Myanmar issues a new Myanmar Companies Act to attract foreign investment. The local companies are expected to take their businesses to a level.
On 6 December 2017, Myanmar’s President U Htin Kyaw signed a new Myanmar Companies Act. The government aims to improve the investment environment and attract more foreign investors. “The Myanmar Companies Act is an urgently needed legislation to improve business”, said U Ye Min Aung, managing director of Myanmar Agribusiness Public Cooperation.
The new companies act will ease market access for foreign investment
Under the new act, foreigners can hold up to 35% stakes of local companies. Companies with more than 35% foreign investments will be classified as foreign-owned enterprises. In the old Companies Act of 1914, only 100% local ownership companies were classified as local companies.
Only local companies are allowed to take part in businesses like banking, finance and pharmaceuticals in Myanmar. With the change of local company definition, foreigners will now be able to invest in these sectors. The new act also allows foreign investors to take stakes in Yangon Stock Exchange (YSX) listed companies as well as trade in shares on the YSX.
Company managers will not have to seek prior approval from the regulator if they want to change the company’s legal status from “local” to “foreign”. The concerned domestic company only need to notify Directorate of Investment and Company Administration to make the change.
“In the past, companies did not want to list because there was no liquidity in the market, given that only local investors were permitted to invest,” said Chester Toh, co-head of law firm Rajah & Tann’s Myanmar Practice. Currently, there are only five companies listed on YSX. The new act will bring greater liquidity and more activities on the YSX.
The new act is expected to attract more capital injections
Existing regulations prohibit local companies from borrowing from foreign banks operating in Myanmar. Under the new act, companies with foreign investment will be able to apply for a loan from foreign banks. The company director will be able to sell the shares or bonds to anyone at any time by stating the rules and regulations.
“It is a significant step forward for corporate governance and embraces modern company law principles, enhancing Myanmar’s legal framework for investors,” said Cheah Swee Ghim, a partner at local law firm Kelvin Chia Partnership.
Foreigners are expected to participate more actively in the local economy. Hopefully, foreign investors will not only bring in money but will also bring technical assistance to local companies.