Investors and sophisticated financial advisers based in England and Wales increasingly evaluate opportunities in jurisdictions such as Bangladesh. The internal rate of return (IRR) is a core financial metric, but legal and regulatory realities materially affect realised returns. This note, prepared from our London office at Holborn Gate, 330 High Holborn, London, WC1V 7QH, England, outlines legal considerations that should be tested against IRR assumptions. It does not provide country-specific legal advice; seek local counsel before taking any action.

IRR in context: limitations and legal sensitivities

IRR measures the compound annual growth rate implied by projected cash flows, but it assumes those cash flows will be delivered on schedule and in the expected currency. Legal factors that can depress or delay cash flows include regulatory approvals, tax and withholding obligations, foreign exchange and repatriation controls, security enforcement and insolvency regimes. When modelling IRR, it is therefore essential to incorporate legal risk, timing uncertainty and exit feasibility as explicit variables rather than assuming a frictionless environment.

Principal legal and commercial issues to test

• Regulatory approvals and conditions: time to grant, ongoing compliance obligations and consequences for non-compliance.
• Currency convertibility and repatriation: potential delays, formalities with the central bank, and practical restrictions that may affect timing and amount of outbound transfers.
• Taxation and withholding: corporate tax, VAT/GST equivalents, withholding on dividends/interest/fees and potential reliefs or treaty benefits.
• Corporate structure and ownership restrictions: limits on foreign participation in sectors, licensing and local incorporation requirements.
• Security and enforcement: availability and priority of collateral, registration requirements and practical enforceability of security interests.
• Insolvency and creditor remedies: treatment of secured and unsecured creditors, insolvency timelines and restructuring mechanisms.
• Contractual protections and governance: shareholder agreements, call/put mechanisms, minority protections and transfer restrictions.
• Compliance risks: anti‑corruption, AML/KYC and sanctions screening that can cause delays or enforcement action.

Practical checklist for evaluating IRR assumptions

1. Validate projected cash flows against likely timing of regulatory approvals and licence renewals.
2. Quantify tax and withholding impacts under realistic scenarios; check treaty positions where relevant.
3. Assess foreign exchange convertibility risks and build contingency assumptions for repatriation delays.
4. Confirm availability and perfection steps for security; test enforcement timelines under local law.
5. Identify credible exit routes (sale to strategic, IPO, share purchase) and the legal hurdles for each.
6. Consider dispute resolution (arbitration seat, governing law) and practical enforceability of awards or judgments.
7. Engage experienced local advisers early; obtain factual and legal due diligence reports.
8. Stress‑test IRR under adverse legal outcomes and consider political risk insurance where appropriate.

Structuring and dispute resolution considerations

Choice of holding jurisdiction, use of shareholder agreements, escrow arrangements, and step‑in rights are common tools to protect value and preserve IRR expectations. Investors often favour clear contractual remedies and an enforceable choice of law and dispute resolution forum; however, the practical enforceability of awards or foreign judgments depends on local recognition regimes and the specifics of the governance and asset structure. Consider hybrid structures that separate operating assets from ownership of valuable cash flows where acceptable under local law.

Jurisdiction and sources

Consult official regulators and government sources for up‑to‑date rules and procedures, including:

• Bangladesh Investment Development Authority (BIDA)
• Bangladesh Bank
• National Board of Revenue
• Bangladesh Securities and Exchange Commission
• UK Government (GOV.UK) guidance on overseas investment and sanctions

General information only; not legal advice and not a substitute for advice on a particular matter.