A new electronic registry system called Myanmar Companies Online (“MyCo”) is to be launched with the coming into force of the new Myanmar Companies Law 2017 (“MCL”) on the 1st of August. The Directorate of Investment and Company Administration (“DICA”) is introducing MyCo with the purpose of streamlining company filings and making the process more transparent.
The DICA requires all existing companies and entities to re-register via MyCo. This mandatory company re-registration must be performed from 1 August 2018 to 31st January 2019, as the implementation period of the Myanmar Companies (Electronic Registry System and Miscellaneous Matters) Regulations 2018. If re-registration is not performed within the stipulated timeframe, the company’s name may be removed from the company registry. Additionally, DICA has wide discretion to dissolve the entity or prohibit the entity from carrying on business in Myanmar until it follows all requirements. Dissolution does not necessarily imply liquidation, and during this period the directors and members of the company may still incur company-related liabilities.
If a company fails to re-register, restoration will be permitted only after the entity pays a prescribed penalty.
Companies presently incorporated in Myanmar should promptly re-register online, free of charge, or deliver a complete set of hardcopies to a DICA office with the filing fee of MMK 50,000.
For the re-registration process, instead of the previously required two documents: the Memorandum of Association and Articles of Association (“M&AOA”), a single document, a “constitution,” can be substituted. Any existing M&AOA which are not replaced with a single constitution, will effectively be converted into one. While companies must have a constitution, there is flexibility in determining its form, content, and business objectives. In the event that a company does not require a uniquely drafted constitution, a standard form constitution is provided on the DICA official website.
At the time of re-registration, companies may update and change corporate information such as details of directors, any secretary, registered office, principal place of business, members, and issued share particulars. It is also necessary to stipulate whether the company has an ultimate holding company, and whether the company will be a “small company,” a company, other than a public company or a subsidiary thereof, which satisfies the following conditions:
New relaxations under the MCL regarding members/shareholders and directors (please see formation/incorporation of companies below) also apply to re-registration of the entities. Existing companies may also now wish to use this opportunity to restructure: (i) having a single member and transferring the minority shareholder’s shares to the main (intended) shareholder, and, (ii) Re-appointing of directors may also be carried out. Details (newly required) of the resident director must be provided upon the company re-registering with the DICA.
The MCL removes the par-value requirement. Upon re-registration all existing shares will otherwise be converted into shares with no par value.
Types of companies:
Although the Myanmar Companies Act (MCA 1914) does not prescribe the limitation of shareholders, directors, types of companies, practically, these were restricted by DICA procedures. Under the MCL, the documentary requirements will be less onerous than under the previous procedures.
One of the key benefits of the MCL is that a permit to trade is no longer required, and private limited companies are allowed to be set up with a single member or shareholder. The company must have at least one resident director (i.e. a permanent resident or resident for at least 183 days in each consecutive 12 month period in Myanmar) in the case of a private company, and three directors with at least one ordinary resident Myanmar citizen in the case of a public company.
Furthermore, overseas corporations that will transact in Myanmar must comply with MCL requirements such as regular filing and reporting to the registrar.
Under the MCL, there will be possibility for foreign investors to invest up to 35% in a Myanmar public or private company.
A company will be defined as a Myanmar company if 35% or less of the shareholding is held by a foreign individual or entity. Using the definition of the MCL, a foreign company is a company incorporated in Myanmar in which an overseas entity or individual (or a combination of these) directly or indirectly owns or controls an ownership interest of more than 35%. “Ownership interest” is defined as a legal, equitable, or prescribed interest in a company which may arise through any means. This includes: a direct shareholding interest; a direct or indirect shareholding in a company which holds a direct or indirect shareholding in the first company; or through an agreement which provides the holder with a direct or indirect right to exercise control over the voting rights on any company resolution.
Only three sections in the MCL mention “foreign companies” (FC) –
Section 6 (b) (viii) requires that the company registration application must state whether a company is an FC; Section 86 (b) stipulates that it must be stated whether a share transfer causes (or not) a company to become an FC; Section 97 (B) (vii) stipulates that it must be stated in the annual return whether a company has become or ceased to be an FC. All sections of the MCL apply equally to all companies whether they be local or foreign.
The new MCL also provides a more straightforward process to close an overseas corporation – by merely filing notice to the Registrar stating that it has ceased carrying on business in the Union and the removal of its name from the register by the Registrar.
Additionally, Myanmar also recognizes “special companies” that contain one or more government shareholders and are formed under the Special Company Act 1950, however, special companies must comply with the provisions of the MCL, except for certain provisions that are repealed by the Special Company Act and its constitution.
The MCL has removed the requirement of prescribing permitted activities of a company, compulsory under the MCA. Under the MCL, this is now optional, subject to the decision of the company shareholders. The permitted activities will continue to apply until 31 January 2019. After this, these will automatically be deemed removed unless the members pass special resolutions to maintain such objects in its constitution and make the relevant filings. If they do so, the company may not do anything beyond the powers conferred on it by its constitution. Alternatively, as of 1 August 2018, shareholders may vote at a later stage to either amend the permitted activities or remove them entirely from the company’s constitution. Any act performed or any contract entered into by a company, beyond the scope of the permitted activities will be unlawful, and such a contract will be void.
Regular annual filings, other corporate secretarial filings (change and new appointment of directors or secretary, change of the registered office, principal place of business, members and change of share particulars, closing (liquidation/winding up of an entity, etc.) appear much easier – simply by filing/submitting a “notice” to the Registrar via the E-registry, using the prescribed forms.
However, questions still remain to the extent that DICA has not clearly stated whether or not “the term or validation of the registration” will be specified (previously this was a five year term). In the case that the term of registration is not identified, filing renewals will no longer exist.
William D. Greenlee, Jr.
Partner, Managing Director,
The information provided here is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.