Venture Capital Law in Bangladesh: Regulations and Fund Setup

Venture capital law Bangladesh: how the 2026 framework fits together

Venture capital law Bangladesh investors and founders work with sits across four bodies of rules that were never designed as a single system: the BSEC (Alternative Investment) Rules 2015 for funds and fund managers, the Companies Act 1994 for the instruments a portfolio company can issue, Bangladesh Bank's foreign exchange framework for money coming in and going out, and the Income Tax Act 2023 for what each party keeps. Getting a deal or a fund right in 2026 means reading all four together.

This guide is written for fund sponsors, fund managers, limited partners and their advisers. It covers fund and manager registration with the Bangladesh Securities and Exchange Commission, the venture capital firms already registered, offshore holding structures, SAFEs, convertible notes and preference shares, Bangladesh Bank's rules on inflow and repatriation, Startup Bangladesh Limited, tax incentives and exits. Founder-side company formation, ESOPs and seed-stage housekeeping are covered in our separate guide to startup law in Bangladesh.

Summary: Venture capital in Bangladesh is regulated at fund level by the BSEC (Alternative Investment) Rules 2015, which require both the fund manager and the fund (a registered trust) to be licensed, and at deal level by the Companies Act 1994 and Bangladesh Bank's foreign exchange rules. Most foreign capital still enters through offshore holding companies, so structure, instrument choice and the repatriation route must be settled before the term sheet is signed.

Key point: No one may act as manager of a venture capital, private equity or impact fund in Bangladesh without BSEC registration, and a foreign manager must do so through a Bangladeshi company with paid-up capital of at least Tk 150 million (wholly owned) or Tk 100 million (partly owned). The fund itself must be a registered trust with a minimum corpus of Tk 100 million.

At a glance

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Table of Contents

What venture capital law Bangladesh covers in 2026

In practical terms, venture capital law Bangladesh practitioners deal with has two layers. The first is fund regulation: who may pool investors' money and invest it in unlisted companies, which belongs to the Bangladesh Securities and Exchange Commission (BSEC). The second is transaction law: shares, shareholder rights, foreign exchange approvals, tax and exits, spread across the Companies Act 1994, Bangladesh Bank's circulars and the Income Tax Act 2023.

A direct investor, such as an angel, a corporate venture arm or a foreign fund investing from its own balance sheet, does not need BSEC registration simply to buy shares in a private company. The moment someone pools third-party money in Bangladesh into a fund for venture or private equity investment, the Alternative Investment Rules apply.

The market in numbers

The regulatory debate is shaped by a thin and foreign-dependent market. A LightCastle Partners report released with Startup Bangladesh Limited found that startups raised only USD 6 million across six deals in the first half of 2026, down 95 per cent from USD 120 million in the first half of 2025, with domestic investors contributing none of the capital.[13] The same report found that since 2013 late-stage deals took 80 per cent of the roughly USD 1.1 billion invested, and 98 per cent of that late-stage money came from abroad.[13]

Foreign exchange rules therefore matter in almost every deal, and the domestic fund regime has attracted few registered vehicles. Larger acquisitions may also need a competition filing, covered in our guide to mergers and acquisitions law in Bangladesh.

The BSEC (Alternative Investment) Rules 2015

The Rules were made by notification dated 22 June 2015 under section 24(1) of the Bangladesh Securities and Exchange Commission Act 1993, read with the Securities and Exchange Ordinance 1969. They apply to the registration and regulation of alternative investment funds, their fund managers and their trustees.[1] They are the core of venture capital law Bangladesh fund sponsors must satisfy.

What counts as an alternative investment fund

An alternative investment fund is a fund constituted in Bangladesh as a trust that is a private equity, venture capital or impact fund (or another type BSEC declares), pools money from eligible investors under a defined investment policy, is closed-ended with a specific tenure, raises money only by private placement, and is not covered by the Mutual Fund Rules 2001.[1]

The three fund types are defined by what they buy:

• Venture capital fund: invests primarily in non-listed equity and equity-linked securities of start-ups with less than three years' operating history, greenfield companies or early-stage businesses built on new products, technologies or business models.[1]
• Private equity fund: invests primarily in equity and equity-linked instruments of potentially high-growth non-listed companies with at least three years' operating history, or carries out buyouts.[1]
• Impact fund: invests in businesses and funds that aim for measurable social or environmental impact alongside financial return.[1]

"Equity-linked instruments" expressly include convertible or redeemable preference shares and debt securities with convertible features.[1] A fund may also be run as an Islamic fund screened by a Shariah council.

Amendments, and the position in October 2026

The Rules were amended by notification dated 14 May 2020 (gazetted on 5 July 2020) and by notification dated 30 June 2021 (gazetted on 24 August 2021). BSEC's consolidated text, published on 24 May 2022, is stated to be updated to the last amendment of 24 August 2021.[1] The 2020 changes cut the lock-in from three to two years, raised the cap on manager holdings to 30 per cent, widened the class of eligible investors and opened units to transfer on an alternative trading board; the 2021 changes revised the application, registration and annual fees.

BSEC's published rules and draft-rules registers, checked in October 2026, show no further amendment in 2024, 2025 or 2026; the Commission's recent reforms have centred on public offerings and listing, covered in our guide to securities law in Bangladesh. Confirm the current text before filing, because BSEC can issue directions under the Rules at any time.

Who can invest

Units may be offered only to "eligible investors". Since 2020 the list is broad: local or foreign fund managers, Bangladeshi and foreign companies, banks, financial institutions, insurers, other funds, foundations, approved pension, provident and gratuity funds, foreign funds, foreign individuals and high-net-worth resident or non-resident Bangladeshis.[1]

A high-net-worth individual is a natural person with a minimum net worth of Tk 20 million certified by the tax authority. Each investor must subscribe at least Tk 1 million, and no fund may have more than 200 investors.[1]

Registering a fund manager with BSEC

Rule 3 makes registration compulsory: no person may act as manager of an alternative investment fund without it. A foreign entity or foreign fund management company that wants to manage a fund in Bangladesh must incorporate a Bangladeshi fund management company and register that company.[1] The Rules provide no passporting route for foreign managers.

Capital and net worth

The applicant must be a company or statutory body whose memorandum states the object of alternative investment fund management. Minimum paid-up capital is Tk 50 million; an existing mutual fund asset manager needs a further Tk 50 million and a separate team. A foreign entity applying through a wholly owned subsidiary needs at least Tk 150 million, and through a partly owned subsidiary at least Tk 100 million.[1]

Net worth must stay at or above 75 per cent of paid-up capital, and any shortfall must be restored within the next accounting year, so sponsors should capitalise with headroom.[1]

People, independence and controls

The manager must appoint a chief executive officer or chief investment officer and a compliance officer, each with a relevant academic background and at least seven years' relevant professional experience. Neither the applicant nor any director may be a loan defaulter, and the manager, its affiliates and directors may have no relationship with a trustee of any alternative investment fund or mutual fund.[1] Written compliance and risk-management procedures are mandatory.

Fees and timelines

The application fee is Tk 200,000, the registration fee payable within fifteen days of BSEC's decision is Tk 1 million, and the annual fee is Tk 200,000, with a Tk 25,000 penalty for each month of late payment. BSEC is to decide within 30 days of a complete application; if it needs more, it may raise requirements within 25 days and then decide within 30 days of compliance.[1]

Duties that shape the deal documents

Several of Rule 6's duties bite directly on venture transactions. Investors get at least two weeks' written notice of a capital call. Every investment needs investment committee approval, and the trustee must consent before money goes into a non-listed company. The fund manager may sit on a portfolio board only with trustee approval, and its directors, employees and committee members must hold no material interest in any portfolio company.[1] Term sheets that ignore these approvals slip.

Setting up and registering a venture capital fund

A fund is a trust under the Trust Act 1882, registered under the Registration Act 1908, and BSEC must approve the draft trust deed before the trust is registered.[1] The fund manager and trustee then apply jointly for registration of the fund with a draft placement memorandum. For the mechanics of registering trust instruments generally, see our note on trust registration in Bangladesh.

The trustee

The trustee must be BSEC-registered, a public limited company with paid-up capital of at least Tk 100 million, and unrelated to the fund manager. It holds the fund's assets, issues units against full payment, appoints auditors and the independent valuer, approves the investment committee and reports quarterly to BSEC, for a fee capped at 0.25 per cent of the realised fund a year.[1]

Corpus, sponsor and manager commitments

Minimum fund corpus is Tk 100 million. Sponsors must subscribe at least 10 per cent of the corpus and pay at least 20 per cent of their subscription before registration, and must keep a continuing investment of at least 2.5 per cent of corpus. The fund manager must invest at least 2 per cent of corpus, in addition to any sponsor stake, and the manager and its connected persons may not hold more than 30 per cent of units at any time.[1]

Commitment period, capital calls and the deployment test

A fund may collect commitments for up to three years from registration and must then declare its final size. It collects 5 per cent of each commitment up front, which can be forfeited if the investor defaults on a call. It must realise and invest at least 50 per cent of corpus within five years of registration; otherwise the manager must refund the money realised within six months, with interest as disclosed in the constitutive documents.[1] Model that deployment test before launch.

Investment limits

At least 75 per cent of corpus must go into non-listed securities of portfolio companies, with idle cash parked in money market instruments for up to a year. Up to 25 per cent may go into listed securities and units of other funds, with no more than 5 per cent in any single listed security. No more than 25 per cent of corpus may go into a single non-listed company. These limits do not apply to a private equity buyout.[1]

Investments in non-listed companies must be equity or equity-linked: a fund may not buy pure debt, make loans, borrow or use leverage, or invest with a connected person of the manager or trustee.[1] The lending ban is decisive when choosing an instrument.

Fees, expenses and valuation

Annual management fees are capped at 3 per cent of net asset value for a venture capital fund, 2 per cent for private equity and 4 per cent for an impact fund. The manager may take a performance fee of up to 20 per cent of net profit above the disclosed hurdle rate, and may not charge it twice on the same profit.[1] BSEC charges a fund registration fee of 0.05 per cent of corpus and an annual fee of 0.04 per cent of NAV, and an independent valuer appointed by the trustee must value investments at least annually.[1]

Tenure, transfers and winding up

A fund's life must be five to fifteen years, extendable by up to two years if the original documents allow, with two-thirds of unit holders by value approving at a meeting at least six months before maturity, plus BSEC approval. Units are locked in for two years, transferable between eligible investors, and barred from the main board, though they may trade on an alternative trading board.[1] Distributions must be cash dividends only.

A fund is wound up at the end of its tenure, on a resolution of 66 per cent of unit holders by value, on BSEC direction, by court order or when the trustee considers it necessary.[1]

Venture capital firms in Bangladesh: who is registered

BSEC's public register lists eleven alternative investment funds. The oldest is the Alternative Investment Fund of Bangladesh, a Tk 500 crore private equity fund managed by Strategic Equity Management Ltd and registered in November 2015. Venture capital funds on the register include BDVL Venture Fund 1 (BD Venture Limited, Tk 50 crore, 2019), Maslin VC Fund-I (Maslin Capital, Tk 10 crore, 2019), IDLC Venture Capital Fund I (IDLC Asset Management, Tk 45 crore, 2020), UFSEPL Venture Capital Fund (UFS Equity Partners, Tk 125 crore, 2021), X Angel Vision Venture Capital Fund (X Angel Asset Management, Tk 100 crore, 2023) and UCB Venture Fund-I (UCB Asset Management, Tk 150 crore, 2023).[2]

The remaining entries are private equity funds, and no fund has been added since June 2023.[2] Beyond the register sit Startup Bangladesh Limited, angel and corporate investors who invest directly without a fund licence, and foreign venture funds, which usually invest through an offshore holding company.

Offshore holding structures and the "flip"

Many institutionally backed Bangladeshi startups have an offshore parent, often in Singapore or the United States, with the Bangladeshi operating company as a subsidiary. Writing in September 2026, the co-founder of Pathao observed that venture-backed companies typically flip at their first institutional round because funds require an offshore parent before they will invest, and argued that the explanation is now legal infrastructure rather than tax.[8] Our guides to Singapore company formation for Bangladeshi founders and offshore company formation deal with incorporation itself.

Why investors want an offshore parent

Offshore law recognises SAFEs, convertible notes and share classes without friction, disputes go to familiar forums, and exits can be completed by selling the holding company. The cost is that every payment between the two layers becomes a foreign exchange event.

The lawful bridge: FEID Circular No. 02 of 2025

Outward investment by residents is tightly controlled, which historically made founder-led flips legally precarious. Bangladesh Bank's FEID Circular No. 02 of 27 March 2025 gives general permission to resident enterprises operating for less than ten years, and to individual Bangladeshi nationals with innovative ideas, to remit up to USD 10,000 per remittance from internal sources to establish an entity abroad supporting a Bangladesh-based startup. The authorised dealer reports the remittance, and the investor files annual progress reports and audited accounts of the foreign entity.[7]

The same circular allows resident companies to apply, through their bank, to acquire shares of a foreign company by issuing their own shares in exchange, at a ratio consistent with global best practice.[7] Swaps are considered case by case, so agree the valuation basis with the bank first.

Getting the flip right

A flip funded with money sent outside permitted channels creates a problem later diligence will find. The cleaner sequence is to set up the holding company within the 2025 permission, move operating company shares to it through the banking channel at fair value, assign intellectual property properly and price intercompany services at arm's length. For onshore funding of the subsidiary, see our analysis of equity or parent loans for a Bangladesh subsidiary.

Convertible instruments, SAFEs and preference shares

Instrument choice is where venture capital law Bangladesh differs most sharply from Singapore or Delaware practice. The Companies Act 1994 recognises shares, including redeemable preference shares, and debentures. It does not recognise a simple agreement for future equity.

Are SAFEs enforceable?

A SAFE is a contract under which an investor pays now for shares issued at a future priced round. It may bind the parties as a contract, but neither SAFEs nor convertible notes have statutory recognition under the Companies Act 1994, and commentators conclude that a Bangladeshi private company cannot issue them as instruments.[8] The company cannot record a SAFE in its share capital, conversion needs a fresh allotment with pre-emption steps, and foreign money received before shares are issued sits awkwardly with Bangladesh Bank's equity rules.

Convertible notes as foreign borrowing

A convertible note is debt until it converts. When the lender is non-resident, the note is foreign borrowing, which follows a different approval route from equity; see our analyses of foreign loans in Bangladesh and foreign loan approval. For a BSEC-registered fund the answer is simpler: a fund may not make loans or buy pure debt, although debt securities with convertible features fall within the definition of equity-linked instruments.[1] Any convertible debt a fund buys should therefore carry genuine conversion terms from the outset.

Preference shares under the Companies Act 1994

Section 154 allows a company limited by shares, if authorised by its articles, to issue preference shares that are redeemable or redeemable at the company's option. Redemption may be paid only out of distributable profits or the proceeds of a fresh issue made for the purpose; partly paid shares cannot be redeemed; and where redemption is funded from profits, an equal amount must be transferred to a capital redemption reserve. The balance sheet must disclose the redeemable shares and their redemption date or notice period.[3]

Convertible and redeemable preference shares are the closest onshore equivalent to Series A preferred stock. Liquidation preference, conversion, anti-dilution and redemption terms belong in the articles of association, not only the shareholders' agreement, because the articles bind the company and its members. Section 85 sets one vote per share as the default where a company has share capital, subject to the articles, so voting and class rights for preference holders also need express drafting.[3]

Pre-emption and private company limits

Section 155 requires new shares issued within authorised capital to be offered first to existing members in proportion to their paid-up holdings, by notice giving at least fifteen days to accept.[3] Every round therefore needs either a rights offer or documented waivers from existing shareholders. A private company's articles must also restrict share transfers, prohibit public invitations to subscribe and limit membership to fifty, excluding employees.[3] A cap table crowded with angels can hit that ceiling sooner than founders expect; for conversion to a public company see our guide to public limited companies in Bangladesh.

Where non-residents will hold preference shares onshore, confirm with the authorised dealer bank before closing how the issue will be reported and redemption proceeds repatriated, because Bangladesh Bank's published general permission is framed around ordinary share issues and fair-value transfers.

Bangladesh Bank rules on foreign equity inflow and repatriation

Foreign exchange is where venture capital law Bangladesh deals most often stall. The general regime is in our guide to foreign exchange regulations in Bangladesh; this is the venture-specific core.

Equity into a portfolio company

No prior Bangladesh Bank permission is needed to issue shares against foreign investment. The money must arrive through the banking channel before the shares are issued, and the authorised dealer must inform the Foreign Exchange Investment Department within 14 days of issue and RJSC formalities. Outside the special zones, inward equity may be held in a foreign currency account for up to one year.[5]

A secondary purchase from a resident founder also needs no prior permission, but must be priced at fair value, with a valuation report from a BSEC-licensed merchant banker or listed chartered accountant above Tk 1 million, and the sale price must be received from abroad before the transfer.[5] Our guide to share transfer in Bangladesh explains the RJSC side.

Non-resident investment in fund units

Under FEID Circular No. 02 of 30 July 2018, non-resident eligible investors may invest in units of a BSEC-registered alternative investment fund. Payment must come by inward remittance through the normal banking channel, including by debit to a Non-resident Investor's Taka Account, and Bangladesh Bank must be told within 14 days of any issue, transfer or redemption of units involving a non-resident. Net-of-tax dividends are freely remittable, but repatriating the fair value of sale proceeds of units requires Bangladesh Bank's prior approval, supported by a valuation report and the trustee's recommendation.[4]

That is stricter than the March 2026 regime for direct shareholdings, and foreign limited partners should weigh it when choosing between the onshore fund and co-investing alongside it.

Repatriation of exit proceeds and dividends

Bangladesh Bank's FEID Circular No. 01 of March 2026 consolidates the rules on transfers of shares in unlisted companies. Banks can now approve repatriation of sale proceeds up to Tk 100 crore without central bank approval, up from Tk 10 crore; deals at or below net asset value per the latest audited accounts can be repatriated regardless of amount; deals up to Tk 1 crore need no independent valuation; banks must repatriate within five working days if papers are in order; and the share transfer must be completed within 45 days of signing the memorandum of understanding or receiving approval.[6]

Net-of-tax cash dividends can be remitted to non-resident shareholders without prior approval or post-facto reporting.[5] Our analysis of capital repatriation in Bangladesh walks through the documents banks ask for.

Startup Bangladesh Limited and public venture capital

Startup Bangladesh Limited is the ICT Division's venture capital and fund management company. By August 2026 it had invested about Tk 1.11 billion in 36 technology startups.[11]

The Bangladesh Fund of Funds

In August 2026 Startup Bangladesh opened manager selection for a Tk 4 billion Bangladesh Fund of Funds, which will invest in professionally managed domestic and international venture funds rather than directly in startups, with a co-investment mechanism and a proposed sidecar facility.[11]

Published eligibility criteria require a manager to be registered with a recognised home regulator, such as BSEC or the Monetary Authority of Singapore, with minimum assets under management of BDT 50 crore for local managers (waivable for emerging managers) or USD 50 million for global ones. The fund of funds will take no more than 49.99 per cent of any partnership fund, and the manager must earmark at least a matching amount for Bangladesh.[12] For a domestic sponsor, BSEC registration is the gateway to this capital.

The bank-owned venture capital company

Bangladesh Bank's July 2025 startup financing circular also requires banks to put their startup fund allocations into equity in a venture capital company that the central bank is forming jointly with participating banks, with detailed rules to follow in separate guidance.[14] When that vehicle is operational it will add a second domestic institutional investor alongside Startup Bangladesh.

Tax incentives for venture capital funds and investee companies

At fund level, Part 1 of the Sixth Schedule to the Income Tax Act 2023 excludes the income of a BSEC-recognised alternative investment fund from total income.[9] Gains inside a registered fund are therefore not taxed in the fund's hands, a strong reason to use the onshore vehicle; the fund manager's fees are taxed normally.

At portfolio level, the Finance Act 2026 extended the growth period for a startup organisation as defined in the Income Tax Act 2023 to nine years, set the turnover tax rate at nil during that period, and allowed losses incurred during the growth period to be carried forward and set off regardless of any change of shareholding.[10] The loss rule matters for venture-backed companies, because every round changes the shareholding. From 1 July 2026 supplies by such a startup are also exempt from VAT, including VAT on imported services and rent.[10]

The individual capital gains exemption of up to Tk 50 lakh covers only listed shares and units and excludes sponsors and placement holders, so it rarely helps on a venture exit.[9] Model non-resident gains and treaty relief deal by deal; see our guides to tax incentives for foreign investors and withholding tax in Bangladesh.

Step-by-step VC legal process for a Bangladeshi deal

Whether the investor is a registered fund, Startup Bangladesh or a foreign fund investing onshore, a well-run deal under venture capital law Bangladesh follows the same sequence into the operating company.

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The term sheet

The term sheet should fix the instrument, valuation, option pool, liquidation preference, anti-dilution, board and reserved matters, founder vesting, transfer, drag-along and tag-along rights, and the dispute forum. For a registered fund, investment committee approval and trustee consent should be express conditions.

Due diligence

Bangladeshi diligence concentrates on the RJSC record, title to intellectual property, compliance of past foreign remittances, tax and VAT registrations, licences and related-party dealings. Gaps in historic foreign exchange reporting are the most common finding and the slowest to fix.

Definitive documents and closing

The core documents are a subscription agreement, a shareholders' agreement, amended articles reflecting class rights, resolutions, pre-emption waivers and IP assignments. Provide for arbitration with a defined seat; the Commercial Courts Act 2026 may speed litigation, but do not rely on court speed to enforce preferences and drag-along rights. Our guide to shareholder disputes in Bangladesh explains what happens when those provisions are tested.

Exit routes for venture capital investors

The exit route decides which approvals, valuations and tax costs apply under venture capital law Bangladesh, so plan it at the term sheet stage.

Trade sale and secondary sale

A sale to a strategic buyer or another investor is the most common exit. For a non-resident seller, the March 2026 circular lets most deals up to Tk 100 crore repatriate through the bank alone, provided the valuation rules are met.[6] For a fund selling units rather than shares, the 2018 prior-approval route applies.[4]

Redemption and buy-back

Section 58 of the Companies Act 1994 restricts a company from purchasing its own shares or lending for that purpose.[3] A founder or company buy-back of ordinary shares is therefore generally unavailable as an exit. Redeemable preference shares under section 154, funded from distributable profits or a fresh issue, are the lawful substitute, which is a further reason to use them for onshore rounds.[3]

Initial public offering

A listing is the exit the Alternative Investment Rules were designed to feed, but they contain an important brake: a non-listed portfolio company in which an alternative investment fund invests may not apply for listing within two years from the date of the fund's last investment in it.[1] A follow-on investment by a fund therefore resets the clock. Lock-ins and eligibility under the Public Offer of Equity Securities Rules 2025 are covered in our guide to securities law in Bangladesh.

Offshore exit and fund maturity

Where the company has flipped, investors usually sell shares in the offshore parent, which avoids a Bangladeshi share transfer but not tax analysis of the indirect transfer. For an onshore fund the backstop is maturity, when the trustee must liquidate remaining assets and distribute proceeds.[1] Start exit planning two years before maturity and seek any extension before the six-month deadline.

Choosing venture capital lawyers in Bangladesh

A competent venture capital law firm in Bangladesh covers three disciplines at once: securities regulation for BSEC filings, corporate law for share classes and shareholder agreements, and foreign exchange for every cross-border payment. Firms strong in only one produce documents that satisfy one regulator and fail another, such as preference rights a bank cannot repatriate against.

When instructing counsel on venture capital law Bangladesh matters, ask for recent BSEC fund or manager registrations, non-resident share issues, and flips or share swaps under the 2025 circular, and ask how they coordinate with offshore counsel.

Mistakes to avoid under venture capital law Bangladesh

Raising a fund before registration

Pooling third-party money and investing it before BSEC registers the manager and the fund breaches the Rules, and BSEC may act under the 1993 Act and the 1969 Ordinance.[1]

Using instruments the law does not recognise

A US-style SAFE signed by a Bangladeshi company creates enforcement and foreign exchange risk. Use convertible preference shares onshore, or keep convertibles at the offshore parent.

Leaving class rights in the shareholders' agreement only

Preference, anti-dilution and redemption rights that appear only in a contract are harder to enforce than rights in the articles. Amend the articles at every round.

Ignoring the fund's own clock

The three-year commitment window, the five-year 50 per cent deployment test, the two-year listing bar and the fixed tenure all interact. Funds that ignore them face refunds, forced sales or blocked IPOs.[1]

Treating the flip as a formality

An offshore parent set up with informal remittances will surface in the next investor's diligence. Use the 2025 circular route.[7]

What to watch in late 2026 and 2027

Four developments will shape venture capital law Bangladesh practice over the next year: whether the Bangladesh Fund of Funds draws more managers into BSEC registration;[11] the operating rules for the bank-owned venture capital company;[14] calls for statutory recognition of convertible instruments, which would need amendment of the Companies Act 1994;[8] and a possible review of the Alternative Investment Rules, unchanged since 2021.

For sponsors, the practical message is to treat venture capital law Bangladesh as a design exercise: settle the vehicle, the instrument and the money route first, and the documents follow.

Frequently asked questions

What does venture capital law Bangladesh regulate?

Pooled venture capital, private equity and impact funds are regulated by the BSEC (Alternative Investment) Rules 2015, which require the fund manager, the trustee and the fund itself to be registered with BSEC.[1] Direct investment by an angel or company into a private company does not require a fund licence.

What is the minimum size of a venture capital fund in Bangladesh?

The minimum fund corpus is Tk 100 million, sponsors must subscribe at least 10 per cent of it, and each investor must subscribe at least Tk 1 million, with a cap of 200 investors.[1]

How much capital does a fund manager need?

At least Tk 50 million paid-up capital for a local manager, Tk 100 million for a foreign entity's partly owned subsidiary and Tk 150 million for a wholly owned foreign subsidiary, with net worth kept at 75 per cent or more of paid-up capital.[1]

Can a foreign VC firm manage a fund in Bangladesh?

Only through a fund management company incorporated in Bangladesh and registered with BSEC. A foreign fund that wants to operate as an alternative investment fund must register or invest through a registered fund.[1]

Are SAFEs valid in Bangladesh?

A SAFE may operate as a contract, but it has no statutory recognition under the Companies Act 1994 and cannot be recorded as share capital.[8] Onshore rounds normally use ordinary or convertible preference shares instead.

Can a Bangladeshi company issue preference shares to investors?

Yes. Section 154 of the Companies Act 1994 permits redeemable preference shares if the articles allow, with redemption funded from distributable profits or a fresh issue.[3]

Do foreign investors need Bangladesh Bank approval to invest in a startup?

No prior approval is needed to issue shares against foreign investment, but funds must arrive through banking channels before issue and the bank must report to Bangladesh Bank within 14 days.[5]

How are exit proceeds repatriated?

Under Bangladesh Bank's March 2026 circular, banks can repatriate share sale proceeds up to Tk 100 crore without central bank approval against a fair valuation, and must do so within five working days if documents are in order.[6]

Is the income of a venture capital fund taxed?

The income of a BSEC-recognised alternative investment fund is excluded from total income under the Sixth Schedule to the Income Tax Act 2023.[9] The fund manager's fees are taxed normally.

What is the Bangladesh Fund of Funds?

A Tk 4 billion fund launched by Startup Bangladesh Limited in August 2026 to invest in professionally managed domestic and international VC funds rather than directly in startups.[11]