RegAlertRule · BB · 5 Feb 2020
FEID Circular No. 02: Regarding Share Money Deposit
Bangladeshi companies must complete share issuance formalities within 360 days of receiving funds from non-resident investors. Share money deposits cannot be used for interest-bearing financial instruments and must be applied solely to the company's main business. If conversion to shares is not completed within the 360-day period, the deposit is excluded from the equity component when calculating debt-to-equity ratios for loan permissions. Companies with existing share money deposits are required to finalize issuance within 360 days of the circular's date.
Foreign Exchange Investment Department
Bangladesh Bank
Head Office
Dhaka. www.bb.org.bd
FEID Circular No. 02 Date: 05 February 2020
All Authorized Dealers in
Foreign Exchange in Bangladesh
Dear Sirs,
Regarding Share Money Deposit
Attention of the Authorized Dealers (ADs) is invited to Para-2(A), Section-I, Chapter-9 of Guidelines for Foreign Exchange Transactions (GFET), 2018 which outlines the reporting requirements against issuance of shares by a Bangladeshi company in favor of non-residents within 14 (fourteen) days of issuance of shares. However, there is no time limit to complete the formalities of share issuance from the date of receipt of money from investors resulting in confusion among the bankers and foreign investors about the receipt, uses, accounting treatment and regulatory reporting. In this regard, following guidance is to be observed to protect the interest of foreign investors:
2. The company shall complete the formalities of issuance of shares within 360 days of receiving
money for this purpose;
3. Share Money Deposit must not be used in any purpose other than the main business of the
company i.e. the fund cannot be used in any interest/profit bearing financial instruments;
4. In case of calculating Debt Equity Ratio for according permission of foreign loan/foreign currency
loan to industrial enterprises and of Taka term loan to foreign owned/controlled company as per Para-4(C),
Section-1, Chapter-16 of GFET, 2018 etc. Share Money Deposit will not be considered as equity component
if the company fails to convert it into share within 360 days of such receipt. However, the company will show Share Money Deposit in their financial statements as per IAS/BAS;
5. If total share capital of the company exceeds the exemption limit as fixed by the Bangladesh
Securities and Exchange Commission (BSEC) after receiving Share Money Deposit, consent from BSEC has to be obtained. Besides, the companies having Share Money Deposit before the issuance of this circular are advised to complete the formalities of share issue within 360 days from the date of this circular. Please bring the above instructions to the notice of all your concerned constituents.
Yours Faithfully,
/-
(Abu Saleh Mohammad Shahab Uddin)
Deputy General Manager
Phone: +88-02-9530488
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