Commencement of the Myanmar Companies Law 2017
The Myanmar Companies Law 2017 (the "MCL") came into force on 1 August 2018. The Directorate of Investment and Company Administration ("DICA") held a ceremony to mark the effective date and the launch of Myanmar Companies Online ("MyCo"), a new online electronic registry system. The MCL modernises the regulatory framework governing how a company is run and governed, bringing it in line with current practices in other countries.
All existing companies and body corporates registered with DICA prior to 1 August 2018 must re-register within six months.
Please refer to our guide on the MCL (which includes a table setting out the key dates under the MCL).
The following notifications were also released as part of the commencement of the MCL:
• Notification No. 56/2018 Prescribed Forms Under the Myanmar Companies Law 2017
• Notification No. 57/2018 Prescribed Fees and Late Lodgement Fees under the Myanmar Companies Law 2017;
• Notification No. 58 /2018 Requirements for Business Associations;
• Notification No. 59 /2018 Requirements for Public Companies;
• Notification No. 60 /2018 Prescribed Model Constitution under the Myanmar Companies Law 2017;
• Notification No. 63/2018 Prescribed extra fees for registry transactions carried out using non-electronic means; and
• Notification No. 66/2018 Myanmar Companies Regulations 2018.
DICA also released Company Directors Guide for directors of companies in Myanmar.
Myanmar Companies Regulations 2018
The Myanmar Companies Regulations 2018 was published on 23 July 2018 (the “Regulations”). In addition to setting out the requirement for the re-registration of existing companies and branches, the Regulations deal with a number of key transitional provisions.
Transition to no par regime: Section 60(b) of the MCL states that a share will not have a nominal or par value. The Regulations confirm that this section applies to all shares whether issued before, on or after 1 August 2018. The concept of paid up capital and partly paid shares will continue to be relevant under the new law. The Regulations confirm that the amount paid to the company at any time for the share is the amount paid on the share and the difference between the price of issue and the amount paid on the share is the amount remaining unpaid on the share. It is also confirmed that the amount standing to the credit to a company’s share premium account and capital redemption reserve becomes part of the share capital.
The following provisions contained in the memorandum and articles of association of an existing company are deemed to be deleted: (i) the amount of share capital with which an existing company is registered or proposed to be registered and (ii) the division of the share capital into shares of a fixed amount.
Resident director: If a company contravenes such requirements, DICA may either on its own motion or the application of another direct members of such company to appoint a resident director.
If a company carries on business without a resident director for more than six months, a person who is a member of the company and who knows that it is carrying on business in such manner after such six month period, is liable for the payment of all debts of the company contracted during the relevant period (or the part of it).
Registration of overseas corporations: Under the MCL, the general position is that an overseas corporation is required to register to carry on business in Myanmar. Section 43(b) of MCL sets out certain activities which are not deemed as “carrying on business”. The Regulations clarify that “carrying on business”: (i) includes the administration, management or otherwise dealing with property situated in Myanmar as an agent, a legal personal representative, or a trustee, whether by employees or agents or otherwise; and (ii) does not exclude activities carried on without a view to any profit.
Special Companies Act 1950 (the "SCA"): The Regulations also confirm the continued role of the SCA. A company in which a Myanmar Government body holds any shares is formed under the SCA and registered under the MCL. Unless otherwise permitted under the SCA, a company formed under the SCA is subject to the provisions of the MCL. If a Myanmar Government body no longer holds shares in a company formed under the SCA, such company ceases to be a “special company” and is deemed to be registered under the MCL and a new certificate of registration will be issued by DICA.
A small company: A private company (which is not a subsidiary of a public company) is classified as a small company if that company and its subsidiaries has no more than 30 employees and annual revenues of less than MMK50m. A small company has a lower regulatory burden as it is exempted from a number of reporting and meeting requirements. The Regulations confirm that in order to benefit from the exemptions, a company is required to meet the above stipulations throughout the year.
Visa free travel for China, Japan and South Korea
From 1 October 2018, tourists from China, Japan and South Korea will be able to travel to Myanmar without a visa. The new approach, which aims to encourage tourism to Myanmar, was announced by Vice President U Henry Van Thio at the Myanmar Tourism Conference in June and will be introduced as a one-year trial.
Myanmar currently does not require tourist visas for travellers from eight fellow members of the Association of Southeast Asian Nations: Brunei, Cambodia, Indonesia, Laos, the Philippines, Singapore, Thailand and Vietnam. The inclusion of the three new countries is another sign that Myanmar is continuing its efforts to encourage tourists from Asia to travel to Myanmar.
Visitors to Myanmar have increased from around 390,000 in 2011, to roughly 1.36 million in 2017, with 70% of total visitors being from Asian countries. The Vice President stated that Myanmar wanted to take advantage of the increase in tourists from ASEAN travellers, and by waiving the need to have a visa, would encourage more tourists and businessmen to visit the country.
Travellers from each of the countries who plan to take advantage of the waiver program will be asked to carry US$1,000 cash when entering the country to cover expenses. For Chinese travellers, a visa-on-arrival ("VOA") program will be introduced, whereby visitors will need to pay an additional sum of US$50. The VOA will cover a stays of up to 30 days for the purpose of tourism only.
Update on tenders for oil and gas blocks
During a July press conference Myanma Oil and Gas Enterprise (MOGE) announced that tenders will carried out before the end of 2018 for the remaining free oil and gas blocks. There are currently 53 onshore blocks and 51 offshore blocks in Myanmar and among them, exploration and production activities are being conducted at 35 onshore and 38 offshore blocks. As with previous tenders, the tenders are expected to be open to foreign companies. In the previous round of tenders awarded in 2014, for the onshore blocks there was a requirement for a foreign investor to partner with a Myanmar company.
The wholesale/retail business procedures
On 26 July 2018, the Ministry of Commerce ("MOC") issued its standard operating procedure ("SOP") for retail and wholesale business registrations, as well as a list of products allowed for trade in Myanmar under Newsletter Nos. 2 and 3 of 2018.
The procedures were adopted following the government giving the green light to foreign and joint-venture companies, to do wholesale and retail foreign and local products in Myanmar in May (Please refer to our 2018 May edition of Myanmar Postcard). The MOC said the list of products will provide specific and detailed information and make clear the type of goods allowed to be traded in Myanmar.
The list includes 24 products and items, such as consumer goods, which includes clothes, watches and cosmetics; food, which includes agricultural and animal products; and household and kitchen items, drugs and medical equipment as well as vehicles and vehicle parts.
According to the Ministry, foreign companies with a minimum capital of US$5 million and US$3 million are allowed to engage in wholesale businesses and retail businesses respectively. Where it is a joint venture company with at least 20% equity held by a Myanmar citizen, the initial investment is US$2 million in respect of a wholesale business and US$700,000 in respect of a retail business.
The new SOP has been met by praise from many businesses, which believe that the move will increase foreign investors and help stimulate the country’s economy with foreign interest and participation.
However, smaller businesses may face difficulties from competition, which is likely to push their prices down. The Myanmar Retailers Association has stated that it will discuss the issues smaller businesses face, and will submit suggestions to the government on the best ways to tackle these.
Commission of Inquiry established on Rakhine issue
Myanmar has established an independent commission of inquiry to look into human rights abuses in the Rakhine state.
The statement issued by the President’s Office on 30 July 2018 states the following: “The Government of the Republic of the Union of Myanmar has today established the Independent Commission of Enquiry as part of its national initiative to address reconciliation, peace, stability and development in Rakhine. The Independent Commission will investigate the allegations of human rights violation and related issues following the terror attacks by ARSA.”
Members of the new commission include two foreign and two Myanmar nationals: Philippine’s former deputy foreign minister Rosario Manalo will chair the commission, with the other members being Japan’s former UN representative Kenzo Oshima, the former chair of Myanmar’s constitutional tribunal U Mya Thein and Aung Tun Thet, a former presidential adviser to Thein Sein. The commission is also said to be aided by national and international legal and technical experts.
The commission is one of several formed in recent months to address the situation in Rakhine state, with a number expressing their frustration at the process. It remains to be seen whether this latest move will engender progress in investigations or is simply another political gesture.