On 1 August 2018, the new Companies Law 2017 will come into force, repealing and replacing the century old Companies Act 1914.
Any company or other entity registered under the Companies Act 1914 or the Special Company Act 1950 will be required to re-register on or before 31 January 2019. Re-registration can be completed online or in person at the government’s Directorate of Investment and Company Administration (DICA). If a company fails to re-register, its name may be struck off the register and the company may be dissolved.
The old Companies Act 1914 distinguished between Myanmar-owned companies and foreign-owned companies, which also affected ownership, leasing and use of land and immovable property. The new Companies Law 2017 maintains the distinction between a Myanmar-owned company and foreign-owned company. In future, a company would, however, only be considered “foreign” if 35 percent or more of the ownership interest is controlled directly or indirectly by foreign shareholder(s).
Previously, any foreign investor conducting business in Myanmar was required to obtain Form-1, the so called “Trade Permit,” which stipulated the approved business activities of the registered foreign enterprise. Approval of the application for such Trade Permit was subject to certain conditions imposed by law or ministerial policy. The new Companies Law (2017) removes the requirement to apply for a Trade Permit.
In the past, most companies were incorporated using the template “Memorandum and Articles of Association” issued by DICA. The requirement to have a Memorandum of Association and Articles of Association is replaced under the Companies Law (2017) with a constitution. At the time of re-registration, existing companies may re-adopt the model constitution issued by DICA, or a customized constitution.
Under the old Companies Act (1914), the business objectives of a company had to be specified in the company’s Memorandum of Association, as well as the aforementioned Trade Permit. Under the new law, this requirement is abolished. A company has full legal capacity to carry out any business or activity within the confines of the law. A company may contain a provision relating to the capacity, rights, powers, or privileges of the company if these are restricted, but does otherwise not have to stipulate these items.
A Limited Company had to have a minimum of two shareholders, whether natural persons or corporate entities. Further, a minimum of two directors was necessary. Pursuant to the new Companies Law (2017), companies may now be incorporated with a minimum of one shareholder and one director only (at least one director needs to be an ordinary resident of Myanmar).
Under the previous law, no foreign corporation was allowed to carry out its business in Myanmar unless it had obtained a Trade Permit. Consequently, any foreign organization that intended to do business in Myanmar on a long-term basis was required to register a branch office with the corporate authorities in Myanmar. As “carrying out business” was not clearly defined, this requirement resulted in some ambiguity. The new Companies Law (2017) provides for additional certainty and states that an overseas corporation shall not carry out any business in Myanmar unless it is properly registered (exemptions may apply, for example for corporations conducting an isolated transaction that is completed within a period of 30 days).
Alexander Bohusch Partner is an attorney-at-law at Luther Law Firm Limited Myanmar. Contact him at [email protected]