SHARE MONEY DEPOSIT OF FOREIGN INVESTOR TO BE CONVERTED INTO SHARE WITHIN 1 YEAR – BANGLADESH BANK
Foreign investors’ share deposits must be converted into shares within one year, according to Bangladesh Bank.
February 7, 2020.
Equity investments from foreign shareholders (held as share money deposits) in a Bangladeshi-registered firm must be converted into shares within one year following receipt. On February 5, 2020, Bangladesh Bank released FEID Circular No. 02 in this regard. Previously, there was no time limit for foreign stockholders to convert their share money deposits into shares.
Bangladesh Bank’s circular outlined the following guidelines:
Bangladeshi enterprises must fulfill the formalities of issuing shares within 360 days of obtaining funds for this purpose, which means the company must file a return with RJSC.
Share Money Deposits must not be utilized for any purpose other than the company’s principal operation, i.e. the fund cannot be used in any interest/profit bearing financial products.
In calculating the Debt Equity Ratio for granting permission for a foreign loan/foreign currency loan to industrial enterprises and a Taka term loan to a foreign owned/controlled company as per Para-4(C), Section-1, Chapter-16 of the Guidelines for Foreign Exchange Transactions, 2018, etc., a share money deposit will not be considered an equity component if the company fails to convert it into shares within 360 days of receipt. The company’s financial statements will reflect Share Money Deposit in accordance with IAS/BAS. If the total share capital exceeds the BSEC’s exemption limit after receiving Share Money Deposit, consent from the BSEC is required. Because the BSEC approval process can be time-consuming, we recommend that businesses move quickly to ensure compliance with this circular.
Companies who made share money deposits prior to the issuing of this circular are recommended to fulfill the share issuance formalities within 360 days of the circular’s issuance date.
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