Now that the Myanmar Investment Law has been passed by both houses of parliament, attention turns to the new Myanmar Companies Act, which senior business sector figures say will be key in improving corporate governance.
The investment law, which will combine and replace the Foreign Investment Law and the Myanmar Citizens Investment Law, was passed by the Amyotha Hluttaw session on October 5 after passing through the lower house the previous week.
The legislation is designed to simplify the investment process and will allow the government to use tax breaks and other incentives to make investing in certain regions or sectors more attractive.
The business community is hoping the new Myanmar Companies Act will have similarly smooth passage through parliament when it arrives. The draft law is “still in the pipeline for inter-ministerial review”, according to DICA’s director general U Aung Naing Oo.
He originally expected to see the Companies Act approved before the end of 2016, and still hopes to see the act submitted to parliament soon. But because the law will require more time under review at the finance ministry he now thinks the first quarter of 2017 is more likely.
The Investment Law is designed to help foreign and local companies put money to work in Myanmar, while the Companies Act is aimed at building a strong framework to govern how they operate. But improved corporate governance should also help make the prospect of investing more attractive in the first place.
Chris Razook, IFC corporate governance advisory lead for East Asia Pacific, said the new Companies Act will help bring Myanmar’s corporate governance framework closer to international standards.
By introducing provisions to help strengthen shareholder rights and detail the duties of directors it will help raise the level of transparency across firms, he said.
“These are all crucial to help attract investors to Myanmar’s private sector,” he added.
U Aung Naing Oo said the idea of an updated Companies Act is to reduce compliance costs and regulatory burdens for firms, as well as enhance corporate governance. This means that when the Companies Act is finally in place life should become easier for local firms.
“There are new provisions in the law that are well exercised in other countries regionally and internationally,” said U Aung Naing Oo.
Provisions for single shareholder and single director companies will make it easier for small and family-owned business to register as firms, he added.
Smaller firms will also be exempt from a requirement to provide annual financial reports to DICA.
The companies act will also fill in gaps in the existing Myanmar Companies Act, a piece of colonial-era legislation passed in 1914. The new act will lay out the duties and obligations of directors, stipulates the power of registrars to regulate companies and allow for the use of electronic communication methods – something not covered in the 1914 law.
“Our focus on the new law is modernisation, simplification and user friendliness,” said U Aung Naing Oo.
Industry experts are also hoping that the new Companies Act will allow foreign investors to buy shares on the Yangon Stock Exchange, which the existing Companies Act does not allow.
Three companies have listed on the new bourse so far this year, and a sound corporate governance framework would help get more local firms into a position to list. Senior government officials have said previously that the new Companies Act could also pave the way for foreign firms to list on the YSX.
Source: Myanmar Times
