The main laws governing M&A are the Myanmar Companies Law (Law No. 29/2017) (MCL), the Myanmar Investment Law (Law No. 40/2016) (MIL) and the Competition Law (Law No. 9/2015).  The key regulatory authority applicable to M&A is the Directorate of Investment and Company Administration (Dica), which administers the MCL and provides secretariat support to the Myanmar Investment Commission (MIC) to administer the MIL.

Companies’ law

The MCL was passed on 6 December 2017 and entered into force on 1 August 2018, replacing the 1914 Myanmar Companies Act (MCA). It modernised the MCA (for example, improving companies’ ability to manage their capital structure) and removes some barriers to foreign investment.

Importantly, companies incorporated under the MCL (as under the MCA) are classified as either a “foreign company” or a “Myanmar company”. This distinction is important as there were historically a number of legal and practical restrictions to foreign companies doing business in Myanmar, and under the MCA, a Myanmar company was defined as a company with no foreign shareholding.  Under the MCL, however, up to a 35 per cent foreign shareholding is permitted in “Myanmar companies”.

For example, in the past, in practice, it was not possible for foreign citizens or companies with any foreign shareholding to acquire interests in property under the 1987 Transfer of Immoveable Property Restriction Law (TIPRL). The TIPRL prohibits the transfer of immoveable property to, or its acquisition or lease for more than one year by, foreign citizens or “foreign-owned companies”, defined as companies that are not 50 per cent or more owned or controlled by Myanmar citizens.  Despite this definition, the Myanmar government’s practice was to interpret this definition more narrowly (by reference to the former MCA) which effectively prohibited such transfer, acquisition or lease by a foreign company.

If the definition of “foreign company” under the MCL is used by land registry authorities administering the TIPRL, it would allow the acquisition of interests in property by companies with at least up to a 35 per cent foreign shareholding.

Foreign investment regulations

The MIL, which became law in October 2016, simplified and deregulated the investment regime in Myanmar, providing a more comprehensive and supportive framework for foreign and local investment in Myanmar. It combined the previous local and foreign investment laws into one law and provided for a streamlined investment approval process.

Generally, a permit will be required under the MIL from the MIC, which administers the MIL, for investments that are strategically important, capital intensive, have a large potential impact on the environment or local community, use state-owned land and other designated investments. Even if a permit is not required, foreign investors will require an endorsement from the MIC under the MIL to have the right to enter into a long-term lease of land (in view of the restrictions under the TIPRL noted above) or to obtain certain tax incentives.

MIC approval will also be required for the direct (and potentially, indirect) acquisition of a majority of shares or controlling interest in a company with an MIC permit or endorsement (described in question 22 below). The MIC has advised recently that indirect transfers of shares in companies with MIC permits or endorsements do not need to be notified to it; however, a prudent approach would be to seek a view from the MIC on a matter-by-matter basis (as indirect interests are within the scope of the approval requirement under the MIL).

MIC issued the Myanmar Investment Rules (Notification No. 35/2017) (MIR) on 30 March 2017 setting out the process of obtaining approval under the MIL, and Notification No 15/2017 titled List of Restricted Investment Activities in relation to section 42 of the MIL (Negative List) on 10 April 2017, setting out the types of investments that are restricted to foreign investment, require approval of a Myanmar government ministry or may only be made through a joint venture with a Myanmar company (under the MIR, a Myanmar company is required to have at least a 20 per cent shareholding in such a joint venture). The Negative List was intended to be a comprehensive list of all such restrictions. However, while the MIC has updated the Negative List from time to time (for example, on 9 April 2018, it updated the criteria for approvals from the Ministry of Electricity and Energy (MOEE) for energy sector projects), as Myanmar’s laws evolve, the Negative List will become dated, and legal advice should be obtained on the specific restrictions applicable to any proposed transaction at the time of investment.

Competition regulations

Myanmar’s Competition Law entered into force on 24 February 2017. This law prohibits collaborations that have the purpose of ‘extremely raising market dominance’ or lessening competition in a limited market, or which would result in a market share above the prescribed amount.

Business combinations prohibited under the Competition Law may be exempt in certain circumstances, including if the acquired business is at risk of insolvency or if it will promote exports, technology transfer or productivity.

The Myanmar Competition Commission (Commission), which was established on 31 October 2018 under Notification No. 106/2018 of the Myanmar Government is yet to systematically enforce compliance with the Competition Law.  Consequently, it remains unclear how the Competition Law will be applied in practice.

Securities regulations

Myanmar passed the Securities and Exchange Law (Law No. 20/2013) (SEL) in 2013 and established the Yangon Stock Exchange (YSX) pursuant to that law in 2015. However, the YSX is still developing as a stock exchange, and there are currently only six listed companies (with a seventh, Amata Holding Public Co., Ltd., approved for listing on 28 December 2020).

The Securities and Exchange Commission of Myanmar (SECM), which administers the SEL, and YSX have implemented a number of measures to encourage further listings and share trading.

In particular, foreigners were permitted to trade shares on the YSX from 20 March 2020, in accordance with Notification No. 1/2019 issued by the SECM on 12 July 2019. The YSX issued the Framework for Trading by Foreign Investors on 6 September 2019 implementing the SECM’s notification by setting out the roles and responsibilities of listed companies, securities companies and the YSX in relation to foreigners trading shares on the YSX, and the SECM subsequently issued Instruction No. 1/2020 on 6 March 2020 setting out the requirements for securities companies to open accounts for foreigners to trade shares.

Under Instruction No. 1/2020:

• both resident and non-resident foreigners are entitled to trade shares on the YSX; and
• each listed entity is permitted to set its own limit for the shareholding by foreigners (and under its Framework for Trading by Foreign Investors, the YSX would suspend purchase orders by foreigners which risked exceeding the upper limit for foreign shareholding (being within five per cent of the upper limit set by the company)).

As of 22 March 2021, all but one listed company (Myanmar Citizens Bank Ltd) has permitted foreigners to trade its shares, while trading of the shares of First Myanmar Investment Public Co., Ltd. by foreigners had been suspended as it had exceeded the cap on foreign shareholding.

The YSX has also announced the establishment of a pre-listing board, to provide greater fundraising opportunities to unlisted public companies which do not yet meet the criteria to list on the YSX’s mainboard. On 2 October 2020, the YSX issued the Securities Registration Business Regulations and Business Operations Manual, required to implement the pre-listing board, and on 28 October 2020 it approved seven companies to advise on registrations on the pre-listing board (including all of the securities companies licensed under the SEL).

A state of emergency was declared on 1 February 2021 under Order No. 1/2021 of the Office of the President (Pro Tem) (“State of Emergency Order”), according to the State of Emergency Order, in response to alleged fraud regarding voter lists in the 2020 general elections, and the Myanmar Union government’s decision not to postpone opening Myanmar’s parliament. The state of emergency is expressed to apply across Myanmar for a period of one year.

According to the State of Emergency Order, it is issued under Article 417 of Myanmar’s Constitution, and transferred the legislative, executive and judicial powers of Myanmar’s government to the Commander-in-Chief of Myanmar’s armed forces (“CIC”) under Article 418(a) of the Constitution.

The State of Emergency Order has been met with protests across Myanmar, and a civil disobedience movement involving strikes by public and private sector employees (particularly in the banking sector). The State of Emergency Order has also been met with targetted sanctions on Myanmar’s military leaders by major western jurisdictions. In particular, President Biden issued a new Executive Order 14014 titled ‘Blocking Property With Respect To The Situation In Burma’ on 11 February 2021 which, as at 22 March 2021, provides for the sanctioning of 16 current and former military leaders (including the CIC, who was already a sanctioned individual) and and the CIC’s two adult children (Khin Thiri Thet Mon and Aung Pyae Sone), as well as three companies affiliated with the Myanmar armed forces (Cancri Gems & Jewellery Co., Ltd., Myanmar Imperial Jade Co., Ltd. and Myanmar Ruby Enterprise) and six companies affiliated with the CIC’s children (A&M Mahar Company Limited, Everfit Company Limited, Seventh Sense Company Limited, Sky One Construction Company Limited, the Yangon Gallery and the Yangon Restaurant) and two military units (including the 33^rd Light Infantry Division, which was already a sanctioned entity). The US has also announced a freeze of US$1 billion in Myanmar government assets held in the US and implemented a ban on the export of sensitive defence equipment to Myanmar’s armed forces (and certain affiliated commercial entities).

The European Union, United Kingdom and Canada have also imposed targetted sanctions to date. The Council of the European Union passed two regulations and decisions on 22 March 2021, amending the existing framework for sanctions under Council Decision 2013/184/CFSP of 22 April 2013 and Council Regulation (EU) No 401/2013 of 2 May 2013, and providing for asset freezes and travel bans of (i) individuals from Myanmar’s armed forces, police force or Border Guard Police (including those responsible for obstructing the provision of humanitarian assistance or independent investigations into alleged serious human rights violations), (ii) individuals and entities undermining democracy or the rule of law in Myanmar, (iii) entities owned or controlled by, or which generate revenue for, provide support to, or benefit, Myanmar’s armed forces, and (iv) associated individuals and entities. As at 22 March 2021, 11 individuals have been designated (including the CIC). In the case of the United Kingdom, these are pursuant to the new sanctions regime established following Brexit under the Sanctions and Anti-Money Laundering Act 2018, and comprise asset freezes and travel bans of sanctioned individuals. As at 22 March 2021, 25 individuals have been designated (including the CIC). Canada added nine individuals (including the CIC) to its list of sanctioned individuals under the Special Economic Measures (Burma) Regulations of 2007, which impose freezes on the Canadian assets of, and prohibit certain transactions with, sanctioned individuals (in addition to existing sanctions which had been in place).

Further sanctions may be expected from those jurisdictions and potentially other jurisdictions (such as Australia). Investments and planned expansions have stalled as businesses monitor the situation in Myanmar, and the effect of the State of Emergency Order on their operations. The events of 1 February 2021 have increased the reputational and operational risks of doing business in Myanmar at the present time.

Dica statistics show that as of 1 January 2021, foreign investment had been particularly strong recently in the power, manufacturing and real estate sectors, and that historically it has also been strong in oil and gas and transport and communications.  The situation resulting from the State of Emergency Order can be expected to significantly affect investment in these sectors in the short-term.

The primary challenge for Myanmar is the speed with which the economic and security situation can be stabilised following  the State of Emergency Order. The State of Emergency Order (and any further measures introduced in response to domestic protests as a result of the State of Emergency Order) have the potential to further restrict economic activity on top of the measures already in place in response to COVID-19, and to disincentivise further investment into Myanmar in the short-to-medium term.

A further key challenge for Myanmar, as with other countries, will be how quickly it controls the spread of COVID-19 and relaxes related economic restrictions. The World Bank had estimated that growth in Myanmar had slowed to 1.7 per cent in 2019-20, down from 6.8 per cent the previous year, resulting in the poverty rate in Myanmar rising to 27 per cent of the population as factories and businesses were forced to close. However, it had anticipated a quick recovery, with growth expected to rebound to seven per cent over the medium-term as restrictions are lifted in 2021. It is likely that COVID-19 rates will rise further following the protests in response to the State of Emergency Order, and that growth will not meet the World Bank’s targets.

Another factor likely to influence M&A activity is the extent and manner of implementation of the reforms Myanmar has been undertaking since opening to foreign investment, and the extent to which Myanmar adapts and modernises its local practices and regulatory culture in implementing such reforms. For example, in February 2020, the Financial Action Task Force returned Myanmar to its grey list of countries which pose a higher risk of money laundering and terrorism financing, only four years after removing Myanmar from the grey list. As the Task Force calls for stronger due diligence and counter-measures when dealing with any country deemed high-risk, this is expected to increase due diligence requirements for transactions in Myanmar, which may particularly impact international banks doing business with Myanmar-based businesses. The Task Force reported in October 2020 that Myanmar has been working closely with it to address compliance issues and strengthen its regulatory framework. The development of Myanmar’s institutions of government has been further complicated by the issue of the State of Emergency Order and transfer of the functions of government to the CIC.

A third major challenge is whether Myanmar can improve its infrastructure to support foreign investment. Around two thirds of Myanmar’s population does not have access to the national electricity grid, and reliable access to power and transport continues to impact the conduct of business in Myanmar. National electrification remains a key priority of the Myanmar government.

As noted in question 1 above, foreign share trading is now possible for YSX listed companies. However, as of 7 January 2021, the maximum foreign shareholding permitted by any listed company was 31.5 per cent, in First Private Bank Limited (available only block trades). In terms of share acquisitions more broadly, under Notification No 1/2016 of SECM, an extraordinary report would be required in connection with share acquisitions that result in a change in the parent company or major shareholder (defined as a shareholder with greater than 20 per cent shareholding), or a transfer of the company’s material undertaking.

Unsolicited, hostile transactions are in practice not possible in Myanmar. In relation to listed companies, there are currently no takeover regulations in Myanmar and there is no history of unsolicited transactions involving YSX-listed companies.

In addition to share acquisitions, as with all companies, it is possible to acquire the business or assets of a publicly listed company.

Another potential legal mechanism for undertaking an acquisition of all shares in a company without the agreement of all shareholders would be by way of scheme of arrangement under the MCL. Schemes approved by 75 per cent of shareholders (or creditors) are binding on all shareholders (or creditors) and the MCL provides for a court, either by the order sanctioning such scheme or a subsequent order, to make provision for the transfer of a company’s undertaking or its shares, pursuant to such scheme. However, there is no precedent in Myanmar for schemes of arrangement, and Myanmar’s courts have not yet developed their practice regarding such schemes.

As there is limited public information available on companies in Myanmar, potential acquirers of Myanmar targets will need to negotiate due diligence disclosure with target companies.

Please see below further information on the limited information which is available publicly.

Technically under the MCL, companies registered in Myanmar are required to maintain registers, among others, of shareholders at their registered office or principal place of business and make them available to shareholders, and in the case of public companies (defined as companies with more than 50 non-employee shareholders or which issue invitations to the public to subscribe for its shares), also to the public at a reasonable price. However, few companies currently comply with this requirement and in general limited information is publicly available about the shareholders of unlisted companies registered in Myanmar.

Under the MCL, any person may obtain an extract of the corporate information of a registered company from Dica’s electronic register, called MyCo, on payment of the prescribed fee. Dica published Notification No 57/2018 on 9 July 2018 setting out its filing fees, including the fees to request an extract of the corporate information of a company.

In addition, on 27 December 2019, Dica published information regarding the beneficial ownership of companies involved in the resources sector in Myanmar. This information had been required to be disclosed pursuant to Notification No. 104/2019 issued on 2 October 2019 by the Office of the President. While this is a first important step to improve transparency around ownership of companies in Myanmar, the information disclosed by companies in this process was incomplete.

Dica followed up Notification No. 104/2019 by issuing Directive No. 17/2019 on 15 November 2019 requiring all entities in Myanmar to keep up-to-date information on their beneficial ownership and provide timely submissions to Dica and the Internal Revenue Department of Myanmar. Basic information about the ultimate beneficial owner of a company in Myanmar was proposed to be made publicly available at bo.dica.gov.mm, although individuals could apply to Dica to have their information protected on the grounds they would be at risk of violence or intimidation.

In addition to the companies themselves, professional advisers such as accountants and legal service providers are also required to assist regulators to identify the beneficial ownership of companies registered in Myanmar. However, while this Directive took effect on 1 January 2020, Dica has not yet published the online form through which companies will be required to report their beneficial ownership.

YSX-listed companies are required under the Securities Listing Business Regulations of YSX to disclose earnings information and corporate decisions on important matters (or any other important fact) regarding the operation, business, assets or stock of the company which will have a considerable impact on investment decisions.

Due diligence continues to be a challenge in Myanmar, including as a result of poor record keeping and compliance of Myanmar companies, lack of familiarity with due diligence and sensitivity to disclosing company information. Prospective acquirers are advised to engage early with potential target companies to explain the purpose and nature of due diligence procedures and build the relationships required to ensure an appropriate quality of disclosure.

The key decision-making organs are the general meeting and board of directors.  Under the MCL, the directors may exercise all of the powers of the company subject to matters reserved for shareholders under the company constitution or by law.

In terms of approval rights for M&A, as noted in question 5, 75 per cent of shareholders must approve a members’ scheme of arrangement. In addition, under the MCL, the directors of a public company, a subsidiary of a public company or (if its constitution provides) a private company, cannot sell or dispose of such company’s main undertaking without the consent of the company in a general meeting.

Directors owe statutory directors’ duties under the MCL, such as to act with due care and diligence and in good faith in the company’s best interests. These duties would apply to a directors’ conduct in the context of overseeing M&A activities.

Minority shareholders also have rights under the MCL in respect of controlling shareholders to take action against conduct that is oppressive.

No, there is no general requirement at law for such approvals.

For public M&A, Myanmar does not have any takeover regulations and there are no laws dealing with tender offers on the YSX. Schemes of arrangement could in principle be conditional, subject to the court’s supervision.

For private M&A with international acquirers, sale agreements may include typical conditions which are used in other jurisdictions (such as conditions for required consents or regulatory approvals).

Exclusivity arrangements are negotiated contractually in Myanmar.

Deal protection and cost coverage mechanisms typical to M&A (such as confidentiality or non-disclosure agreements, non-solicitation agreements and break-up fees or reverse break-up fees) are not prohibited in Myanmar and may be used to protect deals from third party bidders as in other jurisdictions.

M&A activity is generally financed through available cash resources or acquisition loans, but in the case of loan financing, for acquisitions by foreign investors, such finance is generally obtained offshore.

In terms of financing Myanmar investments, it is generally understood that in practice all transfers of funds into or from Myanmar are governed by the Foreign Exchange Management Law (Law No. 12/2012). Prior approval from CBM is likely to be required in practice for loans, while equity fund transfers need only to be declared to CBM.

The disclosure obligations applicable to acquisitions of shares in listed companies are set out in questions 5 and 6 above.

As noted in question 6, under Directive No. 17/2019, Dica has made available basic information about the beneficial ownership of Myanmar companies on its website. In addition, under the MCL, companies are required to maintain a register of members and make such registers available to members during business hours, and in the case of public companies, the public. While this could be a source of disclosure of acquisitions in a company, as noted in question 6, in practice few companies are in compliance with this requirement.

More broadly, companies are required to file an annual return with Dica. Under the MCL, the annual return must list, for public companies, their 50 largest shareholders, and for private companies, all shareholders. Under the Financial Institutions Law (Law No. 20/2016), banks are also required to submit an annual report to CBM of all shareholders having a substantial interest in the bank and their details.

The daily trades by foreign investors in listed companies would need to be reported to the YSX for the purposes of ensuring compliance with applicable restrictions on foreign shareholding (see further question 1).

Subject to the disclosure obligations of companies listed on the YSX, which are set out in questions 5 and 6, no specific public disclosure obligations apply to acquisitions of companies in Myanmar. If the acquiring company is a company listed overseas, public disclosure may be required under the listing rules applicable to such acquiring company.

No, there is no maximum requirement at law.

There are generally no restrictions on the price of the shares in a target company, but schemes of arrangement are subject to court supervision.

Financial assistance provisions of the MCL require that public companies (whether listed or not) must obtain certain approvals of the board of directors and shareholders in order to provide financial assistance to the acquisition of its shares (or that of a holding company).

Under Myanmar law, parties are free in principle to choose the governing law of an agreement. However, in practice, state-owned enterprises and Myanmar government agencies will rarely agree to a choice of foreign governing law, and Myanmar private parties also prefer that Myanmar law applies to the transaction agreements. For agreements that are subject to scrutiny under the MIL (e.g. as part of an application for a permit or endorsement), the MIC will generally require that Myanmar law governs such agreements.

There are currently no takeover regulations in Myanmar applicable to listed companies, and this is not specifically regulated.

Under section 83 of the MCL, a transfer of shares in a company is effective upon the company entering it in its register of members. A company is required to enter such transfers in its register of members subject to its constitution and the receipt of a duly stamped and executed instrument of transfer in the prescribed form, together with share certificates evidencing the interests proposed to be transferred and a declaration by the transferor or transferee (or both) regarding whether the proposed transfer would result in the target company changing its classification from a Myanmar company to a foreign company or vice versa.

Under the 1899 Myanmar Stamp Act stamp duty is payable on share transfers in the amount of 0.1 per cent of the value of the transfer price.

Within 21 days of a transfer of shares in a Myanmar-registered company, a notice must be filed with Dica in the prescribed form notifying it of the transfer. Other associated filings with Dica may also be required, for example, for a change in its business name, or directors.

Under the MIL a notice must be filed with MIC for any transfers of shares in, or the business of, a company with an MIC permit or endorsement. As noted in question 1, while the MIC’s practice appears to have changed recently, the prior approval of the MIC will be required for any direct (and technically, indirect) transfers of shares in a company which has an MIC permit or endorsement (or to transfer the business itself), if it will result in an entity that is not an affiliate of the transferor acquiring majority ownership or control of the shares, or more than 50 per cent of the assets, of the business.

As noted in question 5, hostile acquisitions are not possible in practice in Myanmar.

As noted in question 5, hostile acquisitions are not possible in practice in Myanmar.

No, there are no such circumstances generally at law.

Minority shareholders have rights under sections 192 and 193 of the MCL against conduct that is oppressive.

Schemes approved by 75 per cent of shareholders (or creditors) are binding on all shareholders (or creditors) and either by the order sanctioning such scheme or a subsequent order, a court can make provision for the transfer of a company’s undertaking or its shares, pursuant to such scheme.

In addition, the approval of an offer to buy the shares of a public company by 75 per cent of shareholders within four months of such offer will give rise to a right on the part of the acquirer to compulsorily acquire the shares of dissenting shareholders upon notice within two months, subject to any objection proceedings.