The central bank has relaxed foreign-exchange regulations on repatriation of sale proceeds from equity owned by non-residents in unlisted companies purchased by residents, as a measure to encourage foreign direct investment (FDI) in the country.
Under the relaxed rules, the Bangladesh Bank (BB) will accept fair value of the shares as on the date of sale based on appropriate combination of three valuation approaches.
The three criteria are: net-asset-value approach, market-value approach, and discounted cash-flow approach.
Previously, only net-asset-value approach was the only determinant, depending on the nature of the company.
"This is an important change which will contribute to a rise in foreign investment via the private equity channel," BB Chief Economist Hassan Zaman told the FE about the changes made to the rules governing this aspect of foreign investment.
He adds: "This is part of the process of prudently liberalizing our foreign-exchange regime and the access to equity capital that this will facilitate will lead to companies expanding and job creation."
The central bank issued a circular to this effect Sunday, asking the commercial banks to go by the revised regulations on repatriation of sale proceeds of non-resident-owned equity in unlisted companies purchased by residents properly.
Application for repatriation of proceeds from sale of shares shall be submitted to Foreign Exchange Investment Department at the head office of the BB through due process, according to the circular.
As per the prescribed procedure, such an application has to be adjoined with a valuation certificate of shares issued by a merchant banker licensed by the Bangladesh Securities Exchange Commission (BSEC) or a chartered accountant experienced in company valuation.
"Full set of audited financial statements of the company will have to be submitted to the BB along with application for remittance approval.
"If not fully satisfied about appropriateness of the valuation arrived at, the central bank of Bangladesh reserves the right to obtain second opinion from another qualified valuer of its choice," it noted.
Talking to the FE, another BB official said the central bank wants to consider the market-value approach and discounted-cash- flow approach along with currently used net-asset-value approach to determining the repatriable value of shares of an unlisted company.
"We expect that such relaxation on foreign-exchanger regulations will help encourage FDI in the country," the central banker observed.
He also said foreigners are now allowed to repatriate their investment from the share market without facing any procedural bottlenecks.
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