Bangladesh Bank eases dividend repatriation for foreign investors, no prior approval for preference shares up to 5 percent

Bangladesh Bank has simplified the process for foreign investors to repatriate dividends. From now on, dividends payable to foreign investors against preference shares of Bangladeshi companies can be sent abroad without the central bank's prior approval. The rules for issuing and redeeming such shares have also been relaxed.

Bangladesh Bank issued a new circular on the matter on Tuesday, 3 November. The circular clarifies the procedures and responsibilities for companies issuing preference shares, non-resident or foreign investors, and the banks concerned.

Under the circular, Bangladeshi companies may issue preference shares to non-resident investors at a dividend rate of up to 5 percent. No prior approval from Bangladesh Bank will be required in that case. After issuing the shares, however, the company must submit the necessary report to the central bank's Foreign Exchange Investment Department.

If a company wishes to issue preference shares at a dividend rate above 5 percent, it will need Bangladesh Bank's approval. To obtain it, the company must apply with an explanation of why the proposed dividend rate is reasonable.

The new instruction also simplifies the rules for sending abroad the dividends payable to non-resident investors against preference shares. Separate approval from Bangladesh Bank will likewise not be required for the redemption of such shares.

The circular also clarifies the provisions for converting preference shares into ordinary shares and the process for filing reports after a share issue.

Those concerned believe Bangladesh Bank's move will make the investment process in Bangladesh easier for non-resident investors. They also believe it will reduce administrative complexity in companies' capital raising and in the management of foreign investment.