The process of registering one-person company (OPC) is finally starting this month amid disappointment over a minimum paid-up capital requirement of Tk 2.5 million.
The Registrar of Joint Stock Companies and Firms (RJSC) has developed software for its website to begin registration online in mid-March.
But experts said the minimum capital limit, probably the highest of all countries that introduced OPC, might be the most upsetting feature in the provision.
This ceiling should be revised and fixed at a rational limit to attract small and new start-up companies.
RJSC deputy registrar Abu Essa Mohd Mostafa Bhuiyan said they had technically enabled their website and apps for OPC registration.
He hoped it would be launched on March 15.
On November 18 last year, parliament passed the 'Companies (Second Amendment) Bill-2020' with a provision of formation of single-person companies.
The new rule was framed to attract greater investment, do better in the global ease-of-doing business ranking and formalise informal business.
A "natural person" can start an OPC by registering online at the RJSC.
According to the bill, a single-person company has to have a minimum paid-up capital of Tk 2.5 million to a maximum of Tk 50 million.
The minimum turnover of that company in the immediate past year will be Tk 10 million to Tk 500 million.
If the paid-up capital and turnover exceed the amount, the OPC can be transformed into a private limited company or in some cases into a public limited company.
An OPC has to hold at least one meeting of the board of directors every year.
If directors and the main person of such firms is one person, it will get relief from holding board meetings and decision-making processes.
If that one person dies, as per the bill, the nominated person will get all the shares.
However, the shares of an OPC may be transferred to another natural person only.
The concept of OPC has been legally recognised in the UK, the USA, China, Singapore, Turkey, the UAE, Pakistan, Nepal and Sri Lanka over the years.
In most countries, there is no minimum paid-up capital requirement. Countries like India, Pakistan and Nepal have 100,000 rupee requirement of minimum capital for OPC in their respective currencies.
Policy Research Institute (PRI) executive director Ahsan H Mansur said the amount is certainly high.
"This provision of minimum capital should not be in the Act. Rather, this provision should be in the rules so that rule can be changed when needed."
In the case of OPC, Mr Mansur said, rules should be added to reduce the paid-up amount in phases.
He cautioned that such high paid-up capital might discourage small entrepreneurs from opening a company.
"Only a certain privileged class, who don't want to share their business with anybody, can open a company under the OPC (facility)," said the analyst.
Policy Exchange of Bangladesh chairman M Masrur Reaz said the Tk 2.5-million paid-up capital provision spoiled the spirit and objective.
The OPC has incorporated in the companies act to formalise more and more businesses in the economy and remove barriers to starting formal business, he said.
Mr Reaz, a former senior economist of the World Bank Group, had close association in the consultation process of the OPC provision and reform of the Act.
Increasing entrepreneurship, attracting more investment, boosting formal enterprises instead of trade license based informal or semi-formal business were the key objectives of this Act, he cited.
Adding Tk 25 million as minimum paid-up capital requirement is not easing a start-up, it is rather a barrier to a business.
"If giant business entities like Unilever can open a new company, Mr Reaz said, "it would need a minimum Tk 500,000 paid-up capital only."
"It's utterly unfair when Unilever can open a business with Tk 500,000 minimum paid-up capital but a new start-up requires Tk 2.5 million."
Mr Reaz said minimum paid-up capital should be left for entrepreneurs as OPCs or such private limited companies are not taking public money.
"Banks are taking public money. So, banking enterprises require Tk 4.0 billion as paid-up capital; that's fine and justifiable."
Centre for Policy Dialogue research director Dr Khondaker Golam Moazzem said the Act should be revised after monitoring developments or application of OPC.
The OPC was primarily incorporated targeting start-ups, which have basically lower capital base, he mentioned.
"But with this provision, they can't register under the OPC," Mr Moazzem went on to say.
"Now what done is done. The government should monitor at least one year. If it fails to achieve the target to attract a certain group, there should be a revision."
Mr Moazzem said the government should review both minimum and maximum capital limits.
The upper limit of Tk 50 million might also be used as a tool of abuse, it should be reduced," he concluded.