Types of companies that can be incorporated in Myanmar

Myanmar is becoming a promising investment destination, attracting the attention of many international businesses because of its unique advantages. Myanmar’s economy is on the rise, opening up countless attractive business opportunities in many fields. The Myanmar government is also making efforts to reform the economy, gradually opening up to foreign investment through the issuance of open policies, creating more favorable conditions for the process of establishing and operating businesses. In addition, Myanmar owns rich natural resources such as fertile land, abundant minerals and potential energy sources, creating a competitive advantage for mining and processing industries. Along with Myanmar’s strategic geographical position, located between two major economies, India and China, is also an important factor that makes the country an ideal trade and logistics center in the region. Viet An Law would like to introduce you to the types of companies that can be established in Myanmar through the article below.

Legal basis for the types of companies that can be incorporated in Myanmar

Understanding the business patterns in Myanmar is a key factor for foreign investors who want to enter this market. Learning about each type helps investors choose the type that best suits their business goals. The choice of business form directly affects many aspects, including the level of liability (for example, a limited liability company limits its liability to the scope of contributed capital), the ability to raise capital (it is easier for a joint stock company to raise capital), the management structure (each form has its own regulations on organizational structure), etc tax regime and market access (some industries require specific legal forms). The most common types of business are governed by three main laws: the Myanmar Enterprise Law 2017 (MCL) which regulates the establishment, operation and dissolution of companies; The Myanmar Investment Law 2016 (MIL) regulates preferential policies for investment and foreign investment; and the Partnerships Act of 1932 (PA) which regulates the form of partnership.

Types of companies that can be incorporated in Myanmar

Private Limited Liability Company (Private Joint Stock Company)

A “private limited liability company” or also known as a “private equity company” is a popular type of business. This type has the following main characteristics:

• Number of Members: A minimum of one director and one shareholder is required. The special feature is that one person can hold both of these roles at the same time (both as a director and as a sole shareholder). The maximum number of shareholders is limited to 50 people.
• Limited Liability: This is the most important characteristic of this type of company. Each shareholder’s liability is limited to the amount they have not paid for the number of shares they own. This means that if the company is in financial difficulties or goes bankrupt, the personal assets of the shareholders will be protected, they will only lose the amount invested in the shares (the unpaid part).
• Popularity: A private limited liability company is the most popular type in Myanmar and is also widely used worldwide due to its flexibility and ability to protect personal liability for its owners.

Public Joint Stock Company

A “public joint-stock company” is an important type of enterprise in the economy, especially in capital mobilization and large-scale development. Here are some characteristics of this type

• Number of Members: A minimum of three directors is required and one of them must be a Myanmar citizen. The number of shareholders is not limited. This is a big difference compared to a private limited company.
• Limited Liability: Similar to a private limited company, the liability of shareholders in a public holding company is also limited to the value of the shares they own. If the company goes bankrupt, shareholders only lose the money invested in the stock, their personal assets are protected.
• Stock trading: This is the most prominent feature of a public joint-stock company. The company’s shares can be freely traded on the stock market (e.g., the Yangon Stock Exchange in Myanmar). This creates high liquidity for stocks and makes it easier for the company to raise capital from the public.
• Governance and transparency: Due to the large number of shareholders and publicly traded shares, public joint-stock companies often have a more complex governance structure and comply with strict regulations on information disclosure, ensuring transparency for investors.

Offshore Company

An “Offshore Corporation” is a form of doing business in Myanmar for companies that have been legally established in another country. Instead of establishing a completely new legal entity under Myanmar law, the foreign company registers to operate as a branch or representative office. Here are the characteristics of this type:

• Branch of the parent company: An “Offshore Company” is essentially an extension of the Offshore parent company. The parent company is legally responsible for all activities of the branch in Myanmar. This is different from setting up a subsidiary, which is an independent legal entity under Myanmar law.
• Registration with DICA: Registration with the Investment and Companies Administration (DICA) is mandatory for a foreign company to operate legally in Myanmar. DICA is the government agency responsible for managing business registration and investment in Myanmar.
• Not an independent legal entity: “Foreign companies” do not have a separate legal entity status under Myanmar law. All obligations and responsibilities belong to the Offshore parent company.
• Purpose of Operation: The main purpose of establishing a “Foreign Company” is usually to explore the market, establish a distribution network, execute contract projects, or provide support services for the parent company’s business operations.

Partnership

A “partnership” is a form of business organization in which two or more individuals agree to share in the profits or losses of a business. This type has the following characteristics:

• Cooperation between individuals: A partnership is formed through an agreement between two or more individuals (which can be natural or legal persons) to jointly contribute capital, labor, or other assets to conduct a business.
• Partnership Agreement: This is the most important legal document that regulates the relationship between general partners. It includes provisions on:
  • Goals and scope of business.
  • Contributed capital of each member.
  • Profit and loss split ratio.
  • Rights and obligations of each member.
  • Management and decision-making mechanisms.
  • Partnership dissolution process.
• Unlimited Liability: This is a key feature of a partnership in Myanmar. Each general partner is liable for unlimited liabilities for the debts and obligations of the partnership. This means that if the partnership’s assets are insufficient to pay the debt, creditors have the right to require the partnership members to pay with their personal assets. This is the biggest risk of a partnership.
• Not a separate legal entity: A partnership does not have a separate legal status. The general partners are jointly responsible for business operations.
• Not Compulsory Registration: In Myanmar, registration of a partnership with a state agency is not mandatory. However, drafting a written partnership agreement is extremely important to avoid disputes and clearly define the rights and obligations of the parties.
• Dissolution: The partnership will terminate its operation in the following cases:
  • All members agreed to dissolve.
  • A member dies, loses civil act capacity, or goes bankrupt (unless otherwise provided for in the partnership agreement).
  • The operation duration specified in the partnership agreement expires.
  • There is a court decision.

Joint Venture Company

A “Joint Venture Company” is a form of business partnership in which two or more parties (which can be individuals, companies, or government entities) agree to contribute capital, assets, knowledge, or skills to jointly carry out a specific project or business activity. This type includes the following characteristics:

• Cooperation between the parties: A joint venture is formed through an agreement between the parties, in which each party contributes a portion of its resources to the joint project.
• Joint Venture Agreement: This is the most important legal document, detailing the following:
  • Objectives and scope of operation of the joint venture.
  • The capital contribution rate of each party.
  • Management and administration structure.
  • Profit and loss split.
  • Rights and obligations of each party.
  • Duration of operation (usually with a certain deadline).
  • Provisions on termination or dissolution of the joint venture.
• Separate legal entity (usually): In many cases, a joint venture is formed as a separate legal entity (e.g., Limited Liability Company) under the laws of the country in which the joint venture operates. This helps to clearly delineate the legal responsibilities of the joint venture with the participating parties. However, there are also joint ventures that do not form new legal entities, but operate on the basis of cooperation contracts.
• Specific Objectives: Joint ventures are typically formed to carry out a specific project or business activity, with clear objectives and certain deadlines. After completing the goal, the joint venture can be dissolved.
• Sharing of risks and profits: The parties involved in the joint venture share the risks and profits arising from business activities together.
• Note: Myanmar’s Investment Law has restrictions on foreign investors’ ownership in certain business sectors. Specifically, in restricted sectors, domestic investors must hold at least 20% of charter capital. This aims to protect the interests of Myanmar investors and ensure the participation of the people in important economic sectors.