Before you register company in Bangladesh, it is important to understand the types of companies available. Both limited companies and public limited companies are regarded as limited liability companies as they are subjected to limited liability. This means that shareholders and owners are regarded as separate legal entities from the business; shareholders and owners will not be held liable for the debts and liabilities incurred by the business except for the amount of shares they hold in the company. A limited company refers to a private limited company, and these two terms can be used interchangeably. The main difference between a limited company and a public limited company in Bangladesh is that a public limited company can be listed on a stock exchange.
They also differ in terms of company name, the number of shareholders and directors, the requirements of the Certificate of Commencement of Business, public disclosure of financial information, share transfer, restriction on managing directors, prohibition of voting by interested directors and the rights of preference shareholders and debenture holders.
9 key differences between a limited company and public limited company in Bangladesh
#1 Company name
- The name of a private limited company must end with a “private limited” while the name of a public limited company can simply end with a “limited”.
#2 Number of shareholders and directors
- To set up a limited company in Bangladesh, you will need at least 2 directors and 2 shareholders. However, a public limited company will require at least 3 directors and 7 shareholders to set up. While the maximum number of shareholders in a limited company is 50, there is no cap on the number of shareholders in a public limited company. Both a limited company and a public limited company do not have nationality or residence requirement for directors or shareholders.
#3 Ability to issue shares to the public in public limited company in Bangladesh
- Unlike a Bangladesh limited company, a Bangladesh public limited company can choose to be listed on the Dhaka Stock Exchange or the Chittagong Stock Exchange. This will allow the company to raise capital by issuing shares and debentures to the public. Generally, it is easier for a public limited company to raise additional funds for growth, investment and acquisition as they can simply issue shares in a stock market if they have undergone an Initial Public Offering (IPO). This is not possible for a private limited company.
- Once a public limited company is listed on the stock exchange, any investor can buy and sell shares of that company on the stock exchange.
#4 Requirement of Certificate of Commencement of Business
- Before a public limited company starts its operation, it must first obtain a Certificate of Commencement of Business to show that it is authorised to commence business and complete its business registration in Bangladesh. This is in contrast to a limited company which can simply start its business after receiving its Certificate of Incorporation from the Registrar of Joint Stock Companies and Firms (RJSC).
#5 Public disclosure of financial information
- While it is mandatory for all companies in Bangladesh to be audited by a Chartered Accountant (CA) in Bangladesh, there is no requirement for a private limited company to disclose its audited financial statements to the public. However, a public limited company that is listed on a stock exchange in Bangladesh is required to disclose its audited annual report consisting of both the auditor’s note and all financial statements to the public. This is a requirement by the Bangladesh Securities and Exchange Commission (BSEC) to give potential investors a better insight on the company’s financial state before they choose to invest in the shares of the company.
#6 Share transfers
- When a limited company drafts its Articles of Association, it may set some restrictions to share transfers between shareholders. The procedures required for share transfers between shareholders must be stipulated in the Articles of Association when the company is set up. As such, shareholders of a limited company are only free to transfer shares according to the rules stated in the Articles of Association. Restrictions that are usually included in the Articles of Association include mandating that shares are first offered to existing members in the limited company, before being transferred to someone outside of the company.
- In contrast, shares of a public limited company that is listed are freely transferable. This is because anyone can buy or sell a share of the company on the stock exchange; the public limited company has no control over who can buy or sell the shares of the company.
#7 Restriction on managing director
- A managing director of a public limited company cannot be the managing director or manager of another company. He or she also cannot hold office for more than 10 years. In addition, the annual remuneration of the managing director of a public limited company will be based on a fixed percentage of the net profit of the company. In the case that there are insufficient profits, the company must pay a minimum remuneration fee to the managing director. All these restrictions do not apply to a limited company unless it is a subsidiary of a public limited company.
#8 Prohibition of voting by the interested director in public limited company in Bangladesh
- In a public limited company, a director who has an interest in a contract or arrangement is not allowed to vote in favour or opposition to the contract or arrangement during the company’s meeting. Any director who does not adhere to this provision stipulated in the Companies Act will be liable to a fine of not more than five thousand taka. Similarly, this restriction does not apply to a limited company.
#9 Right of preference shareholders and debenture holders
- Both holders of preference shares and debentures of a private limited company have the same right as ordinary shareholders to receive and inspect the balance sheets and profit and loss account of the company, the reports of the auditors and other relevant financial reports that are accessible to ordinary shareholders. Again, this restriction does not apply to a limited company.
Looking to set up a limited or public limited company in Bangladesh?
Generally, there are more restrictions to a public limited company as compared to a limited company because it is listed on the stock exchange. A private limited company can choose to be converted into a public limited company by registering with the RJSC. It will need to have at least 7 members and 3 directors, and the Board of Director must have agreed to this conversion. Similarly, a public limited company that has less than 50 shareholders can choose to be converted into a limited company by passing a special resolution to amend its Articles of Association to exclude the provisions required by a public limited company.
There are more limited companies as compared to public limited companies in Bangladesh. Typically, you will consider setting up a public limited company if your company size is large and you wish to raise capital by issuing shares. Tetra Consultants will recommend the type of business entity suitable for your Bangladesh company registration, based on your business structure, long-term goals and commercial activities.
To simplify the company registration process in Bangladesh, you can opt to engage the services of Tetra Consultants. Tetra Consultants provides you with a fast and simple way to register company in Bangladesh through our service package, which includes registration of your company with the RJSC; provision of local company secretary; application of trade license; opening of corporate bank account; tax registration; and annual accounting and tax services.
Contact us to find out more about how to register company in Bangladesh and we will revert within 24 hours.