An Indian company (I Co 1) is in the process of setting-up a branch office (BO) in Bangladesh and their application filed with the Board of Investment (BOI) in Bangladesh is currently pending for disposal. A second Indian Company (I Co 2) which does not have any presence in Bangladesh has hired Bangladesh nationals as its employees (from 2010). The employees have not taken section 18A approval from Central Bank. It is proposed that Bangladesh nationals would terminate employment with I Co 2 and would seek employment with I Co 1. I Co 1 will pay the individuals salary along with out of pocket expenses by way of remittance of money from India to the bank account of the individuals in Bangladesh.
The employees wish to apply for provisional registration with Bangladesh Bank under section 18A till the BO is set-up. Can you please advise on the following:
Can I Co 1 proceed with hiring of employees and remittance of employees salary in Bangladesh till the time BO is set up?
The specific law in Bangladesh that supports the above position (together with copies of relevant extract).
Whether any approval has to be taken from Bangladesh authorities, BOI or Bangladesh Bank in order to hire and remit salary to Bangladeshi nationals before the BO is setup?
Thank you for your queries. This is quite an interesting scenario and I will endeavour to answer this as clearly as possible.
1. Can I Co 1 proceed with hiring of employees and remittance of employees salary in Bangladesh till the time BO is set up?
I Co 1 can proceed with the hiring of employees and remittance of employees’ salary in Bangladesh till the time the Branch Office is set up. It is, however, advised that the employees not be recruited as such, instead recruiting them as “advisors” or “consultants” with fixed objectives or set duties, in exchange for consultancy/ advisory remuneration.
Once the Branch Office (BO) set-up is complete, recruitment of employees can then be commenced in the official and usual manner.
2. The specific law in Bangladesh that supports the above position (together with copies of relevant extract).
The law in Bangladesh is silent regarding the recruitment of employees prior to complete establishment of a legal entity in Bangladesh. However, the relevant law in the instance of Foreign Currency Remittance is currently governed by the Foreign Exchange and Regulations Act, 1947 (hereinafter referred to as “FER Act”), which stipulates that any agent, advisor or employee receiving foreign exchange from an entity abroad, will require permission from Bangladesh Bank. This is referred to in 18A of the FER Act, and is stated as follows:
“18A. (1) Notwithstanding anything contained in any other law for the time being in force, no person shall, except with the general or special permission of the Bangladesh Bank, act or accept an appointment to act as an agent in the trading or commercial transactions, or as a technical or management adviser or any other employee, in Bangladesh (whether or not a citizen of Bangladesh) of a person resident in Bangladesh (but not a citizen of Bangladesh) or of a company (other than a banking company) not incorporated under any law in force in Bangladesh.
(2) A person acting or holding an appointment to act as an agent or as an adviser or any other employee in Bangladesh of a person or company referred to in sub-section (1) immediately before the commencement of the Foreign Exchange Regulation (Amendment) Ordinance, 1976 (Ord. No. LXXVI of 1976), may continue to so act for a period not exceeding six months from such commencement unless the Bangladesh Bank has, upon an application made in this behalf in such form and containing such particulars as the Bangladesh Bank may direct, granted him permission to continue to so act thereafter.”
3. Whether any approval has to be taken from Bangladesh authorities, BOI or Bangladesh Bank in order to hire and remit salary to Bangladeshi nationals before the BO is setup.
Before taking up the processing of a remittance application, the Authorized Dealer (ie the Local Bank dealing with the remittance of funds) shall check whether the concerned company/ their local agents have valid approval (with up to date renewal) of Bangladesh Bank under Section 18A/18B of the FER Act. Employees will be applying under 18A and employers will be applying under 18B of the FER Act.
Any 18A application will require the approval/ permission issued by the BOI for the Branch Office, or a confirmation letter that the BO application has been received by the BOI and is under process.
I hope the above is enough to answer your queries. Please do not hesitate to get in touch if you wish to receive more information regarding this matter. Wishing you all the very best!