The central bank has relaxed its regulations, allowing start-ups to invest up to $10,000 abroad by establishing legal entities, officials said.
General permission is granted to establish a legal entity abroad with an amount up to $10,000 or equivalent by way of investment for supporting a start-up in Bangladesh, according to a notification issued by the Bangladesh Bank (BB) on Thursday.
A start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model. Actually, start-ups are in their initial stages of operation, meaning they are relatively young businesses compared to established companies.
Applicants are required to submit applications to the authorised dealer (AD) banks, after effecting remittances up to $10,000 or equivalent on behalf of a resident enterprise, and report the same to the central bank within one month of registration/incorporation of such legal entities abroad, but not later than six months from the date of remittance.
"We have relaxed our regulations to facilitate start-ups in Bangladesh," a senior BB official told The Financial Express while explaining the main objective of the notification.
He also said it is the first step towards opening up capital account transactions in response to changing economic conditions.
The notification also allowed individual Bangladeshi nationals to establish legal entities abroad within the threshold of $10,000. In this case, applicants would have innovative ideas to explore business opportunities abroad with the linkage to reroute investments and earnings into Bangladesh in the near future.
In addition to small value investment, the central bank will consider requests from resident companies to acquire shares abroad by exchanging their own shares/securities with the shares of overseas companies without consideration in cash.
Proposals under this framework will be considered if the swap ratio of shares/securities is determined in accordance with the global best practices, according to the notification.
Regarding share swap, another BB official said this initiative will facilitate the process of opening up capital account transactions in the near future.
Industry insiders expect that such relaxation of regulations will facilitate inward investments through companies established abroad.
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