Myanmar has got rid of the military dictatorship not long ago and is taking steps to improve legislation to attract foreign investment. For example, the Companies Law has been recently amended, which makes the investment regime in this country easier and more comfortable.
Now, one can buy or sell a company in Myanmar in a form of shares, the transfer of the entire business, or its assets. Also now you can practice joining schemes.
Why Myanmar?
Myanmar (former Burma), a small country in Southeast Asia, opened to investors a decade ago after a century of economic stagnation. The US and the European Union lifted restrictions on trade relations with Myanmar only in 2012.
Modern Myanmar is one of the popular jurisdictions in the Pacific region for company registration. The reason for such popularity is primarily that the registration of a company in Myanmar allows using a preferential tax regime due to the territorial approach to taxation.
The largest metropolis and the former capital of Myanmar, Yangon, is where all business activity is concentrated.
Investing in so-called frontier markets - markets with significant obstacles for investors - is a risky venture. Private investors now have several options: direct investment, and investment in funds targeted at local markets.
Two forms of business
Business with foreign investments in Myanmar can be divided into two groups: permitted business (simple form) and business that needs approval (complex form).
With regard to acquisitions in areas related to land (for agricultural purposes or for construction), please be aware that one can not transfer real estate for more than one year. It is strictly prohibited.
M&A deals in Myanmar include several mandatory steps:
- carrying out the due diligence procedure;
- negotiation;
- preparing and signing of agreements on the deal;
- obtaining permits from local regulators.
It is pertinent to note that due diligence of private M&A transactions in Myanmar continues to cause difficulties to the buyers due to incomplete disclosure of information about the company, which occurs quite often.
Potential buyers are advised to engage with potential target companies as early as possible in order to build the relationships which will help proper information disclosure.
Sellers generally do not submit due diligence reports in this jurisdiction.
Large investment projects
If you plan to invest in large scale projects in Myanmar, you will definitely need to ask for permission from the Myanmar Investment Commission. This is especially relevant for strategically important, capital intensive projects, or those projects that use public land and have a high potential impact on the environment.
Foreign investors must also obtain Commission approval in order to enter into long-term lease agreements for land, as well as to directly acquire a majority stake in a company in Myanmar.
Foreign investment in critical infrastructure, such as national security or environmental protection, requires approval from the government. The only way to implement such an investment project is to set up a joint venture with a Myanmar company.
Dispute resolution
Myanmar also lacks a reputation for keeping its word - in the rating of the countries of the world for the enforcement of contracts, it ranks second from the end. In the event of a conflict, it may take up to 3 years and 55% of the value of the contract itself in order to resolve the dispute.
Final word
Myanmar authorities have passed a series of laws that fuel optimism that the country is slowly but surely moving in the right direction. It should be noted that reforms in the economic sphere are pronounced gradually. While these laws have not yet been fully implemented, they are already an important development to protect the commercial interests of investors.
If you are planning to start a business in Myanmar, then you should note that the political situation in the country is not stable. Over the past year, the UN Human Rights Council has repeatedly heard and considered reports of international experts on the facts of human rights violations in this country.
In general, although the volume and scale of foreign presence in the economy of Myanmar have increased, doing business here is not easy.
But if you have decided to try, experienced legal advisors of our company will help you register a business in Myanmar, or start a private M&A transaction in Myanmar. Please reach out to us using the contacts indicated on the website.
