October 20, 2017

Draft Companies Law designed to remove obstacles for foreign investment

A new Myanmar Companies Law currently being drafted by legislators will remove cumbersome restrictions and make foreign investment easier, said Dr Myat Nyana Soe, the secretary of Amyotha Hluttaw Bill Committee.
“The draft law was approved by Amyotha Hluttaw and the amendments made by Aymotha Hluttaw and Bill Committee are already submitted to Pyithu Hluttaw. The draft will be legislated soon”, he said. The draft is expected to become finalized by the end of this year, he said.
The existing Myanmar Companies Act (1914) is over 100 years old, is based on 19th century commercial practices and has proved to be outdated and unfriendly to business. New draft amendments include provisions that will allow companies to start up with only one director and one shareholder. Mandatory annual meetings and financial reports will be abolished. Current requirements for new companies including the submission of articles on association and memorandum of understanding will also be removed in the draft law. The new draft requires only that new companies explain their overall structure. The draft law currently comprises 384 pages and 32 chapters and is being written with support from the World Bank.
“According to the World Bank’s 2014 Doing Business Report Myanmar ranked last in the ease of starting in business. People considered company registration process difficult,” said U Aung Naing Oo, the director general of Directorate of Investment and Company Administration (DICA). Myanmar is currently ranked at 170th place in Doing Business’s rank of World Bank which assigns rankings based on protecting in minorities, processing times, access to electrical power, cross-border trade regulations, taxation polices and other economic governance issues. “Myanmar’s rank rose a bit with economic reforms,” said U Aung Naing Oo. “Another problem is that there is weakness in current existing law to protect the minority investors with low share capital. After enactment of new law, Myanmar is expected to climb up doing business rankings significantly. This new law will include an online registration system which will speed up the process.”
“Foreign investors are waiting for new Myanmar Companies Law which will be enacted to replace Myanmar Companies Act (1914) is currently practiced”, said U Ye Min Aung, the vice chairman of Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). Foreign investors visit UMFCCI and express their interest in investing in Myanmar. US companies are very interested in agriculture, finance, consumer, garment and energy sectors. However, they all are waiting to see government’s policy on new Myanmar Companies Law, he said. Cathay United Bank Chief Representative Mr. Peter Pan Chung En intends to open a bank branch in Myanmar, but is among those waiting on the government to pass the new Companies Law.
“We are very interested in investing in a banking operation in Myanmar,” he said. “But, some rules and regulations are not instituted yet. Despite the approval from the Central Bank of Myanmar, we cannot do business as we were waiting for the new Myanmar Companies Law. Clear rules and regulations are required for investment.”

 

 

May Thet Hnin

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