Myanmar enacts new insolvency legislation

Myanmar enacted a new insolvency law on March 25, a month after receiving Parliament approval.

The new legislation will facilitate the government in managing and dealing with cases involving insolvency in Myanmar and is expected to strengthen the business environment and draw more foreign investors to the country,

“We are working on linking the Insolvency Law to the Myanmar Companies Online Registration so that all registered companies in Myanmar are covered by the law,” U Thant Sin Lwin, Director General of the Directorate of Investment and Company Administration, said.

The law, which has 425 sections, includes recourse for micro, small and medium-sized enterprises (MSMEs) and directives related to cross border insolvency.

It aims to achieve nine objectives, including compatibility between national law systems and commerce systems, effective management, predictability and fairness throughout the process of insolvency and providing support for MSMEs facing financial difficulty. It will also provide protection for local firms entering the international market by building a framework for cross border insolvency.

Resolving insolvency is also one of criteria measured by the World Bank on its Ease of Doing Business Index. Although Myanmar raised its ranking on the World Bank’s Doing Business 2020 Report to165th place out of 190 countries on the index compared to 171st place in 2019, resolving insolvency was one of the areas in which improvement is still much needed.

The new law replaces the Yangon Insolvency Act (1909) and the Myanmar Insolvency Act (1920).

Quek Ling Yi, Partner at Dentons Myanmar, said though, that the interpretation and actual implementation of the new law will have to be guided by directives or notifications issued at a later juncture.

But she noted that “in light of COVID-19, the potential decline in market conditions and consequent rise in bad debts may spur the authorities to publish the guidelines and notifications earlier than expected.”

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Source : Myanmar Times

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