Asia Pacific 2024 L500 data

Asia Pacific 2024 Legal 500 data: Bangladesh

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Doing business in Bangladesh

Can you provide an overview of environmental regulations and compliance requirements for businesses in Bangladesh?

Under section 12 of the Environment Conservation Act 1995, all businesses, in particular, industrial units and/or projects shall obtain an environmental clearance certificate from the director general. Under section 3, the director general shall be appointed by the government and shall be the head of the Department of Environment. If any business, industrial unit and/or project fails to obtain an environmental clearance certificate, they run the risk of getting a sentence of imprisonment not exceeding three years or paying a fine not exceeding Tk 300,000 (taka three lacs) or both (section 15(1) SL. 8).

How are health and safety standards monitored and enforced?

So far as health and safety standards in a workplace are concerned, these are governed by the Bangladesh Labour Act 2006 and is monitored by the Department of Inspection of Factories and Establishments (DIFE). Chapter V (sections 51-60) of the 2006 Act deals with the health and hygiene of a specific workplace, including provisions related to cleanliness, ventilation and temperature, dust and fume, overcrowding, lighting, toilets, and dustbin etc. Chapter VI (sections 61-78) deals with the safety of a specific workplace, including provisions related to safety of the building, precaution as to fires, hoists and lifts, excessive weights, and precautionary measures against dangerous fumes etc.

Further, under section 307, if any person fails to comply with any provision of the 2006 Act, they shall be punished with imprisonment for a term which may exceed to three months, or a fine which may exceed to Tk 25,000 or both.

What cultural and social factors should be considered in our business dealings in Bangladesh?

There are many cultural and social factors to be taken into account by any keen businessmen looking to do business in Bangladesh.

  1. Building professional relationships, which last a long time, is very important in Bangladesh. In Bangladesh, long-term business relationships are an essential part of the business culture, as such relationships are based on trust and belief. An ancillary part of this includes maintaining good communication and showing respect.
  2. Bangladeshis are known for certain beliefs and traditions, such as a sense of family, having respect for elder members of society and maintaining peace within a community. Therefore, these are important values that will have to be taken into consideration when entering the business market in Bangladesh.
  3. Bangladeshis are incredibly frugal in their business, in the sense that they are very calculated with their business decisions. In practice, this means that they are reluctant to take impulsive decisions. As a result, for anyone planning to enter into or choosing a partner within the Bangladeshi industry must keep in mind that any decisions offered or proposed must be well thought out and properly presented, as Bangladeshis will be very calculative regarding their decisions.
  4. Bangladeshi business people also seek very high value for money. In some cases, this will take precedence over other things. Therefore, if they believe that they will not get much value for money for a business idea proposed by someone, it is more than likely that they will refuse to act on it. They believe that this mindset will serve them in the long run.

Are there any specific business etiquette or local customs that we should be aware of?

There are no specific etiquettes and/or customs in Bangladesh but there are some aspects to keep in mind when conducting a business in Bangladesh.

  1. Bangladeshi business people are very traditional and cultural, and this often leads them to prioritising personal and professional relationships rather than certain documents or paperwork. Bangladeshis are always more willing to work with people that they are comfortable with rather than people with polished resumes.
  2. There is a culture in Bangladesh where elder businessmen are more well-respected than young businessmen, simply because of age. Bangladeshi businessmen hold high esteem for elder members simply because it shows resilience and experience, which, they believe, is a crucial trait for any entrepreneur.
  3. Bangladeshi businessmen are also very averse to documentation, and according to their ideology, the less paperwork, the better. They would much rather prefer in-person discussions than drawing up paperwork, including small addendums or supplements etc. Businessmen in this country are not paper heavy, and this can be seen as both a blessing and a curse.
  4. If a business meeting consists of only men, then shaking their hands is the appropriate gesture. However, if there are women present, then it is best to refrain from shaking their hands unless they initiate the gesture first.
  5. The timing of meetings in Bangladesh must also be carefully selected. Since, Bangladesh is a Muslim country, you must take into consideration the prayer timings before scheduling a meeting. For example, an afternoon meeting should not be scheduled before 2pm, as prayers are offered at 1pm, after which lunch is consumed. This is standard practice in Bangladesh.
  6. Bangladeshis are mostly indirect speakers. In a meeting or any conversation, it is normal practice to firstly start with some small talk, which usually involves some general personal questions, and then getting to the purpose of the meeting or conversation. Even then, Bangladeshis tend to express themselves without using blunt terms.

How would you assess the current political climate and overall stability in Bangladesh?

The political climate in Bangladesh is the most stable it has been since Bangladesh’s independence in 1971. The same government has been in power for the past three terms and as a result, has done wonders for the nation during it’s long reign. Bangladesh is also set to graduate from UN’s Least Developed Countries by 2026. Bangladesh’s economic growth is also set to be the sixth highest in Asia this financial year. This shows that Bangladesh’s economy is at an excellent stage at the moment, and with the current government, is set to achieve even higher heights in the upcoming years.

What is the regulatory landscape for forming partnerships or joint ventures with local entities?

In order to set up a partnership, the following steps must be completed:

  1. Obtain a TIN certificate from the National Board of Revenue (for each partner).
  2. Obtain a trade license.
  3. Rent or purchase a space for setting up industry.
  4. Open a bank account in the name of the business.
  5. If the industry is located outside BEZA, BEPZA, BHIPA, BSCIC, then BIDA’s registration must be obtained. If it is located inside these areas, then their particular procedures must be followed.
  6. Obtain a fire license from FSCD.
  7. Obtain environmental clearance from the Department of Environment.
  8. Obtain approval of layout plan from DIFE.
  9. Obtain VAT registration from NBR.
  10. Obtain membership of business/trade body.
  11. Obtain a ‘No Objection Certificate’ from the ministry/division to set up controlled industries.
  12. Follow RAJUK/CDA/RDA processes for building/plant construction approval.
  13. Apply for BIDA’s recommendation to get ad hoc IRC approval from CCI&E for importing capital machinery and/or raw material.
  14. Obtain ad hoc approval from CCI&E.
  15. Import capital machineries and raw materials.
  16. And then start the operation.

The following documents have to be submitted, along with the application for registration of local and foreign joint venture industry:

  1. Certificate of Incorporation.
  2. Memorandum and Articles of Association attested by an authorised person of the applicant company.
  3. Trade license from the concerned authority. The applicant must mention the specific sector.
  4. Tax Identification Number (TIN) certificate of the company.
  5. Land purchase agreement or rental agreement for the proposed project.
  6. List of directors with information on their nationality and address.
  7. Profile of the proposed investment project (if the project cost exceeds BDT100m).
  8. No objection certificate (NOC) from the concerned ministry/directorate/department for industries falling under the category of the controlled sector as per the industry policy (which can be found on the website).
  9. Attachments of the company’s comments as per BIDA’s requirement. The following documents are additionally required for foreign/joint-venture projects.
  10. Encashment certificate (proof of inward remittance of foreign currency into the company account issued by the concerned bank).
  11. List of local and imported machineries printed on the official letterhead of the company signed by an authorised person of the company (which must include serial number, name of machineries, H.S. code, quantity, and value in million BDT/USD).

What due diligence processes should be followed when considering local partners?

The due diligence process for considering local partners in Bangladesh is pretty much the same as it would be for any other jurisdiction. We recommend carrying out the following tasks prior to choosing a business partner:

(i) Carrying out research regarding their reputation:

Choosing a business partner is a big commitment, and therefore, performing adequate research is a must. This includes their online presence, recognition in the particular industry, media coverage, customer reviews etc. It will also be helpful to check their credentials and ensure that they possess the necessary licenses, permits and certifications required to operate in their relevant industry.

(ii) Perusing their financials:

It is crucial to review the financials of a potential partner. This includes reviewing their income statement, balance sheet, cash flow statement, tax returns etc. Further, it is also recommended to review their financial performance, stability, growth in the market etc. Their financial statements can be accessed from the partner themselves or can also be obtained from third-party sources.

(iii) Reviewing their compliance:

It is essential to review and evaluate the compliance history of your potential partner. This includes their compliance with relevant laws, regulations and codes of conduct in their specific industry and market. It is also very important to identify whether they have any impending lawsuits or legal issues as well as disputes or liabilities, which runs the risk of potentially affecting their partnership with you.

(iv) Ensure that your views align:

It’s a significant part of any partnership to be on the same page as your partner. Therefore, you must ensure that your goals, values and vision are the same as your potential partner. It is also important to analyse their strengths, weaknesses and threats as a partner. This will help you better understand whether you are compatible with your partner, in order to ensure a successful partnership.

(v) Doing a test-run:

The last step is to conduct a test-run with your potential partner, in order to cover all your bases. This may include sharing your system, resources and tools with your potential partner and have them do the same.

These are some basic steps to use when performing due diligence on a potential partner.

Are there industry-specific regulations and standards that we need to be aware of?

Yes, there are separate regulations and standards for each industry, with different rules applying to the food industry, the garments industry, the agriculture industry, the electronics industry, and many more. Each regulations and standards is specific to a certain industry, with provisions available for every one of them.

What are the prevailing market trends and potential challenges in our industry in Bangladesh?

The legal sector in Bangladesh is much less adaptable and is incredibly hesitant to accept new things and/or concepts. Even where there are provisions for certain procedures or concepts, in practice, it can often be seen that the procedures are not readily accepted by the courts. One such example is the concept of digital signatures. Under the Information and Communication Technology Act 2006, digital signatures are recognised by the law and courts. However, in practice, it is still not properly recognised by the courts. The legal sector is incredibly paper heavy, and hence, digitalisation is still at a very nascent stage.

In addition, sexual offence cases are still viewed as taboo in Bangladesh, as well as cases related to the LGBTQ+ community. The legal sector’s thinking is not as expansive as it ought to be regarding these types of cases. Female representation is also significantly low in the legal sector.

With regard to current market trends, the start-up sector is booming in the industry at the moment, leading to companies seeking legal help with company incorporation and establishment. Joint venture agreements are also very common nowadays, with more and more companies executing them. Companies today are far more willing to adhere to legal compliance, which has led to them seeking legal help in recent years compared to the previous ones.

Asia Pacific 2024 Legal 500 data: China

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Asia Pacific 2024 Legal 500 data: Singapore

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Doing business in Singapore

Why do business in Singapore?

The question you should be asking is: ‘why not?’ Singapore continues to lead the way as the world’s best place to do business and boasts a business-friendly environment and competitive tax regime, making it an attractive destination for businesses looking to expand in the Asia Pacific region – Economic Intelligence Unit 2023 rankings.

Tax efficient

The competitive tax system in Singapore is one of the key reasons for setting up a business in Singapore. Corporate tax rate is capped at 17% on a company’s chargeable income and Singapore follows a single-tier corporate tax system where income that has been taxed at the corporate level will not be imputed to the shareholders (ie dividends are tax-free). Capital gains are not taxed. Many industries also enjoy additional tax benefits on set-up and for an initial period.

Strategic location and gateway to Southeast Asia

Singapore’s strategic position in the heart of Southeast Asia offers foreign investors and businesses crucial access to the Southeast Asian market. The country is situated in an ideal location for businesses to set up their regional headquarters as it is well-equipped to help investors navigate the challenges and opportunities present in the Association of Southeast Asian Nations (ASEAN) markets, with its efficient procedures, integrated supply chain networks and close cultural and linguistic connections with the surrounding countries of ASEAN and the rest of Asia. Travel connectivity through Asia and the rest of the world facilitates face-to-face meetings when those are required.

Highly educated and diverse labour force

The highly educated and productive workforce in Singapore plays a critical role in the sustainability of the economy. As Singapore is primarily a knowledge-based economy, its labour force is recognised for its high level of education, technical proficiency, and diligent culture. Singapore’s flexible immigration policies based on meritocracy have also encouraged the relocation of foreign talent to Singapore, creating a competitive, diverse, and multiracial pool of talent in the workforce.

Political and economic stability

The political and economic stability and rule of law in Singapore have made it a prominent financial hub in Asia, creating an ideal environment for businesses to grow and thrive in Singapore.

Excellent infrastructure and high quality of life

According to the Global Peace Index 2023 report, Singapore has been ranked the sixth most peaceful country in the world. Besides safety, the country offers state-of-the-art infrastructure, affordable and efficient public and private transportation, excellent healthcare, and a world-class education system for residents, making it one of the top choices in the Asia Pacific region for foreign talent to set up businesses and relocate to with their family.

What are some of the available/common investment structures?

As one of the leading financial services hubs, Singapore offers immense opportunities to investors and fund managers around the world including a variety of legal entities and arrangements for different types of investments. The common structures are:

Private limited company

A private limited company is a type of limited liability company which has a separate legal personality from its shareholders and directors. This means that it is subject to corporate tax, can sue or be sued and is able to own property or assets in its own name. It can be used to establish a fund and is generally subject to strict accounting and auditing requirements, compliance of which creates a credible image to investors and financial institutions alike.

The primary advantages of setting up a private limited company in Singapore include no restrictions on foreign ownership, limited shareholders’ liability, and ease of raising capital.

Variable capital companies

Singapore’s Variable Capital Company (VCC) is a corporate structure introduced in January 2020 used to set up funds through a corporate entity. These investment funds typically comprise private equity, venture capital and/or hedge funds, illustrating the diversity in such investment portfolios. In Singapore, all VCCs must be managed by a permissible fund manager.

Some benefits of setting up a VCC in Singapore include flexibility in structuring funds and operational flexibility, cost savings, the option of re-domiciling foreign investment funds in Singapore while maintaining the privacy of its owners.

Family offices

In recent times, Singapore has become an attractive country for ultra-high-net-worth families to establish family offices. According to the 2023 Global Family Office Compensation Benchmark Report prepared by KPMG Private Enterprise, Singapore is home to an estimated 59% of family offices located in Asia. Besides managing the assets of the affluent, family offices also develop long-term investment strategies for wealth preservation and estate planning while enjoying many tax incentives.

What are some recent developments and growth areas?

Amidst a series of transformative global events that have rocked the world including continued geopolitical tensions, rising inflation and interest rates, and increased cross-border regulation, certain developments and growth areas have emerged in Singapore.

Significant Investments Review Bill

The Significant Investments Review Bill (the Bill), which was passed on 9 January 2024, seeks to introduce ownership and control restrictions over entities pivotal to Singapore’s national security interests.

An entity may be subjected to the Bill if it satisfies any of the following: (a) it was incorporated, formed, or established in Singapore; (b) it carries out any activity in Singapore; or (c) it provides any goods/services to any person in Singapore, and the authorities deem it necessary in the interest of Singapore’s national security for the entity to be subjected to the Bill.

Under the Bill, prospective investors must notify the authorities after being a 5% controller and obtain regulatory approval prior to becoming a 12%, 25% or 50% controller, an indirect controller or acquiring as a going concern (parts of) the business or undertaking. Furthermore, regulatory approval must be sought for the appointment of key officers and for the voluntary winding up/dissolution of any entity subjected to the Bill.

Singapore as ASEAN’s fintech hub

Singapore continues to outperform its regional peers and has cemented itself as Asia’s fintech hub. Singapore’s fintech sector attracted a staggering S$34bn in venture capital investments from 2019 to 2022, making it the leader in Southeast Asia.

In November 2023, the Monetary Authority of Singapore (MAS) also unveiled Orchid Blueprint, a protocol outlining the necessary technological infrastructure for future digital money transactions. MAS has also rolled out a pilot scheme involving the issuance of wholesale Central Bank Digital Currencies (CBDC) for interbank settlement with an intention to potentially expand the use of CBDC to cross-border securities transactions.

Sustainability reporting

As the global effects of climate change become increasingly pronounced, the sense of urgency of climate action has grown exponentially, leading to increased legal and regulatory scrutiny on corporate environmental responsibilities.

Following a public consultation in 2021, the Singapore Exchange (SGX) has introduced a phased approach to mandatory climate reporting based on recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Specifically, between 1 January 2024 and 31 December 2024, annual climate reporting is mandatory for SGX issuers in the following industries: (a) financial; (b) agriculture, food and forest products; (c) energy; (d) materials and buildings; and (e) transportation. For other issuers, climate reporting is required on a ‘comply or explain’ basis.

The sustainability report must address the primary components as follows: (a) material environmental, social and governance factors; (b) climate-related disclosures consistent with the TCFD recommendations; (c) policies, practices and performances; (d) targets; (e) sustainability reporting framework; and (f) board statement and associated governance structure for sustainability practices.

What government incentives are there?

As part of Budget 2024, the Singapore government introduced measures to support high-level initiatives to encourage sizable investments in Singapore such as the Refundable Investment Credit (RIC) scheme. To ensure that Singapore’s tax incentives remain competitive globally, additional concessionary tax-rate tiers have also been announced for the Development and Expansion Incentive, the Intellectual Property Development Incentive, the Global Trader Programme, the Finance and Treasury Centre initiative, and the Aircraft Leasing scheme.

With the RIC, companies can receive governmental support from each qualifying expenditure category (including manpower and capital expenditure costs) which can be used to offset their corporate income tax. Under the RIC, companies that have employed at least one local employee in 2023 will receive at least S$2,000 in cash payout capped at S$40,000. To further ease businesses’ compliance burden, the government will also expand the scope of qualifying expenditure of the renovation or refurbishment expenditure to include designer fees or professional fees. The government is expected to release more details on the RIC in the third quarter of 2024.

What are some challenges?

Singapore has successfully reinforced its status as Asia’s leading business destination, hosting regional headquarters for 4,200 multinational firms, surpassing Hong Kong. Despite this success, Singapore faces a new set of challenges as its success has inadvertently caused it to become entwined in global political complexities and susceptible to foreign interference arising from its status as a business hub for multinational firms from major global powers.

In 2023, Singapore’s reputation and standing as an ‘ultra-clean’ financial hub took a hit when one of the world’s largest cases of money laundering, reportedly with assets seized worth over S$2.8bn, was uncovered. To strengthen investors’ trust and confidence in Singapore as a robust, principled, and high-quality financial centre, an inter-ministerial committee will be set up to review and reinforce the government’s anti-money laundering controls and strategies. In addition to the existing measures put in place by the Accounting and Corporate Regulatory Authority overseeing the incorporation of companies in Singapore, there will undoubtedly be increased rigour in bank account opening, anti-money laundering and compliance checks and due diligence processes to be strictly enforced by gatekeepers in various sectors including financial institutions, corporate service providers, and property developers, just to name a few.

In February 2024, the Singapore government invoked the Foreign Interference (Countermeasures) Act (FICA) for the first time against a Hong Kong-born businessman just shortly after FICA took effect. With the Ministry of Home Affairs having assessed that the person is susceptible to being influenced by foreign actors and potentially advancing their interests, he has been designated as a politically significant person who must comply with transparency requirements to make disclosures of political donations exceeding S$10,000 and declarations of his foreign affiliations and migration benefits.

To keep pace with evolving risks and trends that Singapore is exposed to as a global financial hub, it is evident that the government is on heightened alert and ever more cautious with managing geopolitics, foreign influences, and risks in the city-state.

What are some of the forums available for dispute resolution?

Singapore’s reputation as an international dispute resolution hub underscores its commitment to fostering a business-friendly environment conducive to the needs of foreign investors. Complementing the excellent infrastructure and ease of doing business mentioned above, Singapore offers a secure and predictable operating environment. Central to this is its comprehensive suite of dispute resolution mechanisms which cater to the diverse needs of businesses operating on a global scale. In addition to the local courts, the Singapore International Commercial Court is a specialised forum for resolving complex international disputes, combining the advantages of arbitration with the principles of international commercial law. The Singapore International Arbitration Centre (SIAC) serves as a leading arbitral institution, renowned for its neutrality and enforceability of awards. With a supportive legal framework and judiciary, the SIAC has become the choice for parties seeking confidential resolution of their disputes. Finally, the Singapore International Mediation Centre plays a pivotal role in facilitating mediation for commercial disputes, promoting consensual and cost-effective solutions tailored to the parties’ needs.

By offering a comprehensive range of dispute resolution options, Singapore provides businesses with access to the most suitable mechanisms to safeguard their interests and mitigate risks. As businesses increasingly prioritise efficiency, cost-effectiveness, and enforceability in dispute resolution, Singapore’s legal infrastructure satisfies those needs and reaffirms its status as a preferred destination for doing business.

Further information

Our lawyers at Quahe Woo & Palmer are adept and experienced in advising on the formation of businesses looking to establish a presence in Singapore and the Asia Pacific region and structuring, establishing, and operating different kinds of funds. Besides representing corporate and institutional clients on a wide range of local and regional projects, we also advise ultra-high-net-worth individuals, families and family offices on asset protection, estate planning, business and investments structuring and family governance matters, and manage disputes in all dispute resolution forums available in Singapore.

Should you have any queries as to how the regulatory landscape and recent developments in Singapore may affect your business or other matters, please do not hesitate to reach out to us and we will be delighted to assist with your legal needs in Singapore.

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