Registration of new firms in Bangladesh declined 9 per cent year-on-year to 13,480 in the just-concluded fiscal year of 2021-22 owing largely to the persisting economic uncertainty at home and abroad, official figures showed.
The fall came after it rose to an all-time high of 14,826 in 2020-21, shrugging off the impacts of the coronavirus pandemic, according to data from the Office of the Registrar of Joint Stock Companies and Firms (RJSC).
The office of the RJSC is mandated to provide name clearances and registration to all public companies, private companies, liaison offices or branches of foreign companies, trade organisations, societies and partnership firms.
In FY22, entrepreneurs secured registration to establish 10,817 new companies, down 10.78 per cent from 12,125 a year ago.
Some 254 societies registered with the RJSC, a decrease from 317 in FY21. The number of partnership firms that availed registration stood at 2,268 last fiscal year, again a decline from 2,359 in FY21.
In a promising sign, 124 one-person companies, also known as OPCs, took registration to launch their operations in FY22 — nearly a year after the government amended the Companies Act (Bangladesh) to give a boost to entrepreneurship, draw investors and support the growth of small and medium enterprises.
In FY22, entrepreneurs secured registration to establish 10,817 new companies, down 10.78 per cent from 12,125 a year ago
OPC means a company formed with only one person as a member, unlike the traditional private companies with at least two members. In November 2020, the parliament passed the law.
Sheikh Shoebul Alam, registrar of the office of the RJSC, says the number of firm registrations might have fallen given the current global and local scenarios.
“But we are trying to keep up the momentum we achieved in the fiscal year of 2020-21,” he said, adding that his office is removing the barriers that people face in setting up businesses.
All of the services needed to establish businesses in Bangladesh are provided online by the office of the RJSC, according to the registrar.
In Bangladesh, there are 272,598 companies registered with the office of the RJSC. They include 3,631 public limited companies, 197,564 private limited companies, 1,013 liaison offices of foreign companies, 53,600 partnership firms, 1,159 trade organisations, and 15,507 societies.
In FY22, the state-run agency earned Tk 296 crore, the highest on record and an increase of around 38 per cent from Tk 215 crore generated a year ago.
Non-tax revenue brought in about Tk 159 crore, stamp duties fetched Tk 112 crore, and value-added tax raised Tk 23 crore for the office of the RJSC.
M Masrur Reaz, chairman of the Policy Exchange of Bangladesh, a private sector think-tank, says usually entrepreneurs don’t want to open new businesses during crises.
“Although the economy has reopened following the easing of Covid-19, the pandemic is not fully over yet while the war has added new uncertainty.”
The economist thinks there is the requirement for creating enabling policy and regulatory environment to attract new entrepreneurs, allow existing ones to expand their footprint and encourage informal businesses to become formal.
“If we can’t create new entrepreneurs, we will not be able to expand the base of the economy.”
According to the economist, informal businesses don’t want to go formal for the fear of hassles at the hands of tax officials.
“So, we have to work in this area.”
He recommended drawing up a supply chain linkage policy so that SMEs can keep supporting the larger firms and also grow themselves.
Reaz pointed out the entry barrier facing one-person companies.
As per laws, the minimum capital required to set up an OPC is Tk 25 lakh, whereas there is no minimum paid-up capital requirement for establishing public and private companies.
“As a result, we have not seen a higher number of the registration of one-person companies as we had expected,” said Reaz.
He called for formulating a new company act since the current one is not modern, flexible and supportive enough for the RJSC to carry out its responsibility and the formation of new firms.
“We have brought in some minor amendments to the Companies Act in recent years. But we need a modern company act.”
The RJSC should accelerate its digitalisation efforts and work in the areas of corporate governance of registered firms, he added.