Biz acquisition turns into duck registration hassle

To reduce time and costs, entrepreneurs now prefer to buy out sick or underperforming existing businesses rather than starting from scratch.

Many such acquisitions in the recent past have taken place in the RMG, textile, leather, and packaging and processing sectors.

Last year, Alif Group bought C&A Textiles, based in Chattogram, listed on the capital market, which had not been in production for a long time. Less than a year after the change of ownership, the factory resumed production after necessary repairs and the installation of new machinery.

Another company, Emerald Oil Industries Ltd, also resumed production of its edible rice bran oil in 2021 after a four-year hiatus, thanks to new investment from Minori Bangladesh Limited which acquired the plant.

About 8,000 of these businesses have changed hands in the last three years. In FY22, business acquisitions increased 12% year-on-year, according to the Registrar of Joint Stock Companies and Firms (RJSC).

Avoiding bureaucratic hassles is one of the main reasons why entrepreneurs opt for business acquisition, as it allows them to start their business activities more quickly, they say.

To start a business from scratch, they have to go through a lot of hassles and extra costs to get permission from different regulatory bodies due to bureaucratic entanglements, they point out.

Entrepreneurs say they must obtain dozens of clearances before setting up a new business, including business approval and a name clearance certificate from the RJSC, obtaining certificates from regulatory authorities and registration of a business identification number and VAT with the National Revenue Commission. This is why many large companies take over companies that have been out of business for a long time or are in poor financial health.

Rizwan Rahman, Chairman of the Dhaka Chamber of Commerce and Industry (DCCI), told The Business Standard: “This acquisition trend has largely been in the sectors of RMG, textiles, leather, packaging and processing”.

Md Azimul Islam, Managing Director of Alif Group which acquired C&A Textiles, told TBS: “We were able to start our operations in a very short time after acquiring the business. It would have taken at least three years to create a new company. .”

They repaired the factory, bought new machinery and started operating, he explained.

Building a new business from scratch means obtaining permission from various regulatory authorities, erecting structures and importing machinery, and then starting operation, which is very costly and time-consuming.

In a survey titled “Removing Time, Cost and Process Bottlenecks in Business Registration in Bangladesh”, Business Initiative Leading Development (BUILD) stated that to complete all business registration processes complicated and time-consuming business, an entrepreneur resorts to third-party services, forcing them to spend an additional 43% to open a new business.

The study found that RJSC registration requires 89% of third-party engagement, resulting in a 49% cost increase. In the case of obtaining a commercial license, 67% third-party engagement is required, which costs them an additional 32%.

The post-registration process is more difficult than pre-registration because more offline interactions are required, he noted.

Rizwan Rahman said, “The conventional business licensing and registration process is hectic as several agencies, such as RJSC, Municipal Corporation and NBR, are involved. And the number of agencies varies depending on the nature of the business and the investment.

Requiring full-fledged automation for business registration and license renewal for business mergers and takeovers, he said, to avoid all the hassle when starting a business, a platform National OSS service form is needed integrating all kinds of companies from industry and service sectors for fast and close follow-up.

The BUILD suggested that a fully automated registration service be put in place to reduce the overall time required to register companies.

A one-stop service for all stages of company registration, capacity development of applicants, integration of mobile financial services for payments, ensuring a mobile-friendly website, simplifying modification of the online application, the introduction of express services for foreign investors are among the recommendations made by the BUILD in the study.

Company law expert Tanjib-ul Alam told TBS that company registration is a complicated matter. If a foreign person or organization wishes to become a partner of a company in Bangladesh, they must physically go to the RJSC office for a signature, which is done digitally in other countries.

For business registration, an application and the necessary documents are submitted online. The business registration process is done online. But there is still manual intervention as a contractor has to go to the RJSC office to submit payroll receipts, he also said, wondering, “What will we call this automation.

DCCI Chairman Rizwan Rahman said that the incorporation process has recently been improved through some reforms, but it still needs to be improved to reduce the process, documentation and other unnecessary costs.

Sheikh Shoebul Alam, Registrar (Additional Secretary) of the RJSC, told TBS that one of the reasons for the complexity of the company registration process is that most individuals and organizations seek the help of third parties to complete the registration process. ‘registration.

Commerce Secretary Tapan Kanti Ghosh said a number of reforms have been made to the company registration process. But there is still a lot to do. Officials must work hard to reduce the number of days of the procedure.

Comments are closed.