LIAISON OFFICE AND BRANCH OFFICE: DIFFERENCES

Publishes by The Daily Star on March 30, 2013 (Link Over)

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.