The new Myanmar Companies Law 2017 (Pyidaungsu Hluttaw Law No.29) (“MCL”) passed on 6 December 2017, and implemented on 1 August 2018, replaces the century old Myanmar Company Act 1914 (“MCA”). The MCL modernizes Myanmar’s corporate framework and provides new opportunities for local and foreign companies that didn’t exist under the MCA.

This is a great win for “local” and “foreign” investors in Myanmar. The MCL has been in the draft stage for around three years. Under the MCL, foreigners can now buy equity in Myanmar companies and Myanmar companies have greater access to foreign capital. This couldn’t come at a better time as Myanmar companies in need of capital can now expand their businesses easier with foreign collaboration.

Under the MCL, foreign companies/foreigners are now permitted to:

1. Acquire share ownership of up to a prescribed threshold of thirty-five per cent (35%) in a “Myanmar Company,” and the company will still be considered a “Myanmar Company”;
2. Purchase shares in a “Myanmar Company” without obtaining advanced permission from DICA. The MCL means that DICA will only need to be notified when the foreign ownership of a “Myanmar Company” exceeds the prescribed limit of thirty-five per cent (35%), in such a case, the company will need be re categorized as a “foreign company”;
3. Allow a board of directors to determine the form of consideration for an issuance of shares;
4. Have the option of drafting customized company constitutions providing they do not breach the MCL.

Since former U.S. President Obama’s Executive Order in 2016 lifted the last remaining American sanctions against Myanmar, foreign investors, family offices, private equity firms and VCs have spent 2017, identifying potential – “Myanmar Companies” as targets with a view to acquire an interest. We are expecting a significant uptick in M&A activity going into 2018. We understand this to affect certain key sectors of Myanmar’s economy which have been largely off limits to foreign investors in the past. Certain areas of interest include: banking; distribution; trading and insurance.

Under the MCL all existing companies, branches and representative offices will be required to re-register with DICA within 6 months of 1 August 2018.

Under the MCL, a company must have at least one “resident” director that is a resident in Myanmar for at least 183 days per year. There is no requirement that this director be a Myanmar citizen.

The MCL is expected to open Myanmar to a second wave of increased foreign investment that has not been experienced since the enactment of the Foreign Investment Law in 2012 (repealed and replaced by the Myanmar Investment Law 2016).

Through our office in Yangon, Duane Morris & Selvam advises corporations on investment, business and regulatory processes in Myanmar. For further information, please contact Mr Krishna Ramachandra (kramachandra@duanemorrisselvam.com), Ms Babita Ambekar (bambekar@duanemorrisselvam.com), Mr Priyank Srivastava (psrivastava@duanemorrisselvam.com), or Mr Rory Lang (rjlang@duanemorrisselvam.com) or visit www.duanemorrisselvam.com. Duane Morris & Selvam is recognised as a leading law firm for Myanmar related Corporate, M&A and Projects (including Energy) work – The Legal 500 (2017 & 2018).