particularly, Section 56 of the Act of 1872 - in order to excuse itself from the timely performance of their respective obligations under the contract.
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:
With the increased terrorism and crime, the security service business in Bangladesh is a flourishing industry with continuous demand. Hence there is potential market for the investors to invest in this market.
EXECUTIVE SUMMARY
The security service business in Bangladesh has a huge potential as the people now more concerned about ensuring the safety of their lives and their valuables against crime, and in this era of busy life that want professionals to handle the same. Therefore, the demand of the private security service is continuously growing.
To become a part of this Security industry there are various options of entities, Sole Proprietorship, Partnership Business 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 like other industries, security industry is soon going to face serious problem as well.
Nonetheless, it is expected that, as the epidemic starts to decline, business shall resume and with the help of the government, this sector shall find its steady growth in a short period of time.
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How to Incorporate a Business in Bangladesh
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