Foreign Exchange Investment Department
|FEID Circular No.- 1||Date: May 06, 2018|
All Authorized Dealers in
Foreign Exchange in Bangladesh
Transfer of shares and repatriation of sale proceeds of shares in favor of non
resident in private/public limited companies not listed with stock exchanges.
Please refer to Paragraph 3(B), Chapter 9 of the Guidelines for Foreign Exchange Transactions- 2018 (GFET) Volume 1 on the captioned subject.
02. Paragraph 3(B), Chapter 9 of GFET stated that the sale proceeds of nonresident equity investment in public limited companies not listed with the stock exchanges and private limited companies are repatriable abroad with prior Bangladesh Bank approval as on the date of share sales, based on latest audited financial statements. In accordance with GFET Bangladesh Bank would accept fair value of the shares as on the date of sale based on appropriate combination of three valuation approaches (viz. net asset value approach, market value approach and discounted cash flow approach) depending on the nature of the company.
03. To bring rationalization and simplicity in valuation process, it has been decided that-
a) In case of transfer of shares from non-resident to resident in public limited companies not listed with the stock exchanges and private limited companies, the Memorandum of Understanding (MoU) for share sale-purchase agreement between buyer and seller needs to be concluded on receipt of approval from Bangladesh Bank regarding determination of the fair value of shares. Bangladesh Bank will accept the fair value of the shares as repatriable abroad /or for re-investment in Bangladesh determined as on the date of MoU for share sale-purchase agreement based on the latest audited financial statements of the target company. The fair value of the shares shall be determined by weighted average calculation of all the 3 (three) valuation approaches (viz. net asset value approach, market value approach and discounted cash flow approach) or on any of the suitable approaches depending on the nature of the company, having justified ground.The MoU shall be executed at the fair value approved by Bangladesh Bank, subject to observance of the following instructions-
(i) Permission requests for transfer of shares and repatriation of sale proceeds of shares shall be submitted to the Foreign Exchange Investment Department, Bangladesh Bank, Head Office, Dhaka with a Valuation report issued by a Merchant Banker licensed by Bangladesh Securities and Exchange Commission (BSEC) or a Chartered Accountant experienced in company valuation and listed by Bangladesh Bank and/or BSEC for auditing banks, financial institutions and listed companies;
(ii) Professional valuation report is not mandatory if the applied value for the repatriation does not exceed BDT 1.00 (One) million. Also such report is not mandatory in case the net asset value is higher than the deal value. In such cases Bangladesh Bank will work out the fair value of share based on the audited financial statements and the documents enclosed in Annexure-B of the target company;
(iii) The valuation certificates by eligible valuer will have to be supported by full explanation justifying the fair value arrived at. If not fully satisfied about appropriateness of the valuation arrived at, Bangladesh Bank reserves the right to reassess the value, based on financial statements submitted along with the application;
(iv) Authorized Dealer (AD) shall forward the permission request for repatriation of sale proceeds of shares in favor of non-resident only after being satisfied that the target company has complied with the provision of Paragraph 2(A) and 2(B), Chapter 9 of GFET regarding issue and transfer of shares in favor of or by non-resident.
b) Sale of shares owned by resident shareholder to non-resident is subject to fair value determined by Merchant Banker licensed by BSEC or a Chartered Accountant, for sales/transfer value of shares exceeding BDT 1.00 (One) million. Resident shareholder receiving payment against sales of shares shall submit valuation report to the AD and MoU for share sale-purchase agreement together with Form-C for encashment of inward remittances on account of sales proceeds of shares. AD shall report the share transactions to the Foreign Exchange Investment Department, Bangladesh Bank, Head Office, Dhaka giving details of documents within 14 days of transfer of shares as per Paragraph 2(B), Chapter 9 of GFET.
c) Transfer of shares from non- resident to non-resident is also subject to fair value of shares as pursuant to ‘b’ above. Within 14 days of the transfer of shares, target company shall arrange through AD to report to the Foreign Exchange Investment Department, Bangladesh Bank, Head Office, Dhaka as per Paragraph 2(B), Chapter 9 of GFET with copy of valuation report of shares and MoU for share sale purchase agreement.
d) The valuer shall maintain requirements regarding valuation in particular, though not exclusively, such as:
(i) A report and fairness opinion confirming that the valuation has been undertaken in accordance with the internationally best practices and that they have maintained the fundamental principles of ethical conduct namely integrity, objectivity, competence, confidentiality and professional behavior regarding the valuation;
(ii) The revalued amounts of assets and liabilities shall be included in the financial statements in accordance with the applicable provisions of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as adopted in Bangladesh;
(iii) The valuer shall be independent from the target company, its directors, auditors and other stakeholders;
(iv) The valuer shall be responsible for any anomalies in the valuation.
e) Annexure-A to this circular provides indicative guidelines for arriving at fair value.
f) Application to Bangladesh Bank shall also be supported by documents as noted in Annexure-B.
g) With the issuance of this circular, FE Circular No. 32, dated August 31, 2014 as contained at appendix 6/3 of GFET shall stand amended.
Please bring the instructions of this circular to the notice of all your concerned clientele.
(Md. Ali Akbar Faraji)
Deputy General Manager
Phone : 9530352