The Memorandum of Association (“MoA”), the Articles of Association (“AoA”) and the Permit of Trade provided under the MCA have been replaced by a streamlined single document referred to as the Company’s constitution which has to be executed in both Myanmar and English) and is valid indefinitely and removed a number of previously required contents including inter alia the intended activities of the company.
Although the company’s intended activities are no longer recorded in the constitution, we understand that the newly incorporated entity will need to seek and obtain operating and business licenses before conducting any regulated activities. C
ompany registration is now made online on the new DICA website “MyCO” and new forms for every corporate modification have been developed. All payments are now possible online by credit card or by deposit with DICA.
Existing companies are required to re-register under the MCL prior to 31st January 2019 (at no cost). If a company fails to re-register, it may be suspended, struck off and possibly ordered to wind up.
II. Foreign invested enterprises
One main development introduced by the MCL is that a company shall be considered as a domestic company (as opposed to a foreign invested company) provided that the volume of shares held by a foreign entity (or a foreign invested entity) does not exceed 35% of the total number of shares. We note however that such definition has not always been taken into consideration in recent ministerial notifications.
III. Enhanced corporate governance
A sole investor can now establish a company (under the MCA, a company had to have at least two shareholders at all times). Regarding the shares themselves, new classes of shares are permitted: preferential or restricted rights, voting rights, option to acquire shares, etc. Pre-emptive rights are possible provided they appear in the Constitution.
The MCL enhances minority shareholders rights. Notably, a minority shareholder has the right to sue a majority shareholder in cases of “oppressive conduct”, or unfairly prejudicial and unfairly discriminatory behavior. In addition, the MCL introduced a right to intervene in any lawsuit where the company is involved.
The appointment of at least one resident Director is required within 12 months of the reregistration or incorporation. The duties of the Directors are clarified (a guide is made available on the DICA website). Fiduciary duties of the directors (including care and diligence, to act in good faith and in the best interest of the company and for a proper purpose, and a duty to disclose conflicts of interest) are further detailed in the law (and the template constitution) and may be subject to penalties.
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