Myanmar Set To Adopt New Insolvency Laws Including A Corporate Rescue Procedure

The Republic of the Union of Myanmar moved a step closer to the adoption of new insolvency and restructuring laws with public consultations for the proposed laws recently taking place in Nay Pyi Taw and Yangon. It is proposed that the new laws will be finalised and put before Parliament in the latter part of 2018 and enacted in 2019.

The initiative has been driven by the Asian Development Bank (ADB).1

Background

Myanmar is transitioning from over 50 years of military rule and a centrally planned economy towards a free market economy.

As a common law jurisdiction, Myanmar's existing corporate insolvency laws are set out in the Myanmar Companies Act 1914, which essentially reproduces 19th century British insolvency laws. In many respects the existing insolvency regime is outdated.

A new insolvency system is required to encourage the greater availability of credit and provide a more effective means of dealing with financial distress and failure.

The new law has been developed over the course of a number of in-country visits by the ADB team, working in conjunction with a number of Myanmar government bodies including the Union Supreme Court.

Myanmar has a population of approximately 54 million, but is characterised by a significant income gap. Recent reforms and developments carried out by the new government, in collaboration with foreign countries and organisations has fuelled economic growth and a growing consumer middle class. However, over 80% of the country's enterprises still comprise micro and small to medium enterprises ("MSMEs") with less than 10 employees. Accordingly, the new insolvency laws have been designed to cater for the specific characteristics of the Myanmar legal and commercial environment, including MSMEs.

Key features of proposed new Insolvency Law

The new law is based on common law tradition but reflects modern international best practice. It will cater for both corporate and personal insolvency, including specific provisions for MSMEs.

Companies and MSMEs in financial distress will have the option of following the traditional liquidation route or alternatively opting for rehabilitation proceedings while enjoying a moratorium from legal proceedings. Among other things, the rehabilitation proceeding provides for the appointment of an insolvency practitioner as a Rehabilitation Manager to oversee the company. It is the responsibility of the Rehabilitation Manager to prepare a rehabilitation plan for the company, to be...