LIAISON OFFICE AND BRANCH OFFICE: DIFFERENCES
This week Your Advocate is Barrister Omar Khan Joy,
Advocate, Supreme Court of Bangladesh. He is the head of the chambers
of a renowned law firm, namely, ‘Legal Counsel’, which has expertise
mainly in commercial law, corporate law, family law, employment and
labor law, land law, banking law, constitutional law, criminal law, IPR
and in conducting litigations before courts of different hierarchies.
Our civil and criminal law experts from reputed law chambers will
provide the legal summary advice.
Query
I
have found your details from an article published in the Bangladeshi
daily, the Daily Star. Your article helped us in deciding on a legal
matter, which we would have otherwise taken to a lawyer. We have yet
another query and we will be obliged if you may also publish your reply
in the said newspaper. I represent a large multinational company having
our head office in a European country. We are having some business
relationship with some Bangladeshi companies for few years now and the
same are only increasing. We are planning to have an official
establishment in Bangladesh, preferably in Dhaka city. But, we do not
want to do any direct business through the said office. Can you please
advise us on the difference between a branch office and a liaison office
under the Bangladeshi law?
Response
Thank you
very much for your query. I am delighted to know that your company is
willing to establish its office in Bangladesh. There are a good number
of foreign offices that are maintaining either a liaison or a branch
office in Bangladesh for many years and have not gone for incorporation
of either a joint venture or a fully foreign owned company. This is
largely your business decision. The basic distinction between a branch
and a liaison/rep office is more or less the same in Bangladesh as in
the other parts of the world. In short, a liaison office cannot do any
money generating activity while the branch office can actually do
business and earn profit like a company. For your better understanding, I
take this opportunity to give you further brief explanation of the two.
Liaison
Office: A Liaison Office is an establishment that is established under
the Bangladesh Board of Investment (BOI) authority. The activities of a
liaison office or representative office are ‘very restricted’. Such
restrictions are imposed by the terms of the registration documents.
Most commonly, liaison offices are not allowed to generate any income of
its own and foreign remittance of USD 50,000/- for a year from parent
company is imposed (as expenses for maintenance of the office). BOI may
also impose a condition for inward remittance of USD 50,000/- within two
months of its registration to meet the establishment cost and expenses
for the first six months. BOI generally allows liaison offices to
undertake market research, networking on behalf of parent company to
expand business, assisting and coordinating between parent company and
local agents etc. After getting the permission from the BOI to set up
the liaison office, you need to take permission from the central bank,
i.e. Bangladesh Bank and a security clearance from the Ministry of Home
shall have to be obtained. Permission for the liaison office is
generally granted for 3 years and needs to be extended thereafter in
every 2 years.
Branch Office: A Branch Office of a foreign entity is
also registered under BOI authority. In addition, it has to be also
registered (certain documents to be filed) under the Companies Act with
the Registrar of Joint Stock Companies and Firms (‘RJSCF’). Branch
Office is allowed to undertake activities generating income or profit.
However, such activities are generally restricted to some extent by BOI
at the registration. Permission to open and continue a Branch Office is
given for a specified time and needs to be renewed from time to time. In
order to establish a branch office, the parent company will have to
make an application to BOI with certain documents and thereafter file
some documents with the RJSC. The Branch Office will be incorporated
under the Memorandum and Articles of Association of the Parent Company.
The Branch Office’s activities, therefore, shall have to be within the
purview of the said Memorandum of Association (“MOA”) and Articles of
Association (“AOA”). The Name of the Branch office will have to be the
same as the Parent Office. You may, however, indicate on the letterheads
of the Branch Office that the entity has a Rep/Country office in
Bangladesh and include its local address thereafter. Once the permission
is obtained, you may proceed to open up a bank account and your
nominated banker/legal adviser shall assist you to obtain Bangladesh
Bank (central bank of Bangladesh) permission to operate a bank account
with any scheduled bank in Bangladesh. The Branch office will thereafter
obtain Trade License from the City Council, Tax Identification number
from National Board of Revenue and security clearance from Ministry of
Home Affairs. It shall also have to comply with any other requirement
stipulated in the Registration letter. Prior to these, the Branch Office
will have to enter into a contract to obtain a registered office
address.
I hope that the above shall help you in having a primary
understanding and help you to take your decision. Though I understand
that one the previously published article has helped you to solve a
legal query, I would still strongly advise you to take professional
legal help while setting a branch/liaison office in Bangladesh. I
welcome you and your organization to Bangladesh and hope that your
office will be able to work smoothly once the same is set.
Posts
