What Type of Entity Should We Use to Set Up Our Business?

Private Limited Company

A company is owned by shareholders/members (minimum one) and managed by directors (minimum one). However, shareholders in Myanmar, in practice, frequently exercise direct control over the operation of the company, primarily by serving as directors themselves or through a designated or nominated director. Company directors are subject to fiduciary duties and obligations imposed by law for the company’s benefit. The liability of each of the shareholders is generally limited to the total par value of their shares.

1. Registered Overseas Corporation

Myanmar law no longer includes the term “branch office”. Instead, the designation used is a registered overseas corporation, which refers to a business entity incorporated outside Myanmar but operates in Myanmar after registration. Myanmar law sets out a range of detailed requirements with regard to registration, the use of the overseas company’s name in Myanmar, the preparation and the submission of annual filings, and the process by which an overseas corporation may stop operations.

What are the Legal Issues Associated with the Start-up of a Company?

1. Incorporation and Registration

Foreign investors seeking to establish a private limited company must submit an application online via the MyCO. This process takes approximately one to two working days and successful applicants will receive a corresponding Certificate of Incorporation.

1. Activities of the Company

Companies are now allowed to engage in any lawful business activity, subject to securing required post-registration licenses and permits (e.g., companies engaged in telecommunications, insurance or financial services). Similarly, a company is not required to specify its intended business activities in its articles of incorporation (and thereby limit its authorized scope of business) unless specifically required by separate law or government policy to do so (for example companies engaged in financial services).

1. Registered Address

The company registration application must specify the address to which all official notices and communications to the company are to be sent and which may or may not be the same address as the company’s principal place of business. The only requirement for a registered address is that it is an address in Myanmar.

1. Directors and Director Duties

The minimum number of directors is one and the minimum number of shareholders is one unless it is a public company, in which case it must have at least three directors. It is also a requirement that any company have at least one director who is resident in Myanmar, which means residing in Myanmar for a minimum of 183 days in any 12-month period.

1. Shares and Shareholders

As discussed in Chapter 31, there is no minimum capitalization requirement to establish a private limited company or register an overseas corporation in Myanmar.

1. Auditor       

Companies are generally required to appoint a licensed auditor except for companies classified as small. However, even small companies will be required to appoint an auditor in the following circumstances:

1. a separate law requires it (e.g., depending upon the company’s intended business activities or if operating under a post-registration license such as banks, etc.)
2. the constitution of the company requires it;
3. the members require it by ordinary resolution; or
4. the Registrar determines that an auditor must be appointed.

 

1. Company Constitution

Myanmar law requires all companies to have a constitution that provides for such matters such as the composition of the board, the manner by which shareholder and board meetings are conducted, and limitations on the power of the board or the company.

1. Government Fees

• Incorporation of private company limited by shares (Form A-1) 150,000 MMK/ US$ 115.38
• Incorporation of private company limited by guarantee (Form A-3) 150,000 MMK/ US$ 115.38
• Registration of overseas corporation (Form A-8) 150,000 MMK/ US$ 115.38

1. Online Filings and Records of Companies

The MyCO does away with the previous manual filing done with the DICA and now allows for the online submission of applications for the incorporation of companies as well as the online filing of required company information, MyCO also currently provides information on the status of a company as registered, its registration number, its date of registration, its company type, its registered address, and its officers.

What are the Legal Issues Associated with Operating as a Foreign-Held Company?

1. Definition of Foreign Investor

Myanmar law defines a foreign investor as a person investing in Myanmar who is not a Myanmar national, including foreign companies, foreign branch offices, and other foreign enterprises held by non-Myanmar parties.

1. Prohibited and Restricted Sectors

Myanmar law prohibits foreign investments in the following industries:

1. MIC Permits

As a general rule, foreigners may engage in investment activities in Myanmar by the registration of an on-shore entity (see Chapter 31), without having to secure any further approval from the MIC. However, Myanmar law does require that investors (whether foreign or local) secure an investment permit from the MIC (an “MIC Permit”)

1. Application for MIC Permit

Myanmar law requires that foreign companies seeking to engage in activities requiring a MIC Permit to apply for and receive such permit in the proper form prior to engaging in such activity. Upon its receipt of the required completed application form, the MIC decides whether or not the proposal meets the stipulated criteria for the MIC Permit and decides whether or not the application should be rejected. If the application for the MIC Permit is not rejected in first instance, the MIC will process the application, and if required, may also request for additional information from the investor and/or input from other governmental organizations in relation to the MIC Permit application. Once the MIC has completed the processing of the MIC Permit application, and reaches the decision to issue the MIC Permit, such MIC Permit will be issued within ten working days from the date of the decision.

1. Application Fees

The usual application fee for a MIC Permit is based upon the amount of investment

1. Land Rights

Foreigners are also generally prohibited from owning land in Myanmar. They are also only allowed to lease land for a term not exceeding 1 year. However, foreigners can also seek an MIC Endorsement with an accompanying land rights authorization to lease land for a term not exceeding 50 years (with 2 renewal terms of 10 years each).

1. Wholesale and Retail Restrictions

Foreigners who are seeking to engage in wholesale or retail activities in Myanmar for the sale of the following commodities are required to secure a wholesale or retail permit from the Ministry of Commerce:

1. Consumer goods (including clothes, watches, and cosmetics

2. Foodstuff (including agricultural products except restricted products, marine products, animal products, ready-made foods, various types of beverage, and domestically manufactured liquors)

3. Household goods (including ceramics, earthenware, and glassware)

4. Kitchen products

5. Medicine, medical devices and hospital equipment

6. Animal feed and veterinary medicines

7. Stationery

8. Furniture

9. Sport accessories

10. Communication products (including cameras and phones)

11. Electronics

12. Construction materials and equipment

13. Electrical goods

14. Chemicals for industrial manufacturing

15. Seeds, inputs for agriculture, and materials for agricultural use

16. Machinery for agriculture

17. Various types of machinery and accessories

18. Bicycles

19. Motorcycles and accessories

20. Spare parts for motor vehicles and heavy machinery

21. Children’s toys

22. Decorative materials for households (including flowers and plants)

23. Souvenirs and handmade products

24. Fine art, musical instruments, and accessories (excluding antiques).

What is the Process to Obtain a Work Permit?

Foreigners employed to work in Myanmar are required to obtain various documents and approvals such as a business visa, a foreign registration certificate, a stay permit, a work permit, Form C and a labor card depending upon their particular employment circumstances.

1. Obtaining a Business Visa

A foreign national engaged to work in Myanmar is required to apply for a business visa, which is initially for a single-entry and valid for 70 days and is the authorization to reside in Myanmar.

1. Dependent Visa.

 

1. Foreign Registration Certificate (FRC)

Foreign nationals who enter Myanmar with a business visa that will allow them to remain for more than 90 consecutive days are required to secure an FRC within one month from their arrival. The validity of all FRCs expires on the 30th day of November of every year, and the FRC has to be renewed annually in December. Applications are made with the Immigration Department of the Ministry of Labor and Immigration and Population (“MLIP”).

1. Stay Permit

A stay permit is an authorization for the foreign employer to reside in Myanmar for a period exceeding the term in the employee’s business visa. If a foreigner’s employment will continue beyond the term of business visa, and the foreigner has not, in the meantime, been able to secure a stay permit, then the foreigner must exit Myanmar and re-apply for a new business visa.

1. Requirements for MIC and SEZ Companies

For foreign nationals employed by MIC and SEZ companies, their employment is required by law to be approved by and registered with the MIC, whether or not they intend to apply for a stay permit (which, as stated above, is only necessary if the national wishes to remain in Myanmar for a period beyond the term of his or her business visa). Such approval and registration are generally referred to as a “work permit” by the MIC and operate as part of the supporting documents for the application for stay permits.

1. Work Permit
2. Labor Card

 

1. Obtaining Form C

In order for a foreigner to legally reside outside of a hotel in Myanmar, the foreigner must apply for Form C with the relevant Township Immigration Office of the MLIP within 24 hours after his/her arrival in Myanmar. Application for Form C is the responsibility of the landlord of the foreign national and requires recommendation of the relevant Ward Administration Office of the General Administration Department, Ministry of Home Affairs certifying that the foreigner resides at a particular residence within the ward and sets forth the following details.

What Incentives are Available to Foreign Investors by the Government?

1. Benefits Available

The MIC is authorized to grant the following benefits and incentives to qualifying projects:

1. Limited-period income tax exemption
2. Exemptions and reliefs from customs duties and other internal taxes
3. Other exemptions and reliefs

 

1. Land Rights Authorization

When reviewing applications for Land Rights Authorization, the MIC will consider various criteria including whether the land may be used for purposes contemplated in the investment under applicable laws, and if the proposed use of the land will or may be likely to require a significant alteration of topography or elevation of the land, and whether such alteration is likely to have a material adverse effect on the environment which cannot be mitigated.

What are the Legal Issues Associated with Foreign Ownership of Land?

1. Restrictions on Foreign Ownership

Myanmar law prohibits any sale, transfer and exchange of land to any foreigner or foreign company.

A foreign company is defined as a company incorporated in Myanmar in which an overseas corporation or other foreign person (or combination) owns and/or controls, directly or indirectly, an ownership interest of more than thirty-five percent, however, note that uniformity in the application of this rule varies, in that some land officials continue to apply the previous more narrow rule that classified companies with any foreign shareholding as a foreign company while others apply the new rule.

1. Condominium Ownership

Myanmar law allows foreigners to own up to 40% of the total sellable floor area in a qualifying condominium development. Accordingly, any transfer of title to a foreigner causing this ownership ratio to exceed 40% will not be allowed.

1. Restrictions on Leases

 In Myanmar restrictions on the lease of land and other real estate also apply. Foreigners and foreign held companies are generally limited to leasing land and other real estate for one year at a time.

1. Requirement of Registration with the Officer of the Register of Deeds

Until recently, registering the transfer of title of land, mortgages, encumbrances and third party interests has not been widely adopted in part due to the absence of appropriate registers across Myanmar. However, the government has recently enacted laws creating and revitalizing national land registers and requiring that instruments that which purport to convey ownership over immoveable property, create, declare, assign, limit or extinguish any right, title or interest in immoveable property in excess of Ks 100,000, including mortgage deeds and involve leases from year to year, or for any term exceeding one year or reserving a yearly rent be registered or, otherwise, shall be deemed ineffective