Upload
others
View
3
Download
0
Embed Size (px)
Citation preview
Baker & McKenzie (currently named BM Myanmar Legal Services Ltd), a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organisations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm.© 2016 Baker & McKenzie
Myanmar Investment Update
Ola Nicolai BorgePartner
May 2016
© 2016 Baker & McKenzie 2
DISCLAIMER‒ This presentation is only intended to facilitate a
discussion on certain aspects of investing in Myanmar. A more detailed assessment is required in order to confirm any potential tax or legal effects of any potential investment structures.
Ola BorgePartner, Yangon+95 1 255 [email protected]
About Ola Ola has more than sixteen years of experience as a legal, tax and financial advisor - specializing in cross-border transactions and corporate structuring. Over the last six years he has advised a wide range of clients on legal and tax issues related to investments in Myanmar. Ola has previously held senior positions in Big4 and international law firms in Europe, the US and Southeast Asia.
Finally, Ola is the president of the Myanmar-Norway Business Council.
Quick facts
Established in 2014
No. of lawyers and legal staff: 15
A full spectrum of legal service – This includes integrated advice on foreign investment including M&A and joint ventures, coordinated tax planning, project development, project finance and regulatory and commercial affairs
Working together with Norwegian Businesses in Myanmar
Unrivalled domestic presence – Our unique selling point is the ability to have Myanmar-qualified lawyers on-the-ground with local knowledge and a network of contacts (unlike other law firms that staff only expat lawyers)
Strong history of investing in Myanmar –Even prior to the Yangon office opening we were at the forefront of handling Myanmar legal issues through our network of Southeast Asian offices What others say about our Myanmar
presence“There is nothing easy about it, but Baker & McKenzie has more experience doing it than any other firm, and they are the archetypical multi-cultural firm with a huge presence in Asia, so they know the ropes.”
– Law360, 2014
With you today
All contracts incl. employment,
lease, distributorship, and sale and
purchase agreements
Investment under the Foreign
Investment Law and special economic zone law
Options for establishing a
presence as well as obtaining approval
for / structuring that presence
Project development,
including regulatory, financing and environmental
issues
Protection ofintellectual property
rights
Government relations
Foreign exchange and exchange control
issues
Land ownership and
land rightsTax, customs, international
sanction regimes and other trade and
commerce issues
Permissible foreign activity and foreign ownership restrictions
Our teamAbout the Yangon office
How we can help
A snapshot of our work in Myanmar
− Advising a regional infrastructure fund on its potential investment in a Myanmar-based tower company.
− Advising a regional venture fund on its potential joint venture to establish a Myanmar telecommunications tower company.
− Advising a regional development company on the potential acquisition of a portfolio of commercial developments in Myanmar.
− Advising one of Thailand's largest banks on tax structuring and market entry in Myanmar.
− Acting as the borrower’s Myanmar counsel in a senior and mezzanine secured financing of its tower roll out and operations by a syndicate of DFIs. We also advised on a bridging Murabaha financing of the project.
− Advising a regional bank as offshore lender on the offshore financing of the Kempinski Hotel redevelopment project in Myanmar. We also advised a local Myanmar bank in its role as onshore security agent.
Legal Regime for Investment4
© 2016 Baker & McKenzie
Available forms of registration:Types of Incorporation / Registration
100% owned foreign subsidiaries Joint Venture companies with Myanmar citizens Myanmar Branch of Foreign Company /
Representative Offices
All incorporation / registration of the above entities are deemed to be a Foreign company / entity. This could change with the new companies act.
Choice of registering under•Myanmar Foreign Investment Law; or•Myanmar Companies Act.
When do you need to register?
© 2016 Baker & McKenzie
Restrictions:Myanmar Foreign Investment Law
•Prohibited activities:•Damaging to environment; or•related to certain extraction/natural resources
•Activities only allowed in Joint Venture :•including production of a wide range of consumer goods;•certain construction activities; and •certain transportation services;
•Activities under certain conditions:•activities that require approval from ministries; and •activities that require Environmental Impact Assessment
•Unrestricted activities
The Myanmar Investment Commission have wide discretionary power.
© 2016 Baker & McKenzie
Restrictions:Land ownership
•Foreigners cannot own land in Myanmar.
Land lease
•Maximum lease for foreigner is 1 year, with some exceptions:
•Foreign Investment Law – 50+10+10 years;
•Special economic zone law – 30 years
Trading activities
•Foreigners are not allowed to import and distribute products!
•Certain exeptions have opened up
•Exepcted to open up more going forward
© 2016 Baker & McKenzie
Restrictions:• Typical trading structure:
Manufacturing entity
Sales and marketing support
Third country
Myanmar
Distributor
Goods
TargetCo
Goods
Service fee
Payment
Payment
© 2016 Baker & McKenzie
• Corporate Income Tax Rates:• Resident companies – 25%• Branch – 25%**Income subject to WHT is not further taxed.
• Capital Gains Tax rates:• Resident tax payers – 10%• Non-resident tax payers – 10%• Oil and gas industry – 40 to 50%
• Withholding Tax on transactions with Non-Residents:• Dividends – 0%• Interest – 15% • Royalties – 20%• Services and goods – 3.5%
•Tax incentives (discretionary):•Corporate income tax holiday for 5 year;•Import duties, •Plus others….(To be changed with new investment law)
Legal system10
© 2016 Baker & McKenzie 11
Legal resourcesState of the laws and regulatory framework
Many laws are rather old Based on British Law Codes from pre-independence Subject to certain revisions
Many new laws in the pipeline New Companies Act New Investment Law
Are the old laws a big problem? Technically outdated? Well designed Well integrated Easy to apply Available case law
© 2016 Baker & McKenzie 12
Comparison of Potential Changes from the “new” Companies LawOld Companies Act New Companies Law (Draft)Total section of the Act – 287 Total section of the Law - 415
Company has Articles of Association and Memorandum of Association
Company only has Constitution
Permit to Trade (Form of Permit) required No further Permit to Trade (Form of Permit)
Minimum two shareholders in private company One shareholder could be allowed in private company
Two directors are required in private company One director could be allowed in private company
Managing Agent is allowed Managing Agent is not further allowed
Share Warrant is allowed Share Warrant is not further allowed to issue
No Share Option concept Share Option concept is introduced
No different concept of small companies Introduce small companies concept • not compulsory AGM• not compulsory detailed reporting and audit requirement
Note – This changes may be different when the actual law come out.
© 2016 Baker & McKenzie 13
Comparison of Potential Changes from the “new” Investment LawOld Investment Laws New Investment Law (Draft)There are two laws;(i) Foreign Investment Law and(ii) Citizen Investment Law.
There will be only one law “ Myanmar Investment Law”
Most of the company requires MIC permit MIC will issues the notification which requires the MIC permit. Other types of business only require MIC confirmation to obtain land use rights and other rights
Income Tax Exemption – 5 years MIC will annouce based the three zone depending on the development stage.(i) Zone 1 (least development stage) – up to 7 years(ii) Zone 2 (has some development) - up to 5 years(iii) Zone 3 (developing stage) - up to 3 years
Land use right – 50 + 10 + 10 Land Use right – 50 + 10 + 10 (So, not different) However, policy is expected to change – making it easier to get long term lease without formal MIC application
Employment – foreign to local employment ratio There is no further foreign & local employment ratio. As for the work which does not required proper skill or experiences, it shall only appoint local employee.
Unclear for foreign arbitral award Foreign Arbitral award shall be recognized under New York Convention 1958
Note – This changes may be different when the actual law come out.
Experiences & Observations14
© 2016 Baker & McKenzie 15
Experience from AcquisitionsUncertainties regarding formalities
who owns the company? what do the company own? are the books reliable? any dispute resolution?
Can Foreigners buy shares in target?Can Foreigners buy assets of target?Discrepancy on price expectations Frequently observed structure
Form a new joint venture company Local Partner contribute assets Foreign Investor contribute capital
Nominee structures not recommended
Recommendation: Be thorough and realistic
© 2016 Baker & McKenzie 16
Typical Acquisition Structure
© 2016 Baker & McKenzie 17
Experience from Greenfield projectsInteracting with government
Unclear & Outdated rules Wide discretionary powers to approve activities Lack of comfort to make decisions Limited capacity for “decision makers” Things moving slow…….
Recommendation: Be patient
Interacting with partners Discrepancy between “cover of the book and content” Strategic difficulties with getting away from “agent” Legal difficulties with getting away from “agent”
Recommendation: Chose wisely
© 2016 Baker & McKenzie 18
Baker & McKenzie (currently named BM Myanmar Legal Services Ltd), a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organisations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm.© 2016 Baker & McKenzie
Thank You.Ola Nicolai BorgePartner