In Thailand, foreign companies can sell their securities by listing with Stock Exchange of Thailand as long as those securities are not traded on any foreign exchange. However, this is not permitted in Myanmar. Last year, in 2022, when the inflation starts to rise up obviously due to the sanctions hit by the U.S and the western powers, the value of Myanmar Kyat has also started to decline. During that time, people have no trust in Myanmar’s local currency kyats and started to hold foreign currency or gold or other alternative for those, such as securities. However, Myanmar has no such developed stock markets. But, when the demand for securities started to rise, the foreign companies are interested in Myanmar’s securities market. Therefore, it is of such a great importance to understand if the foreign companies are authorized to issue bonds or debentures in Myanmar.
To find out if a foreign company are allowed to issue bonds or debentures in Myanmar, let’s look at the brief legal research hereunder.
Choice of Business Vehicle is limited?/Company must be a public company limited by shares to do public offering?
Pursuant to Sections 2 and 3 of Myanmar Companies Law (“MCL”), the business vehicles available in Myanmar are as follows:
(i) a company limited by shares (which can be a private company which shall not have more than 50 members not including those who are in the employment of the company or a public company which may have any number of members)
(ii) a company limited by guarantee which may have any number of members
(iii) an unlimited company which may have any number of members
(iv) a business association and
(v) an oversea corporation
A private company is defined under Section 1 (c) (xxv) of MCL as a company incorporated under MCL or under any repealed law which must limit the number of its members to 50 not including the persons who are in the employment of the company, must not issue any invitation to the public to subscribe for the shares, debentures or other securities of the company. In addition, Section 202 (b) of MCL also adopts the same idea mentioned in Section 1 (c) (xxv) of MCL that a company which is not a public company shall not offer its shares or other securities to the public or agree to allot any securities of the company with a view to their being offered to the public.
Based on those provisions mentioned afore, it is clear as the daylight that a company desirous to issue shares, debentures or other securities to the public must be a public company. Plus, there is an additional limitation imposed on the public company as per Section 17 (b) of Securities Exchange Law (“SEL”) that the company must be formed as the limited company whose liability is limited by shares.
Securities Company, as defined under Section 2 (i) of Securities Exchange Law (“SEL”), is a company limited set up in accordance with the existing law to carry out the securities business. Therefore, all in all, it must be a public company limited set up in accordance with the applicable laws including but not limited to MCL to do securities business regardless of whatsoever.
Visiting back to the Announcement No. 1/2015 issued by SECM regarding the criteria stipulated for the company to be able to participate in the Yangon Stock Exchange (commonly known as “YSX”), it is intriguing to have learned that one of the criteria set forth in the Announcement indicates that the company should be registered as the “private” company limited by shares.
The aforementioned Announcement was issued on 14 January 2015 before the MCL was entered into force. Plus, in the last paragraph, Section 5, the Announcement mentions that application after the deadline, which is 27 February 2015, will not be considered. Hence, it can be said that the said limitation or criteria should not be applied to the new companies desirous to be a participant company on YSX. If the same criteria were applied to the new companies wishing to be on YSX, it would not be plausible since the provisions of MCL, mentioned in one of the preceding paragraphs in details, without a doubt, prohibit a private company from issuing any invitation to the public to subscribe for the shares, debentures or other securities of the company.
Despite whatsoever being provided in the applicable laws, one can never argue that doing business in Myanmar is quite unique, and therefore, the foreign investors should be aware that the practice could still be far from what the legal provisions say.
Definition of Securities Business and Types of Securities Business License Available
Section 2 of SEL contains the definition of “securities business” where it defines the securities business assecurities dealing, securities brokerage, securities underwriting, securities investment advisory and securities depository and clearing and the business prescribed by notification as securities business by SECM.
The types of securities business license available in Myanmar are indicated in Section 23 of SEL as follows:
(i) Securities Dealing Business License
(ii) Securities Brokerage Business License
(iii) Securities Underwriting Business License
(iv) Securities Investment Advisory Business License
(v) Securities Companies Representative Business License
(vi) Other business license prescribed as the securities business by SECM
As per Section 25 of SEL provides, the securities company may apply for one or more of categories of license; Securities Dealing Business License, Securities Brokerage Business License and Securities Underwriting Business License.
Incorporating Public Company Limited by Shares
In order to be incorporated as a public company limited by shares, it is required to file Form A-2 with the Registrar, the Directorate of Investment and Company Administration on MyCO website (https://www.myco.dica.gov.mm/index.aspx).
Before filing so, one should be aware of the essential requirements relating to the incorporation of a public company in Myanmar. According to Section 4 (a) of MCL, a company registered under MCL shall have at least a name, a constitution, at least one share in issue, at least one member, three directors, at least one of whom shall be Myanmar citizen who is ordinarily resident in Myanmar and a registered address. In addition to it, Section 17 of SEL contains a provision that the securities company shall include “Securities” in its name and it shall have authorized capital and a minimum of paid-up capital in accordance with the stipulations (based on the Announcement No. 1/2015 issued by SECM, the minimum paid-up capital requirements for securities company desirous of participating in YSX are 15 billion Kyat for securities underwriting license, 10 billion Kyat for securities dealing license, 7 billion Kyat for securities brokerage license and 0.3 billion Kyat for securities business advisory license respectively. Since the announcement was made with the deadline SECM set for the application of those license, it is uncertain if SECM would still set the same minimum requirements for those license in the future.)
It is also worth noting that based on Section 12 of SEL, the public companies are also subject to the supervision of SECM and therefore, whether one has obtained the securities business license or not, the company should pay attention closely to the regulations of SECM as well since the company is a public company and it falls under the supervision of SECM as such.
License Application Procedure
After incorporating the company, as per Section 25 of SEL, the securities company may apply for one or more of the following categories of securities business license;
(i) Securities dealing business license
(ii) Securities brokerage business license
(iii) Securities underwriting business license
According to Section 26 of SEL, if the securities company has obtained any of those licenses, it can carry out securities investment advisory business without obtaining a separate business license.
Details of the requirements for the application of licenses can be seen in Chapter IV of the Securities Exchange Rules.
Practical “Concerns” to be aware of
Though SEL is not composed of provisions prohibiting the involvement of foreign company in applying for securities business license entirely, SECM’s Announcement No. 1/2017 mentions that SECM has not allowed any foreign company which has obtained respective licenses relating to securities business to do securities business in Myanmar.
Scope of this Article
The article is prepared and written on 25 September 2023and therefore, the scope of this article is set and limited to the existing laws, rules and regulations so far as applicable up to the date of the article.
Qualification of this Article
The article serves as a knowledge-sharing article and the interpretation of the provisions quoted here is done solely based on the legal knowledge and personal interpretation of the author. Therefore, should this article be used as a legal advice by any other party, whether for a natural person’s or corporation’s affairs, the author has no legal obligation or the author is not held accountable for such person or corporation for any reason whatsoever.
Laws, rules and regulations observed for this article include:
– Myanmar Companies Law (2017) [Pyidaungsu Hluttaw Law No. 29/2017]
– Securities Exchange Law (2013) [Pyidaungsu Hluttaw Law No. 20/2013]
– Securities Exchange Rules
– SECM Announcement No. 1/2015 on Criteria for Securities Business License
Prepared by:
Ingyin Hmwe @ Liliana [LL.B. Graduate of University of Yangon (2018), LL.M Candidate in Business Law (International Program) of Chulalongkorn University]
Contact for work or discussion:
Email: ingyinhmwe97@gmail.com
Line: chinsu_08
WhatsApp: +959420092776 , +66972486121
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