Myanmar Doing Business

Protecting Minority Investors

At a Glance : Protecting Minority Investors

2019 Ranking: 185

2019 Distance to Frontier Score*: 25.00 (unchanged from DB2018)

Regional Average (East Asia Pacific): 53.33

More information on Myanmar’s performance in Protecting Minority Investors - Click Here

* The distance to frontier (DTF) measure shows the distance of each economy to the “fron-tier,” which represents the best performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s distance to frontier is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100 rep-resents the frontier. The ease of doing business ranking ranges from 1 to 190. (Source; World Bank)

What it measures

Minority shareholders’ rights in related-party trans-actions and in corporate governance

Why does it matter?

Stronger minority investor protection is associated with:

  • Higher market capitalisation
  • Higher entry level to capital market

 

Measure of Quality

Indicator Answer as recorded by the Doing Business2019 report [note: does not include provisions of the new Companies Law] Score assigned by the Doing Business2019 report
Extent of conflict of interest regulation index (0-10)   3
Extent of disclosure index (0-10)   3
Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of directors excluding interested members 2
Must an external body review the terms of the transaction before it takes place? (0-1) No 0
Must Mr. James [see Methodology hyperlink] disclose his conflict of interest to the board of directors? (0-2) Existence of a conflict without any specifics 1
Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) No disclosure obligation 0
Must Buyer immediately disclose the transaction to the public? (0-2) No disclosure obligation 0
Extent of director liability index (0-10)   0
Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Buyer? (0-1) No 0
Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Not liable 0
Can shareholders hold the other directors liable for the damage the transaction caused to Buyer (0-2) Not liable 0
Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) No 0
Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) No 0
Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0
Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of fraud or bad faith 0
Ease of shareholder suits index (0-10)   3
Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? (0-1) Yes 1
Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) No 0
Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) No 0
Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Yes 2
Is the level of proof required for civil suits lower than that of criminal cases? (0-1) No 0
Can shareholder plaintiffs recover their legal expenses from the company? (0-2) At the discretion of the court 0
Extent of shareholder governance index (0-10)   3
Extent of shareholder rights index (0-10)   5
Does the sale of 51% of Buyer's assets require shareholder approval? No 0
Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? Yes 1
Must Buyer obtain its shareholders’ approval every time it issues new shares? No 0
Do shareholders automatically receive preemption rights every time Buyer issues new shares? No 0
Must shareholders approve the election and dismissal of the external auditor? Yes 1
Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? Yes 1
Assuming that Buyer is a limited company, does the sale of 51% of its assets require member approval? No 0
Assuming that Buyer is a limited company, can members representing 10% call for a meeting of members? Yes 1
Assuming that Buyer is a limited company, must all or almost all members consent to add a new member? Yes 1
Assuming that Buyer is a limited company, must a member first offer to sell their interest to the existing members before they can sell to non-members? No 0
Extent of ownership and control index (0-10)   1
Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? No 0
Must the board of directors include independent and non executive board members? Yes 0
Can shareholders remove members of the board of directors without cause before the end of their term? No 1
Must the board of directors include a separate audit committee exclusively comprising board members? No 0
Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? No 0
Must Buyer pay declared dividends within a maximum period set by law? No 0
Is a subsidiary prohibited from acquiring shares issued by its parent company? No 0
Assuming that Buyer is a limited company, must Buyer have a mechanism to resolve disagreements among members? No 0
Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? No 0
Assuming that Buyer is a limited company, must Buyer distribute profits within a maximum period set by law? No 0
Extent of corporate transparency index (0-10)   3
Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? No 0
Must Buyer disclose information about board members’ primary employment and directorships in other companies? No 0
Must Buyer disclose the compensation of individual managers? No 0
Must a detailed notice of general meeting be sent 21 days before the meeting? No 0
Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? No 0
Must Buyer's annual financial statements be audited by an external auditor? Yes 1
Must Buyer disclose its audit reports to the public? No 0
Assuming that Buyer is a limited company, must members meet at least once a year? Yes 1
Assuming that Buyer is a limited company, can members representing 5% put items on the meeting agenda? No 0
Assuming that Buyer is a limited company, must Buyer's annual financial statements be audited by an external auditor? Yes 1
It is forbidden to appoint the same individual as CEO and chairperson of the board of directors? No 0
Must the board of directors include independent and non executive board members?  No 0
Can shareholders remove members of the board of directors without cause before the end of their term?  Yes 1
Must the board of directors include a separate audit committee exclusively comprising board members? (Note: Board of directors can form their own committees – section 160(d) of MCL.) Yes 1.0
Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? No 0
Must Buyer pay declared dividends within a maximum period set by law?  No 0
Is a subsidiary prohibited from acquiring shares issued by its parent company?  No 0
Assuming that Buyer is a limited company, must Buyer have a mechanism to resolve disagreements among members? (Note: Yes, chairman has a casting vote under section 145(c) of MCL.) Yes 0
Assuming the Buyer is a limited company, must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer?  No 0

 

What has improved

The new Companies Law, which came into effect on 1 August 2018, provides significantly improved protections for minority investors (not reflected above). Upon verification by the World Bank Doing Business team, these will be reflected in the Doing Business2020 Report, which will be issued around the end of October 2019

 

Action Plan

Action Item Timeline Status
Effectively implement the new Companies Law and Regulations, and communicate provisions to the private sector Short Term Ongoing
Assess possible crossover provisions from the draft Insolvency Law. Short Term Ongoing

Assess application of the new Companies Law and, where not already provided for, consider to

  1. Limit stringent corporate governance provisions to listed companies and large ‘public’ corporations
  2. Require shareholder approval of large related-party transactions
  3. Require independent review of related-party transactions before they take place
  4. Allow the court to void a related-party transaction that is harmful to the shareholders
  5. Introduce legal provisions to the corporate governance framework to ensure that shareholders will be paid within a specific and reasonable timeframe when dividends are declared
  6. Require shareholder approval of new share issuances
  7. Introduce legal provisions to the corporate governance framework ensure that all shareholders are offered an exit option if the company is acquired by a third party.
  8. Separate the role of the chair of the board and CEO.
  9. Require the Board of Directors to include both independent and non-executive board members
  10. Facilitate access to corporate documents by plaintiffs before and during trial
  11. Communicate through DB website

Medium to Long Term

[Update required]
Develop a corporate governance code Long Term In progress (supported by IFC and OECD)

 

Lead Person

U Aung Naing Oo

The Protecting Minority Investors Indicator Support Group is headed by the Director General of the Directorate  of Investment and Company Administration (DICA), Ministry of Investment and Foreign Economic Relation

 

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