According to Section 1 (c) (xiv) of Myanmar Companies Law 2017 (“MCL”), a company incorporated in the Union in which an overseas corporation or other foreign person (or combination of them) owns or controls, directly or indirectly, an ownership interest of more than thirty five percent is defined as a “foreign company”.
Under Sections 3 and 4 of the Transfer of Immovable Property Restrictions Act 1987 (“TIPRA”), it is mentioned that no person shall sell, buy, give away, pawn, exchange or transfer the immovable property with a foreigner or a foreigner owned company by any means and likewise, no foreigner, or foreigner owned company shall acquire the immovable property by way of purchase, gift, pawn, exchange or transfer (later, this prohibition be used generally as “Prohibition” for the convenience purposes). The “immovable property” is, as per Section 2 (d) of TIPRA, defined as land, benefits from the land building and things constructed or situated on that land and things installed on those buildings.
Moreover, MCL does not provide any exemption to TIPRA as it mentions in its Section 464 that the provisions of MCL relating to foreign companies shall not affect the operation of any provision of the TIPRA.
In addition, as mentioned under Section 37 of the Constitution of the Republic of the Union of Myanmar, the Union is the ultimate owner of all lands and all natural resources above and below the ground, above and beneath the water and in the atmosphere in the Union.
Therefore, it is worth noting that the said provision under the Constitution of the Republic of the Union of Myanmar and the restriction under TIPRA were applied to an overseas corporation accepting the immovable property as a security, in this regard, the land can be subject to the confiscation as a public property and those who contravene the Prohibition shall be punishable with the imprisonment for a term up to 5 years as per TIPRA’s Section 11.
Up to the date of this article, it is still a grey area whether the foreign bank could accept the land as a security or not.
Types of Mortgages Available in Myanmar
Pursuant to Section 58 of the Transfer of Property Act 1882 as amended up to 2013 (“TPA”), the types of immovable property mortgage are as follows;
- Simple mortgage – a type of mortgage where the mortgagor binds himself to pay the mortgage money back without delivering the possession and agrees expressly or impliedly that the mortgagee;
- Mortgage by conditional sale – a type of mortgage where the mortgagor sells the mortgage property to the mortgagee if he fails to pay back the mortgage money within the agreed period;
- Usufructuary Mortgage – a type of mortgage where the mortgagor binds himself to repay the mortgage money at the agreed date with the mortgagee, the situation where the mortgagee has the right to receive the rents and profits accruing from the property;
- English Mortgage – a type of mortgage where the mortgagor binds himself to repay the mortgaged money at the agreed date with the mortgagee and obtain the property that after making the payment and if the mortgagor failed to do so, the mortgaged property shall be transferred to the mortgagee;
- Mortgage by deposit of title-deeds – the type of mortgage where the mortgagor delivers the document of title to the immovable property to create a security
- Anomalous mortgage – the type of mortgage which is not covered by any of the mortgage mentioned above.
Despite whatsoever being provided under TPA, any existing or applicable laws of Myanmar do not permit or allow a foreign company, including an oversea corporation or foreign bank branch, to accept the immovable property as a security under any existing laws of Myanmar so far as applicable up to the date of this research.
“Deemed” Voidable Contract
Regarding the legality of the Contract, Section 2 (g) of the Contract Act 1872 clarifies in simple terms that a contract not enforceable by law is said to be void.
Moreover, the Contract Act re-stated the same nature in its Section 23 that the consideration or object of an agreement is lawful if it is not forbidden by law or is not of such a nature, if permitted, it would defeat the provisions of any law; or is not fraudulent or involves or implies injury to the person or property of another or the Court regards it as immoral, or opposed to the public policy. Plus, it is mentioned under the same section that every agreement of which the object or consideration is unlawful is void.
Therefore, interpreting the said provision, it appears that the contract whose object is unlawful is void and whether if such object is lawful or not is subject to the Court’s interpretation.
In practice, if a foreign entity is involved in a way that it has the right to an immovable property; it is to be aware that the Court is, as per the said provisions under Contract Act 1872, in the position to assume the agreement which is “Mortgage Deed” entered into between the mortgagor and the mortgagee, the overseas corporation, as “void”.
Perfection of Equitable Mortgage
Section 16 of the Registration of Deeds Law 2017 lists out the documents which are mandatorily required to be registered (“Compulsory Registration”) and according to that Section, it is found out that the mortgage deeds other than a mortgage by deposit of title deeds fall under the Compulsory Registration. To clarify, mortgage deeds which are in the nature of “mortgage by deposit of title deeds” are not mandatorily required to be registered with the Registration Officer.
Concerning the Mortgage Deed, the stamp duty will be levied on the Mortgage Deed and the amount of stamp duty paid is 0.5 percent on the amount or value. However, please note that it is the Revenue Officer who has the full authority or discretion in determining the amount of Stamp Duty to be paid and hence, please note that the amount suggested here could vary in practice.
Nevertheless, despite being said under the Registration of Deeds Law 2017 that the mortgage deeds in relation to the mortgage by deposit of title deeds are not required to be mandatorily registered, when being enforced or submitted as evidence in case of default of payment fallen on part of the mortgagor, could lead the Court to pronounce the contract as “void” as the immovable property cannot be transferred to any foreigner or foreign owned companies in any manner.
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 Quoted/Referenced herein
- Myanmar Companies Law 2017 (Pyidaungsu Hluttaw Law No. 29/2017)
- Transfer of Immovable Property Restriction Act 1987
- Transfer of Property Act 1882 as amended up to 2013
- Registration of Deeds Law 2018 (Pyidaungsu Hluttaw Law No. 9/2018)
- Contract Act 1872 (India Act IX 1872)
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, legalbandaid@gmail.com
Line: chinsu_08
WhatsApp: +959420092776 , +66972486121
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