Bangladesh’s company registrar has approved first three ‘one-person company (OPC)’ firms under a new business-ownership model that is expected to lure investments from home and abroad.
Business promoters think the modus operandi for one-man company would diversify company incorporations with smaller ventures becoming formal firms, ushering in a boom-time for business if a few perceived hurdles are removed.
Such type of company incorporation is believed to attract investment from both local and foreign entrepreneurs as there are many entities having ownership of single natural person.
And — adding a deeper dimension to the country’s trade-and-business ambiance — this reform may help improve upon the ease-of-doing-business status of Bangladesh.
The new-generation OPCs registered with the Registrar of Joint Stock Companies and Firms (RJSC) are: JR Aviation Services OPC, Boalia Services OPC and Akkas Uddin Mollah OPC.
“This is a new type of company owned by a single person and we are allowing it as per amendment of the Companies Act 1994,” said one senior official at the RJSC.
He hopes this will attract both foreign and local investments at a time when the total private-investment scenario remained sluggish for covid consequences.
There are few more such companies in the pipeline, according to RJSC.
Many foreign companies had failed to establish successful ventures in Bangladesh due to absence of the provision for forming OPCs.
OPC is a company formed with only one or single person as its board member and does not require having multiple board members.
The Companies (2nd Amendment) Bill 2020 was passed in parliament in November 2020 making legal provision for the formation of OPCs in the country, which are available in India, Pakistan and other economies.
An OPC can be formed by a single natural person instead of the existing two or more natural persons. Company is usually considered an artificial person or entity and as a going concern.
This new option is believed to promote the current status of sole-proprietorship business as such aspirants could not turn their entities into structured ones for a lack of the provision.
According to the Companies Act, an OPC has to have a minimum paid-up capital of Tk 2.5 million to maximum Tk 50 million. The minimum turnover for the firms should be Tk 10 million in the immediate-past year.
Such a company has to hold at least one meeting of the board a year. If the sponsor of an OPC dies, then, as per the memorandum concerned, the nominated person will get its full shares.
The law mentions that, for handover of the shares of this kind of company, the presence of the particular person signing the handover papers through the commission has to be ensured.
Rajib Ahmed Bhuyan, the owner of JR Aviation Services — the first entity incorporated as OPC in Bangladesh — explains why and what for he opted for transmutation of his existing business proprietorship. “The OPC system will better facilitate my business,” he says.
Mr Bhuyan told the FE that his manpower business had faced some legal problems and hopes that the switchover to OPC will remove that hurdles.
In the meantime, some people who are familiar with the OPC methodology told the FE that the minimum paid-up capital of an OPC (Tk 2.5 million) is too high for the small entrepreneurs. It should be open in order to formalise the informal entities.
Dr Masrur Reaz, chairman at the Policy Exchange of Bangladesh — a local think tank — said: “The high paid-up capital will not attract possible entrepreneurs to be listed with the authority.”
He thinks if there was no such barrier, many enterprises would show their interest in entering into formal business with registered company.
“With no restrictions on the paid-up capital, many small enterprises could enter into the formal economy,” he said.
Ferdaus Ara Begum, who works as the chief executive officer at Business Initiative Leading Development (BUILD), proposes that the minimum paid up- capital for incorporating OPC should be kept open.
The objective of launching such a system is to formalise the informal small entities. “The objective of the OPC has been violated due to the high paid-up capital,” she says.
Ms Ferdaus told the FE correspondent that they had kept raising their voice against the high paid-up-capital provision. “We met the Commerce Minister earlier. He had also assured us about it.”
The BUILD chief executive, however, noted with satisfaction that the government has reduced the corporate tax for the OPC to 25 per cent.
