New Companies Law a game changer for bourse

The enactment of the new Myanmar Companies Law will bring about change for local companies listed or planning to list on the Yangon Stock Exchange (YSX), leading to further development in the economy.

Under the new Companies Law, which was officially signed into legislation by President U Htin Kyaw on Wednesday, foreigner investors will now be permitted to take up to a 35 percent stake in local companies. It also stipulates that businesses with foreign stakes of more than 35pc will be classified as foreign companies.

This is positive for the YSX as well as the wider economy. “It is a huge step forward. The new amended law modernizes the Myanmar companies legal regime and brings it into step with international best practices. And, when fully implemented, it will encourage foreign investment and provide needed liquidity to Myanmar companies,” said William Greenlee, managing director of DFDL’s Myanmar office.

U Tun Tun, senior financial officer and executive director of YSX-listed First Myanmar Investment Company (FMI), agreed. “The emergence of this law will result in more foreign direct investments into Myanmar. With more foreign investments in [local firms], these businesses will be able to expand and strengthen their market share through better access to funds and improved liquidity in the stock market. As such, this new legislation is very encouraging for the business community.”

“The new Myanmar Companies Law will provide opportunities for foreigners to invest and buy shares in YSX-listed companies providing the liquidity necessary for an efficient and functional stock exchange,” YSX senior executive officer U Thet Tun Oo said.

That, in turn, could spur more companies to list on the local bourse. Already, THM Telecom Public Company, has received approval to list on the YSX. The announcement was made on Monday, just two days before the new law was approved. When THM completes the necessary procedures and eventually lists within the next month or two, it will be the fifth company on the YSX.

Indeed, with more foreign participation permitted, trading volumes on the YSX are expected to rise after recently hitting its all-time low. On Thursday, the Myanmar Stock Price Index closed at 474.72, not far from its record low of 451.39 on November 17. A total of just 7,138 shares in the four existing listed companies exchanged hands Thursday.

Melvyn Pun, CEO of Yoma Strategic, the Singapore-listed associate company of FMI, reckons the new law will drive the local capital markets forward. “The passing of the Companies Law is a game changer. I expect local corporations and banks to benefit from recapitalisation by international investors, which will spur economic growth and strengthen local companies,” he said.

Details needed

Still, lawyers and business insiders said it could take a while for the economy to absorb the impact of the new law.

“While the new Companies Law gives investors so many more options compared to the previous 103-year-old Companies Act, there are many details in the new Companies Law that will need to be further explained in the coming weeks. It will be very interesting to see how the 35pc foreign ownership allowance of Myanmar companies will be digested by the different ministries,” said Bob Tseng, a lawyer at Thanlwin Legal.

Other lawyers point out that while the new law will make it easier to do business and set up new companies, foreign ownership in land or financial institutions may still be restricted by other government ministries. For example, even though the Companies Law states that foreigners can take up to a 35pc stake in all local companies, in the banking sector, the Central Bank still has the power to restrict equity ownership in the local banks.

For now though, the business community is applauding the move. “While the new act brings Myanmar more up to date in its legal infrastructure, there is plenty still to be done to attract increased levels of foreign investment into the country. This is a necessary first step for the economy,” Peter Beynon, chair of British Chamber of Commerce Myanmar, said.

“The adoption of this law represents another significant update of the legal investment environment in Myanmar. Although a lot remains to be done in order to make Myanmar competitive, from a legal standpoint, with its ASEAN neighbours, a solid foundation is now being build towards a brighter future for the people of Myanmar,” said Eric Rose, lead director of Herzfeld Rubin Meyer & Rose Law Firm.

Source : Myanmar Times

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