On 14 February 2020, the Pyihtaungsu Hluttaw has enacted the Insolvency Law 2020 (“IL”) which officially came into force on 25 March 2020. On 28 April 2020, the Union Supreme Court enacted the Insolvency Rules 2020 (“IR”). On 19 November 2021, the Directorate of Investment and Company Administration (“DICA”) announced that the insolvency proceedings and winding up of the companies must be carried out under the IL and not under the Myanmar Companies Law 2017 (“MCL”) anymore.
Before enacting and enforcing the IL, when a shareholder wanted to voluntary wind up a company, this procedure was governed by Part V, Division 26 of the MCL. It is now governed by Part VII, Division 2 of the IL.
In practice, despite the new law and rules being in force, voluntary winding up procedures were still performed under the old provisions and using old forms from the MCL as new forms under IL were not officially published on Myanmar Company Online (“MyCo”) and the procedure to appoint a liquidator under the IL had not been released.
Types of winding up of a Company
Under the MCL, there are three ways for winding up of a company,
i. by the Court;
ii. voluntary winding up or;
iii. subject to supervision of the Court.
In voluntary winding up under IL, the following types of winding up are allowed:
1) Transition of Winding Up by Terminating Rehabilitation
2) Member’s Voluntary Winding up
3) Creditor’s Voluntary Winding up
4) Winding Up by the Court
Transitioning from the MCL to the IL
The IR prescribes a strict time frame for each phase of insolvency proceedings along with the applicable fees, forms and penalties. The lack of such forms created confusion as it prevented compliance with the new law. According to our unofficial inquiry to DICA, hard copies submission of the forms attached to the IR were also not accepted.
As businessmen were waiting for the new forms to be released on MyCo, old forms used under the MCL were still accepted.
Finally, new forms relating to insolvency were officially released on DICA MyCo website.
However, companies which have already commenced their winding up procedures with old forms, have to carry on with old forms to finish the process.
Voluntary Winding up
Under Section 147 of IL, shareholders can voluntary wind up a company under two scenarios:
(i) by passing a special resolution for the company be wound up; or
(ii) where the constitution of the company fixes a period for the duration of the company and that period expires or provides that the company is to be dissolved upon the occurrence of an event and the event occurs and the company in general meeting has passed a resolution requiring the company to be wound up voluntarily.
Strict Timeline for Voluntary Winding Up
Summary of voluntary winding up under Insolvency Law
First, a special resolution must be passed within three (3) weeks from the date of making Statutory Declaration of Solvency which is a declaration made by the directors of the company and approved by the majority of the directors at a director’s meeting stating that they have made full inquiry into the company’s affairs and have formed the opinion that the company will be able to pay its debts in full within a period not exceeding one (1) year from the commencement of the winding up. Before passing the special resolution, the Statement of Company’s Assets and Liabilities must be prepared as of the day before the day the Statutory Declaration of Solvency is made.
It should be noted that if the Statutory Declaration of Solvency is not made within three (3) weeks before the date of passing of the resolution of winding up and does not include the Statement of Company’s assets and liabilities, it will have no effect for on the Statutory Declaration of Solvency.
The IR states that the Statutory Declaration of Solvency must be delivered to DICA together with the notice of appointment of liquidator. Then, the notice of appointment of a liquidator must be filed within two (2) business days after the date of appointment. If the declaration of solvency is not delivered to DICA within the time prescribed by the IR, the company and every officer in default is liable to a fine by the DICA of an amount not exceeding 100,000 kyats. The notice of appointment of a liquidator must be published in a daily newspaper circulating generally in Myanmar within five (5) business days from the date of notifying appointment of liquidator to DICA.
Final meeting with the shareholders
As soon as the company’s affairs are fully wound up, the liquidator must make up an account of the winding up, showing how it has been conducted and evidencing how the company's property has been disposed of, and then must call a meeting of the creditors or a meeting of the members in case of a members’ voluntary winding up.
Within one (1) week from the date the final meeting has been held, the liquidator must send the following documents to DICA:
i. a copy of the liquidator’s account of the winding up and a copy of the minutes of meeting called under Section 211(a) of the IL;
ii. a letter confirming the absence of quorum if the quorum was not present together with the liquidator’s final statement; and
iii. a copy of tax clearance from the Internal Revenue Department.
DICA will then dissolve and de-register the company within three (3) months from these final filings.
Conclusion
Because the economic situation is currently looking rather bleak in Myanmar, many companies are deciding to wind up instead of temporarily suspend their activities. While it is in a transition period between the old procedure of the MCL and the new procedure of the IL, companies must pay full attention to the new regulations and comply with the strict time-frame prescribed by the IR.