Bangladesh Bank has eased regulations governing the issuance and redemption of preference shares in favour of non-resident investors, allowing eligible companies to offer dividends of up to 5 per cent of the face value without obtaining prior approval from the central bank.
Under a circular issued by Foreign Exchange Investment Department on Tuesday, resident companies operating in manufacturing and service sectors can issue preference shares to non-resident investors against foreign currency remitted through official banking channels.
The move is expected to provide companies with greater flexibility in raising funds from non-resident investors while simplifying procedures for dividend payments and the repatriation of redemption proceeds.
According to the circular, companies can issue preference shares without prior central bank approval if the dividend rate does not exceed 5 per cent of the face value.
However, any proposal involving a higher dividend rate, participating dividends or adjustable dividend arrangements will require prior approval from the central bank, with proper justification submitted through the authorised dealer bank.
The subscription agreement between the issuing company and the non-resident investor must clearly specify the number of shares, face value or issue price in Bangladeshi taka, dividend rate, tenure and conditions for redemption or conversion.
The central bank has also simplified reporting requirements.
Authorised dealer banks must report the issuance of preference shares to Bangladesh Bank within 14 days, along with relevant documents, including the company’s memorandum and articles of association, RJSC-endorsed Form XV and evidence of foreign currency encashment.
The circular specifies that preference shares must be issued at par, and no company valuation will be required for their issuance or redemption.
However, where shares carry a conversion facility into ordinary shares, the fair value of the ordinary shares must be determined in accordance with the valuation methodology prescribed by an earlier Bangladesh Bank circular issued on 8 March 2026.
The circular also allows dividend payments and redemption proceeds to be remitted abroad without prior central bank approval, provided all applicable foreign exchange regulations and tax requirements are fulfilled.
For each redemption instalment, authorised dealer banks must submit post-facto reports to Bangladesh Bank within 30 days.
Remittance must be processed through the same authorised dealer bank that received the original investment, and proceeds must be repatriated to the country from which the original investment funds were sent.
The central bank has further clarified that unpaid principal or accrued dividends will not attract additional interest or compensation after the due date or expiry of the preference shares.
Non-resident investors will also be allowed to reinvest dividends in ordinary shares of the same company or another company at fair value, subject to applicable regulations.
Authorised dealer banks are required to maintain relevant tax deduction certificates and documents relating to double taxation avoidance agreements. Any change in the authorised dealer bank will require a no-objection certificate from the existing bank.
Bangladesh Bank said fully convertible and irredeemable preference shares will be treated as equity capital.
Issuing companies and authorised dealer banks must also comply with applicable know-your-customer, anti-money laundering, counter-terrorist financing and tax regulations.
Issued under the Foreign Exchange Regulation Act, the circular came into effect immediately.
