Myanmar Companies Law

&

Myanmar Companies Online MyCO

Myo Min

Director

Company Affairs Division

Priorities of Companies Law reform

1. Modernise the law to align

with international practices legal developments

2. Create a clear, transparent,

consistent and stable for companies

3. Clarify the law and simplify

procedures to provide for companies and

4. Improve corporate governance

5. Improve transparency and accountability for companies through an electronic registry system

6. Assist SMEs by lowering compliance burden and increasing flexibility for managing companies

2

Commenced on 1st August 2018

Key changes in the new law

Single

shareholder/single

director companies

Company

constitution

No more fixed

value for shares or

authorised capital

Foreigners allowed

to own up to 35%

Myanmar resident

director

Overseas

corporations (as

branch offices)

Small company

exemptions

Easier decision

making (written

resolutions)

Solvency testsBetter corporate

governance

Directors duties

and liabilities

New DICA

enforcement

powers

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Legal characters of a company

1. Artificial legal person

2. Separate legal personality

3. Limited liability

4. Perpetual existence

5. Transferability of shares

6. Separate property

7. Delegated management

The modern world is built on two centuries of industrialisation. Much of that was built by equity finance which is built on limited liability.

(The Economist, 31 December 1999)4

“Foreign company” concept

“Foreign company”means a company incorporated in the Union in which an overseas corporation or other foreign person owns or controls, directly or indirectly, an ownership interest of more than 35%(s. 1(c)(14))

“ownership interest” (s. 1(c)(22))means a legal, equitable or prescribed interest in a company including:

(A) a direct shareholding in the company;

(B) a direct or indirect shareholding in another company which itself holds a direct shareholding, or an indirect shareholding, in the first company; or

(C) through an agreement which provides a direct or indirect right to exercise control over the voting rights on any resolution of the company;

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Quiz: Which of these are foreign companies?

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Company A

Company B

Foreigner

Myanmar citizen

Myanmar citizen

Company C

Myanmar citizen

Overseas corporation

65%

35%

30%

35%

35%50%

50%

35% of 65%= 22.75 %

50% of 35%= 17.50 %

“Foreign company” requirements

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Only 3 sections in the MCL mention “foreign companies” (FC)

Section 6(b)(viii) Must state in company registrationapplication whether a company is an FC

Section 86(b) Must state whether share transfer causes acompany to become or cease to become an FC

Section 97(b)(vii) Must state in the annual return whether acompany has become or cease to become an FC

All sections of the Companies Law apply equally to all companies (foreign or local)

“Foreign company” concept

NOT a type of company

A classification of companies based on ownership.

“Foreign company” can be private company, public

company or a company limited by guarantee,

unlimited company.

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Overseas corporations = branch offices

“Overseas corporation” – Any company or other corporation incorporated outside the Union (section1(c)(21)

An overseas corporation must not “carry on business” in Myanmar unless registered with DICA (section 43)

“Carrying on business” test (section 43(b))

Must appoint an “authorised officer” (section 47(b)(iii))

Authorised officer is a person who resides in Myanmar for 183 days minimum

Residency requirement starts from date of registration

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Company constitution

10

MoA

AoA

Company constitution

Company constitution

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Section 11(a) Each company will have a constitution … to

bind … the company and the members ... as if … [it] had been

signed by each member and contained a covenant on the part

of each member to observe all the provisions of the constitution.

Company constitution is a statutory contract members and the company

Contract enforceable by the company and the DICA or other parties)

A company can include whatever it wants in theconstitution, and it is valid to the extent it isthe law (section 12(a)

Who makes decisions for a company?

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Shareholders Directors

Rules for decision making

1. Companies Law

2. Company constitution

3. Shareholders Agreement (or Joint Venture Agreement)

Decision Making Powers

Shareholders

1. Request shareholder meetings of the

2. Vote on resolutions at shareholder meetings

3. Only shareholders can approve members’ resolutions such as: Change constitution

Change name

Change company type

Appoint or remove

Directors

1. Sign contracts on behalf of the company

2. Make decisions such as hiring employees

3. Decide business plan and strategy

4. Approve BOD resolutions such as: Approve share transfers

Issue or allot new shares

Hire employee

Pay dividends

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Decision making by companies

(Meetings)

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Shareholder

Meetings

Annual

General

Meeting

Special

General

Meeting

Statutory

Meeting

Director

Meetings

Board

Meetings

Committee

Meetings

Creditor

Meetings

Debenture

holder

meetingsCreditor and

contributory

meetings

(for

liquidation)

Shareholder resolutions

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Ordinary resolution – Passed by a majority of

votes (Section 1(c)(20))

• Appoint a director and remove a director• Appoint an auditor• Approve financial reports• Approve benefits and pay for directors’ • Shareholder resolutions must be passed by ordinary resolutions

law requires a special resolution (Section 155)

Special resolution – Passed by 75% or more

of votes (Section 1(c)(40))

• Change of company name, change of company type, change of approve capital reduction and share buy-back, issue preference conversion of shares

DICA’s Role under the Companies Law

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Register companies, overseas corporations

and associations 2)

Maintain public

registry of information on

in Myanmar (sections to 421)

Monitor and inspect information filed with DICA (sections 426-7)

Investigatesuspected breaches of

Companies Law 269 to 278, 426)

Issue penalty notices for offences under

Companies Law and impose late filing fees

(section 439)

Take legal action for breaches of Law in Court

(sections 436-8)

How companies are regulated

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Internal Affairs of companies

(Governance & management)

• Regulated by Companies Law and:

• Company constitution

• Shareholders Agreements (JV)

• Securities Exchange Law and Rules

• Court rules and procedures on winding-up

External Affairs of companies

(Conduct of business)

• Regulated by laws concerning business activities: • e.g. Investment Law, Taxation

Laws, Competition Law, Labour Laws

• Laws regulating sectors:• e.g. Mining Law, Hotel and

Tourism Law, Financial Institutions Law

• Criminal (Penal) Code and Procedures

Electronic registry

or

Myanmar Companies Online

MyCO

18

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www.myco.dica.gov.mm

Re-registration of companies

All existing companies, associations and branch officeswill be required to re-register in the new registry Myanmar Companies Online (MyCO).

Re-registration is completely free.

Update all company details in the Re-registration Form(without separate filings or fees).

Re-register within six months by 31 January 2019

Simply complete a “Re-registration Form” online ordeliver a hardcopy to a DICA office.

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Prepare for the new Companies Law1.Review new model company constitution –

Decide whether to adopt it and whether to retain objects of the company

2.Check company’s share capital – Confirm how many shares on issue, issue price for each share, capital, unpaid capital, shareholders details

3.Prepare company registers – Update register of members, register of directors, register of charges, register of options/ debentures/securitiesand decide where they will be kept

4.Review Directors Duties – New director duties and liabilities under the new law

5.Re-register your company – Complete re-registration online or at DICA

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myomin.dec1976@gmail.com+95 9 259003179+95 1 656891