Cenbank waives approval for foreign investors’ dividends up to 5%

The Bangladesh Bank has allowed resident companies in the country’s manufacturing and services sectors to issue preference shares to non-resident investors without prior approval for dividends of up to 5% of the shares’ face value.

The central bank issued a circular today (3 November), sending it to all authorised dealer (AD) banks dealing in foreign exchange.

Under the new rules, preference shares can be issued only against foreign currency remitted into Bangladesh through official banking channels. Companies must obtain prior Bangladesh Bank approval if the dividend rate exceeds 5% of the face value.

Preference shareholders receive dividends at a predetermined rate before ordinary shareholders. They also enjoy priority in recovering their investments if a company is liquidated, although they generally do not have voting rights.

The shares must be issued at face value, eliminating the need for company valuation at the time of issuance or redemption. However, if preference shares are converted into ordinary shares, the fair value of the ordinary shares must be determined under existing rules.

Fully convertible and irredeemable preference shares will be treated as equity capital, according to the circular.

Companies must submit the required documents and a report to Bangladesh Bank through their AD banks within 14 days of issuing preference shares. For redemption, banks must submit a post-facto report within 30 days of remitting the proceeds abroad.

Both dividends and redemption proceeds must be remitted to the investor’s home country through the same AD bank that received the original investment.

A Bangladesh Bank official said easing the requirement for prior approval to remit dividends and return capital would encourage foreign investors and reduce processing time at banks.