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Dhaka: Bangladesh Bank has issued new guidelines on the issuance of preference shares in favour of non-resident investors, payment of dividends, conversion into ordinary shares and repatriation of investment proceeds, aiming to attract more foreign investment into the country.
Under the new guidelines, companies will not need prior approval from the central bank to declare dividends of up to 5 per cent of the face value of preference shares issued to non-resident investors. However, prior approval will be required if the dividend rate exceeds this limit.
The Foreign Exchange Investment Department (FEID) of Bangladesh Bank issued a circular in this regard on Tuesday (November 3).
According to the circular, any resident company operating in the country’s manufacturing or services sector may issue preference shares in favour of non-resident or foreign investors. However, such issuance must comply with the Companies Act 1994, applicable rules and regulations of the Bangladesh Securities and Exchange Commission (BSEC), and the company’s memorandum and articles of association.
The investment proceeds against preference shares must be brought into Bangladesh in foreign currency through legitimate banking channels.
A subscription agreement must be signed between the issuing company and the non-resident investor. It must clearly specify the number of shares, face value, issue price, dividend rate, tenure, redemption terms and conditions for conversion into ordinary shares. Where required, approval from Bangladesh Bank must also be obtained.
The circular states that prior approval from Bangladesh Bank will not be required if the dividend rate on preference shares does not exceed 5 per cent of their face value. Approval will be mandatory for any higher rate. The same requirement will apply to preference shares carrying participating or adjustable dividend rates.
For this purpose, an application explaining the rationale for the proposed dividend rate must be submitted to the FEID of Bangladesh Bank through the nominated authorised dealer (AD) bank.
Following the issuance of preference shares, the concerned AD bank must submit a report to Bangladesh Bank within 14 days. The report must include the company’s memorandum and articles of association, the RJSC-approved Form 15 or return of allotment of shares, an encashment certificate in the prescribed format and the online foreign exchange transaction identification number. Schedule X must also be submitted, where applicable.
The new guidelines require preference shares to be issued at face value. As a result, company valuation will not be necessary for their issuance or redemption. However, where preference shares carry an option for conversion into ordinary shares, the fair market value of the ordinary shares must be determined to establish the conversion ratio.
In this regard, the procedure prescribed in FEID Circular No. 01, issued by Bangladesh Bank on March 8, 2026, must be followed.
If preference shares are converted into ordinary shares, the concerned company must notify Bangladesh Bank through its AD bank. It must also submit the required documents in accordance with paragraph 2(A), Chapter 9, Volume 1 of the Guidelines for Foreign Exchange Transactions, 2018 edition.
The circular also provides important instructions on the repatriation of dividends and investment capital by foreign investors. If preference shares are issued in compliance with Bangladesh Bank’s regulations, the AD bank may remit dividends and redemption proceeds to foreign investors without prior approval from the central bank, subject to compliance with applicable foreign exchange regulations and tax payment requirements.
However, if redemption proceeds are remitted in instalments, the AD bank must submit a subsequent report to the FEID of Bangladesh Bank within 30 days of each remittance. The report must be accompanied by the TM form containing the online foreign exchange transaction identification number and other required documents.
The central bank has also specified the banking arrangements to be followed for repatriating foreign investors’ funds. Dividends and redemption proceeds must be remitted through the same AD bank that received the original investment in Bangladesh. The concerned AD bank must also maintain year-wise records of dividend payments and redemption proceeds remitted abroad.
Besides, dividends and redemption proceeds must be sent to the non-resident investor in the same country from which the original investment was transferred to Bangladesh.
If an instalment payment on preference shares falls due, or the tenure of the shares expires, but any portion of the principal or accumulated dividends remains unpaid and has not been remitted abroad, no additional interest or compensation may be paid or claimed on the outstanding amount.
However, dividends earned on preference shares may be reinvested in ordinary shares of the same company or another company. In such cases, the fair market value of the ordinary shares concerned must be taken into consideration.
Bangladesh Bank has also emphasised the need to maintain tax-related documents when remitting dividends abroad. The concerned AD bank must preserve auditors’ certificates confirming the deduction of tax at source (TDS) and determining the amount eligible for remittance.
Where tax benefits are claimed under a Double Taxation Avoidance Agreement (DTAA), the necessary certificates from the National Board of Revenue (NBR) and other supporting documents must also be kept on record. These documents must be readily available for inspection by Bangladesh Bank officials whenever required.
If a company wants to change its nominated AD bank, it must obtain a no-objection certificate (NOC) from the existing bank. All documents held by the previous bank relating to the remittance of dividends abroad must be transferred to the new bank. The change must also be reported to Bangladesh Bank.
In the case of redemption of preference shares, two copies of Schedule X must be submitted to the FEID of Bangladesh Bank both before and after payment of the final instalment. The first copy must be submitted immediately before the final instalment is paid, while the second must be submitted after the payment.
The second Schedule X must reflect the removal of the names of preference shareholders. Relevant financial statements relating to both stages must also be submitted.
Bangladesh Bank said fully convertible and irredeemable preference shares would be treated as equity capital.
It also instructed AD banks to ensure proper compliance with know-your-customer (KYC) requirements, anti-money laundering (AML) rules, counter-terrorist financing (CFT) regulations, tax laws and other relevant legal and regulatory requirements when accepting such investments and facilitating the repatriation of funds.