What is the main source of law authorising this entity form?
Myanmar Companies Law 2017 (“MCL 2017”)
Give a brief summary of the entity form:
Does the entity possess separate legal personality?
Ltd./Co., Ltd. has a separate legal personality.
(Maximum) period of existence
Ltd./Co., Ltd. has no maximum period of existence, it has perpetual existence.
The governing documents are Constitution of Ltd./Co., Ltd.
Liability of incorporators / shareholders
Incorporators/shareholders are not personally liable for the debts of the company and liabilities of members are limited on the types of shares. Shareholders liable to the extent of amounts unpaid on shares owned by them. If their shares are fully paid, then the shareholder has no further liability.
The governing bodies are the Board of Directors and the Committee of Directors which exercises powers delegated to it by the Board of Directors.
Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?
Under the MCL 2017, it is possible for Ltd./Co., Ltd. to enter into legal merger, asset acquisitions, equity acquisitions and international restructurings. However, these activities are subject to the Transfer of Immoveable Properties Restriction Act, Myanmar Investment Law, Foreign Exchange Management Law, Competition Law and other specific legislation of Myanmar.
Can this type of entity be publicly listed or held?
Yes, this form of entity can be listed if it meets the requirements for listing by changing the company type to PLC.
Can this type of entity be used for a non-profit or charitable organization?
No, it is not allowed.
Give a brief summary of the process of incorporation, formation, or organization, including:
Main documents required
- Company Constitution
- Detail list and supporting documents of Directors and Shareholders
Involvement of notary, company register, governmental authorities
The incorporation registration must be filed with the company registrar, the Directorate of Investment and Company Administration (DICA) (“yin-hnii-hmyote-hnan-hmu hnint company mya hnyun-kyar-hmu oo-sii-htar-na (daikar)”), through electronic company registration system “MyCO” (“myko”). Manual registration is not available at this time as the DICA is trying to encourage all applicants and users to submit all applications/forms and amendments through MyCO.
There are no waiting periods and it can be filed 24/7 with the company registrar.
Main costs, including registration and similar fees (excluding legal fees)
Normally, the company registration fee for a private limited liability company is 250,000 Myanmar kyat (MMK) (Approx. US$120). However, the DICA had reduced the registration fee to 150,000 Myanmar kyat (MMK) (Approx. US$72) due to the COVID-19 pandemic. The registration fee for a public limited company is 2,500,000 Myanmar kyat (MMK) (Approx. US$1,190).
Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?
It is not mandatory to describe business objectives when Ltd./Co., Ltd. is registered via MyCO. However, after two months, Ltd./Co., Ltd. must file an annual return and declare the business activities of the Ltd./Co., Ltd. in Myanmar.
Minimum number of incorporators / shareholders and residency requirements
At least one shareholder is required for Ltd./Co., Ltd. There is no residency restriction on shareholders.
Minimum number of directors (or other applicable officers) and residency requirements
At least one director is required for Ltd./Co., Ltd. There is a residency restriction, in which at least one of the Directors shall be ordinarily resident in Myanmar. The director and shareholder may be the same person.
Minimum share capital, or equivalent, and payment requirements (including opening a bank account)
There is no restriction on minimum share capital.
Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?
Generally, incorporators/directors need not be physically present in Myanmar. However, at least one Director must be ordinarily resident in Myanmar. “Ordinarily resident” means that the individual is a permanent resident of the Myanmar under an applicable law or is resident in the Myanmar for at least 183 days in each 12 month period, starting from the appointment date.
Is a tax identification number, or equivalent, required? If so, how is it obtained?
The company registration identification number will be treated as tax identification number under the new company registration system.To obtain a tax identification number, the company must apply for a business taxpayer’s registration at the relevant Internal Revenue Department office.
What is the title of the applicable company registry?
Directorate of Investment and Company Administration (DICA) (“yin-hnii-hmyote-hnan-hmu hnint company mya hnyun-kyar-hmu oo-sii-htar-na (daikar)”
What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:
The information listed below must be filed at the DICA through MyCO:
- Name of company
- Address details on registered and principal place of business
- Company Constitution
- Share capital (issued and paid up)
- Details of shareholders (natural person or corporate entity)
- Details of Directors
- Details of company secretary (if applicable)
- Annual return
- Mortgages, charges
- Information regarding insolvency, and liquidation
- Appointment of receiver, liquidator
The following information is now publicly available:
- Company name and registration number.
- Company type.
- Company status (registered, foreign company, small company).
- Annual return due date.
- Principal activity of the company.
- Filing history of the applications that the company has submitted to the registrar.
- Address of the company.
- Names of the Directors (but not including their details).
What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?
Board of Directors/ Committee of Directors
The board and members of directors’ committee represent the company and undertake day to day operations of the company. They must carry out business with good faith for the interest of the company. Their duties and liabilities are mentioned in the law and company institution.
How are the members of the executive body appointed, dismissed and replaced?
Members of board of directors are elected and appointed by shareholders at general meeting by a resolution passed by a majority of the votes of members. Any directors can be dismissed by ordinary resolution of general meeting. Any casual vacancy occurring among the directors may be filled up by the directors.
An ordinary resolution is resolution which has been passed by a simple majority of the votes of members entitled to vote as are present in person or by proxy (where allowed) at a general meeting of which notice specifying the intention to propose the resolution as an ordinary resolution has been duly given.
Is it possible to appoint corporate directors or must all directors be natural persons?
No, it is not possible. An entity cannot be appointed as a director. The company directors must be natural persons only.
Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?
The company can have non-executive directors and can establish either one-tier or two-tier structure in accordance with the company constitution.
What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?
General meeting can pass ordinary resolutions or special resolutions for the purpose of appointing and terminating a director, appointing an auditor, approving financial reports, approving benefits and pay for directors’, changing company name, changing the type of company, amending the company constitution, approving capital reduction and share buy-back, issuing preference shares, conversion of shares, appointing a liquidator, and winding-up the company.
An ordinary resolution is a resolution which has been passed by a simple majority of the votes of members entitled to vote as are present in person or by proxy (where allowed) at a general meeting of which notice specifying the intention to propose the resolution as an ordinary resolution has been duly given and a special resolution is a resolution which has been passed by a majority of not less than three-fourths of the votes of members entitled to vote as are present in person or by proxy (where allowed) at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given.
What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?
At least two shareholders must be present at all times during the meeting or such larger number as may be specified in the company’s constitution in order to have a quorum for the meeting. If the company has only one member, the company does not need to have a members’ meeting and may instead pass any resolution by signing it and recording it in writing.
Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?
Small companies are exempted from holding an annual general meeting (AGM), reporting financial statements and auditing requirements. Small companies under MCL 2017, are defined as (A) companies and their subsidiaries which have no more than 30 employees; and (B) companies and their subsidiaries that had annual revenue in the prior fiscal year of fewer than MMK 50,000,000 (Approx. US$23,810) in aggregate.
What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?
The annual accounts and financial report must be prepared by Directors and audited by company auditor in the case of companies other than small companies. These audited account and financial report must be presented at AGM and adopted.
Is the entity permitted to determine its own financial year?
No, it is not permitted. The mandatory financial year commences on 1 April and ends on 31 March of the following year.
Is the entity subject to any statutory (external) auditor obligations?
Public companies are permitted to appoint external auditor. Small companies are exempted from appointing auditor.
Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?
It is optional for the company to appoint a secretary. The secretary may be appointed by a resolution of the directors.
An officer of a company or a body corporate is a person who makes, or participates in the making of, decisions that affect the whole, or a substantial part, of the business of the company or body; or has the capacity to significantly affect the company’s or body’s financial standing.
An authorised officer is appointed by an overseas corporation which is a corporation incorporated under the law of a country other than Myanmar, to act as its representative for the purpose of the MCL 2017.Authorized officers must be ordinarily resident in Myanmar. “Ordinarily resident” refers to a person who is a permanent resident of Myanmar or is resident in Myanmar for at least 183 days in each 12 month-period commencing from the date of registration of the company or body corporate.
No person shall be appointed or act as an auditor of a public company or a subsidiary of a public company unless he holds a certificate from such other person or body authorised under an applicable law entitling him to act as an auditor of companies.
What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?
"ownership interest” is a legal, equitable or prescribed interest in a company which may arise though means including:
- 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
- through an agreement which provides the holder with a direct or indirect right to exercise control over the voting rights which may be cast on any resolution of the company.
Are different classes of ownership interests possible? If so, what are some examples of different classes?
Different classes of shares are possible, which are:
- Ordinary shares, Class A shares, Class B shares, Class C shares, Employee’s shares, Management shares, Redeemable shares, Preference Shares, Redeemable-preference shares and Other types of shares as specified by the company’s constitution.
What documentation is required for the transfer of ownership interests?
Transfer of ownership interests requires a relevant certificate, Form C-3 prescribed by the registrar and a share transfer form, showing evidence of the shares or interests intended to be transferred.
Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?
The share transfer must be recorded in the company’s shareholders register and the transferor is required to notify the company registrar. The additional formal requirements for notifying the company registrar of the transfer of ownership include the following corporate records:
- Board of Directors resolution to approve the transfer of ownership;
- Form C-3 (Change to share capital or register of members);
- Declaration of transferee;
- Declaration of transferor;
- Consent to act as member (in case of the appointment of a new member);
- Share Transfer Form; and
- Share certificate.
These documents must be submitted to the registrar through MyCO for approval and be kept as corporate records.
Are there any applicable stamp duties imposed when transferring ownership interests?
A transfer of shares must be duly stamped. The stamp duty is 0.1% on the value of the share that is transferred and MMK 50 (Approx. US$0.04) on each share certificate.
How are shares issued? (including information on payment obligations, registration requirements)
The board of a company may issue shares or other securities at any time, to any person, on the terms and in any number the board thinks fit. Subject to the constitution of the company, shares may be issued fully or partly paid. If the shares are issued as partly paid, the terms of issuance must specify when calls may be made and when the shareholder is liable to pay such calls.
Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?
In the event that a share is issued for consideration other than cash, the board must record the consideration in sufficient detail to identify it, and determine the reasonable present cash value of the consideration for the issuance and record this and the basis for assessing it, and maintained with the books and records of the company.
The original resolution must be kept by the company and made available to the DICA is requested.
Share premium contributions, i.e. equity contributions without issuing shares are possible.
Partially paid shares re permitted. The only restrictions are that the terms and conditions specified by the company are subject to the constitution as are when calls may be made and the shareholder’s obligation to pay such calls.
Any requirements with respect to share cancellation, share repurchase and other capital reductions
Share cancellation, as a consequence of capital reduction, must also be approved by a special resolution passed at a meeting of the shareholders of the class of shares which are to be cancelled. A special resolution is a resolution which has been passed by a majority of not less than three-fourths of the votes of members entitled to vote as are present in person or by proxy (where allowed) at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given. Special resolutions are required to authorize the alteration of company constitution, a change of company name, a change of company type, the issue of preference shares, the alteration of share capital, the variation of class of shares, and winding up of the company.
The company may repurchase (buy-back) its shares by equal or selective if the company satisfies the solvency test immediately after the repurchase, the repurchase is fair and reasonable to the company’s shareholders as a whole, and the repurchase does not materially prejudice the company’s ability to pay its creditors. An equal buy-back is one that satisfies the following conditions:
- the buy-back offers relate only to ordinary shares;
- the offers are to be made to every person who holds ordinary shares to buy back the same percentage of their ordinary shares;
- all of those persons have a reasonable opportunity to accept the offers made to them;
- buy-back agreements are not entered into until a specified time for acceptances of offers has closed; and
- the terms of all the offers are the same.
All other buy-backs except equal buy-back are selective buy-backs.
The solvency test means that: (A) the company is able to pay its debts as they become due in the normal course of business; and (B) the company’s assets exceed its liabilities, in each case as determined in accordance with the accounting standards applicable to such companies or prescribed from time to time.
An agreement for an equal repurchase must be approved by an ordinary resolution passed at a general meeting of the company or must be made conditional to such approval, and an agreement for a selective repurchase must be approved, or be made subject to approval, by either a special resolution passed at a general meeting of the company or a resolution agreed to, at a general meeting, by all ordinary shareholders.
A company limited by shares, subject to its constitution, may:
- reduce its share capital to which extinguish or reduce any unpaid amounts for share capital not paid up, or, either with or without extinguishing or reducing liability on any of its shares;
- cancel any paid-up share capital which is lost or unrepresented by available assets, or, either with or without extinguishing or reducing liability on any of its shares; and/or
- return any paid-up share capital which is in excess of the wants of the company.
If the reduction is an equal reduction, it must be approved by an ordinary resolution passed at a general meeting of the company. If the reduction is a selective reduction, it must be approved by either a special resolution passed at a general meeting of the company or a resolution agreed to, at a general meeting, by all ordinary shareholders.
Any requirements with respect to distributions to shareholders?
Distributions can be made to shareholders in accordance with the constitution or by the special resolution of shareholders.
Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?
Yes, provided that the provisions in such agreement do not contradict the company constitution, the MCL 2017, the Contract Act and other existing laws in Myanmar.
Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?
The company must hold an AGM of shareholders every year. The financial account and report of directors must be approved by the AGM and the company must also file a return with tax authorities reporting on company incomes for the financial year from 1 April to 31 March. In addition, the company must file an Annual Return application on the applicable date set by the registrar/MyCO system. The official fee is MMK 50,000 (Approx. US$24) per submission.
What are the general corporate tax rates? (Specify if there is a national versus local distinction).
Corporate Income Tax (CIT) rate for 2022/2023 is 22% on net profits. Resident entities are obliged to declare and pay CIT on their worldwide income. Non-residents are only obliged to pay CIT on their Myanmar-sourced income.
Summary of any specific matters, e.g. recent or prospective major legal developments
The main changes introduced by the MCL 2017 are detailed below.
Up to 35% Foreign Shareholding in Local Companies
The most significant change introduced by the MCL 2017 is the new definition of a foreign company. Under the MCA 1914, a locally incorporated entity with any foreign shareholding is considered a foreign company in Myanmar. The MCL 2017 changes this legal definition, allowing companies to have up to 35% of their shares held by foreign nationals before being considered a foreign company. This allows foreign investors to partake in business activities that were previously restricted to companies with 100% of shares held by Myanmar citizens.
Based on the existing practice of the Directorate of Investment and Company Administration (DICA) (“yin-hnii-hmyote-hnan-hmu hnint company mya hnyun-kyar-hmu oo-sii-htar-na (daikar)", the principal government body regulating company affairs in Myanmar, locally incorporated companies must have a minimum of two shareholders. The MCL 2017 changes this position, allowing companies to be incorporated with a minimum of one share and a single shareholder. This brings Myanmar’s company law practices more in line with international standards, and it allows companies to incorporate wholly-owned subsidiaries in the country.
Number of Directors and Residency Requirements
Under the MCL 2017, only one director has to be appointed for each company. This is different from the previous practice of DICA, which required locally incorporated companies to have at least two directors. However, the MCL 2017 requires at least one director of the company to be ordinarily resident in Myanmar—that is, resident in Myanmar for at least 183 days in each year (but not necessarily a Myanmar national). Public companies must have at least three directors, one of whom must be a Myanmar citizen ordinarily resident in the country.
Replacement of Memorandum and Articles of Association with a Constitution
DICA’s practice under the MCA 1914 is to require companies to have a memorandum and articles of association in accordance with sample templates provided by DICA during incorporation. The MCL 2017 replaces this requirement with a single company constitution. The memorandum of association, articles of association, and any other constituent documents of an existing company in Myanmar will collectively regarded as its constitution, provided that they are consistent with the MCL 2017.
Abolition of Company Objectives
The MCL 2017 abolishes the requirement for companies incorporated in Myanmar to stipulate their company objectives, which effectively limit the type of business activities that a company can undertake. Under the current MCA 1914 framework, persons wishing to incorporate a company in Myanmar are required to have the intended company objects approved by DICA before filing a company incorporation application. Registered objectives of an existing company will cease to exist 12 months after the enactment of the MCL 2017.
Removal of Permit to Trade Requirement for Foreign Companies
The MCL 2017 removes the requirement for foreign companies to obtain a permit to trade when applying for company incorporation. The removal of this regulatory hurdle, which, despite its name, does not permit foreign companies to engage in trading activities, expedites the company incorporation process.
Abolition of Authorized Capital and Par Value
The MCA 1914 only allowed a company to hold shares up to the amount of authorized capital stated in the memorandum of association, with any capitalization beyond that requiring a formal amendment to the memorandum. This requirement changes under the MCL 2017, which states that shares shall not have a nominal or par value. This allows companies to have more flexibility in pricing shares.
Different Classes of Shares Permitted
The MCL 2017 allows companies to issue different classes of shares and securities, thereby permitting companies to distinguish the rights of different shareholders. Companies can therefore issue preferential shares and shares with weighed voting rights.
Exemptions for Small Companies
Under the MCL 2017, companies with less than 30 employees and annual revenues lower than MMK 50 million (approx. US$23,810) are exempted from certain reporting and meeting requirements. For example, unless required by the company’s constitution, the DICA, or an ordinary shareholders’ resolution, a qualifying company does not need to hold an annual general meeting or file an annual balance sheet, directors’ report, or financial statements.
Directors’ Duties Codified
In line with common law principles and modern legislation governing companies internationally, the MCL 2017 lays down a comprehensive set of directors’ duties. This includes the duty to act with care and diligence, the duty to act in good faith in the company’s best interest, the duty to avoid reckless trading, and more.
Clarification on the Regulation of Overseas Corporations
The MCL 2017 states that all overseas corporations (i.e., foreign-incorporated entities) must register in order to “carry on business” in Myanmar. While the MCL 2017 does not define activities which constitute the carrying on of a business in Myanmar, it states that an overseas corporation is not deemed to be carrying on business in Myanmar merely because it maintains a bank account, conducts an isolated transaction completed within a period of 30 days (not being one of a number of similar transactions repeated from time to time), holds property, becomes a party to legal proceedings, or lends money.
Under the MCA 1914, foreign-incorporated entities are able to register their branch offices or representative offices in Myanmar with DICA, though neither branch offices nor representative offices are recognized as distinct legal entities from the foreign-incorporated entities and are regarded as nonresident foreigner entities in Myanmar. It is therefore important for foreign businesses with regular business transactions in Myanmar to consider these new provisions to determine whether registration under the MCL 2017 is required.