Bangladesh Bank has eased rules for issuing and redeeming preference shares in favour of non-resident investors, allowing eligible companies to offer dividends of up to 5 per cent of face value without prior approval.
Under a circular issued by its Foreign Exchange Investment Department on Tuesday, resident manufacturing and service companies can issue preference shares to non-residents against foreign currency remitted through official banking channels.
Prior approval is required for dividends above 5 per cent, participating dividends or adjustable dividend arrangements. Companies must submit justified proposals through their authorised dealer (AD) banks.
Subscription agreements must specify the number of shares, face value or issue price in taka, dividend rate, tenure and redemption or conversion terms.
Shares must be issued at par, with no company valuation required for issuance or redemption. However, where conversion into ordinary shares is allowed, their fair value must be determined under the method prescribed in a Bangladesh Bank circular issued on 8 March 2026.
AD banks must report each issuance to the central bank within 14 days, submitting the company’s memorandum and articles of association, Registrar of Joint Stock Companies and Firms-endorsed Form XV and proof of foreign currency encashment.
Dividends and redemption proceeds can be remitted abroad without prior approval, subject to foreign exchange and tax rules. Remittances must pass through the AD bank that received the original investment and return to the country from which the funds originated. AD banks must submit post-facto reports for each redemption instalment within 30 days.
The circular bars additional interest or compensation on unpaid principal or accrued dividends after the due date or expiry of the shares. Non-residents may reinvest dividends in ordinary shares of the same or another company at fair value, subject to regulations.
AD banks must retain tax deduction certificates and documents related to double taxation avoidance agreements. A change of AD bank requires a no-objection certificate from the existing bank.
Fully convertible and irredeemable preference shares will be treated as equity capital. Companies and AD banks must comply with know-your-customer, anti-money laundering, counter-terrorist financing and tax requirements.
Issued under Section 20(3) of the Foreign Exchange Regulation Act, 1947, the circular took effect immediately.
