Bangladesh Bank has relaxed regulations governing the issuance of preference shares by local companies to foreign investors to attract more foreign investment into the country.

Under the new rules, domestic companies in the manufacturing and service sectors will no longer require prior approval from the central bank to issue preference shares to foreign investors, provided they meet specified conditions. Prior approval will also not be required for repatriating dividends and proceeds from share redemption if the prescribed requirements are fulfilled.

The central bank issued a circular on Tuesday, November 3, 2026, outlining the simplified procedures.

According to the circular, local companies must sign an agreement with foreign investors specifying the number of shares, face value, issue price in Bangladeshi taka, dividend rate, tenure, redemption terms and conditions for conversion into ordinary shares.

The investment funds must be brought into Bangladesh in foreign currency through legitimate banking channels.

Companies can issue preference shares with a dividend rate of up to 5% of the face value without prior approval from Bangladesh Bank. However, approval will be required through an authorised dealer (AD) bank if the dividend rate exceeds 5% or involves participating or variable-rate dividends.

Within 14 days of issuing the shares, the AD bank must submit the required documents to Bangladesh Bank’s Foreign Exchange Investment Department (FEID).

The circular also requires preference shares to be issued at face value, eliminating the need for company valuation for issuance or redemption purposes. However, if the shares are convertible into ordinary shares, their fair value must be determined in accordance with existing central bank guidelines.

Dividend payments and redemption proceeds must be repatriated through the same AD bank that facilitated the original investment and to the country from which the investment originated. The AD bank must report each redemption instalment to Bangladesh Bank within 30 days of its transfer.

The circular further allows dividends from preference shares to be reinvested in ordinary shares of the same company or another company.

It also states that investors cannot claim additional interest or compensation on outstanding capital or accumulated dividends if they fail to repatriate the funds within the stipulated period.

Fully convertible and non-redeemable preference shares will be treated as equity capital.