Third party use bloats company reg costs: study

Businesses have to count 80 per cent higher cost to complete registration of a company through consultants or a third party at the Registrar of Joint Stock Companies and Firms (RJSC), according to a study released yesterday.

The study by Business Initiative Leading Development (BUILD) finds that entrepreneurs need to spend Tk 36,000 to complete the registration of a company through a third party, up from Tk 20,000 when they do the job themselves.

Third party payment accounts for 44 per cent of the total cost for getting registration at the RJSC.    

In case of only registration at the RJSC through third parties, average cost goes up to 94 per cent to Tk 23,557 from Tk 12,128.

The engagement of third parties such as consultants, lawyers or brokers account for 49 per cent of the total cost, according to the study done in collaboration with a USAID funded project.

For getting trade licences through third parties, the cost goes up 47 per cent to Tk 10,308, said the paper presented at a webinar organised by BUILD, a public-private dialogue platform.

The study was made public at a webinar on "Streamlining the Company Registration Process in Bangladesh", organised by BUILD.

BUILD CEO Ferdaus Ara Begum said the survey was conducted during the March-April period of 2021 on the companies registering over the past two years.

She said new and inexperienced applicants spent more hours to obtain information on the RJSC registration, thus taking eight days to complete it whereas it was supposed to be finished within three days.

Manual intervention in preparing documents, consultations with third parties paying bank fees and increased travelling and printing costs are responsible for additional costs, the survey shows.

BUILD said Bangladesh was still behind in the South Asian average in terms of the procedure, time, and cost related to starting a business.

BUILD recommends introducing a fully automated registration service for entrepreneurs, and ensuring one-stop services for company registration.

Cost of services need to be in tune with the citizen's charter and enabling fee payments through mobile financial services would also ease the process. It also recommended creating a mobile-friendly website and implementing e-trade licences countrywide.

At the event, Commerce Minister Tipu Munshi said the government was committed to implementing high-impact regulatory reforms such as streamlining the existing company registration process and reducing administrative costs in the procedures.

The RJSC of Bangladesh has undergone several reforms and digitalised the registration process, but still, there is room for improvement for which collaboration of both the public and private sector is required, he said.

In an open session, Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry, pointed out that the cost of company registration process in the RJSC ranges from Tk 6,000 to Tk 10,000.

This is bearable for medium and large industries but a bit high for small ones, he said.

"Third party support is recognised all over the world. We may provide this third party/consultancy system under institutional formation and bring them under the tax bracket," he added.

A remarkable number of reforms have been made but more needs to be done, said Tapan Kanti Ghosh, secretary to the Ministry of Commerce.

The officials must work hard to reduce the number of days required for the procedure, he said.

To avail the benefit of automation, every applicant should be accustomed to the online process, Ghosh said, adding that the RJSC should ensure that third parties do not pose any obstacle in the smooth process.

The RJSC seeks to implement a full online service, said Sheikh Shoebul Alam, registrar of the RJSC.

He recommended training, awareness and outreach programmes to familiarise the stakeholders related to the RJSC with the existing online system.

Maleka Khayrunnessa, additional secretary to the Ministry of Commerce, echoed him.

She said applicants should be accustomed to the online process and there should be more training or publicity so that the registration can be done without the help of a third party and without any hassle.

If Bangladesh wants to become one of the top 50 countries in the Ease of Doing Business index, it needs to improve on time, cost and number of procedures in company registration, said Igor Gutan, team leader of Business Enabling Environment of USAID Feed the Future Bangladesh Improving Trade and Business Enabling Environment Activity.