Businessmen and economists have been eagerly awaiting a crucial piece of legislation that could have a transformative effect on the Myanmar economy.
Myanmar Companies Law is a major step to transform the Myanmar economy and it will beneficially affect the influx of foreign investment in domestic businesses, Aung Naing Oo, director general at Directorate of Investment and Company Administration (DICA) under the ministry of planning and finance, stressed at an official briefing on the Myanmar Companies Law, which was held on December 13 at the Melia Yangon Hotel.
He said the new law will encourage informal businesses as well as unregistered enterprises to register and so the businesses can easily set up and grow. Moreover, the law will also help improve the partnerships with overseas businesses that will provide many opportunities.
He said that it has taken over three years for this reform, including the passage of the law and the input from the private sector, government, ministries and the members of parliament.
The new Myanmar Companies Act will come into force on August 1, 2018.
The new law has been signed and approved by Myanmar President Htin Kyaw on December 6, 2017, replacing the country’s century-old Companies Act, which had been in place since 1914.
The Act was drafted by the directorate of investment and company administration of Myanmar (DICA) and Asia Development Bank (ADB) also provided technical assistance.
“The Myanmar Companies Act is an important foundation for the creating of the business environment in Myanmar. The new act adopts the international best practices on the company formation, business registration processes and corporate governance in Myanmar,” Kelly Bird, ADB’s director of public management, financial sector and trade division (Southeast Asia) said at the December 13 opening ceremony.
The new law follows the enactment of the new Myanmar investment law that was brought in eight months ago.
Aung Naing Oo said they have been developing and strengthening the rules related to the country’s economy. The new Myanmar investment law was enacted by the new government and now the new Myanmar Companies Law will come into effect on August 1, 2018.
As he noted, the law provides many opportunities for foreigners to work together with local businesses and vice versa.
“The regulatory framework may be seen to be better than in previous years and the improved situation will make investors confident,” Aung Naing Oo added.
The most obvious change in the new law is the change of the definition of a foreign company.
In a provision of the Companies Act 1914, even if the company included just a one percent foreign share, it was classified as a foreign company. The new companies law allows foreign ownership up to a 35 percent stake in a domestic company and its partnership businesses and it will be defined as a local company.
Dr. Phone Win, director of Mingalar Myanmar socio-economic association, told Mizzima that the change will improve the environment for partnerships.
“The new law encourages the partnership business, so we can work together with foreigners as they wish to invest with us,’’ he said.
He says that the new companies law will create more transparency in the Myanmar economic sector and particularly in the small and medium enterprise (SMEs) sector which is the country’s main economic driving force. Collaboration with foreign companies will improve technological innovation and market access.
“We have lived under a socialist regime and we have suffered from sanctions for almost five decades. If I say honestly, I think that we are able to get international market access and technology from hanging out with foreigners. I realize that market access is growing in importance. So these things are going to be easier when the new companies law is enacted,” Dr. Phone Win added.
Around 60,000 Myanmar companies have been registered by DICA and all of them now have to get new business registration, so they need to re-register within six months starting from August 1, 2018.
“But they don’t need to do the whole process from beginning to end, they have to re-register on an electronic platform,” DICA’s director general, Aung Naing Oo said.
Lincoln Legal Services (Myanmar) Ltd, business consultant and law firm which founded their company in April 1, 2016 told Mizzima that there are many international investors who have been interested in the Myanmar Companies Law.
“We are receiving many phone calls, emails and inquiries from our clients,” Nyein Chan Zaw, director of Lincoln Legal Services (Myanmar) Ltd, said.
He said that the new law liberalizes many restrictions for foreign companies and it offers many great opportunities to do business in the country.
“I think it will improve more the investment status in Myanmar as soon as the law is enacted,” Nyein Chan Zaw added.
Old companies as well as new ones may register both online and manually.
The change in the companies act may also encourage foreign trading in the Yangon Stock Exchange (YSX), which opened over a year ago. Foreign investors will see the opportunity to invest in companies beyond the current banking and finance sectors.
“It has been a long time that the stock market wanted a 35 percent of foreign shares into the market. Securities and Exchange Commission of Myanmar (SECM) demanded that we bring in the new law to come out as fast as possible. Now I am realizing that the companies law will provide stock market growth,” Aung Naing Oo said.