Insolvency Law at Myanmar
Myanmar's insolvency landscape underwent a significant transformation with the enactment of the Insolvency Law 2020, which came into force on 25 March 2020. This comprehensive legislation replaced the outdated Yangon Insolvency Act 1909 and Myanmar Insolvency Act 1920, introducing modern procedures for corporate, personal, and cross-border insolvency. (Sweeping Changes to Myanmar’s Insolvency Law Regime - CharltonsMyanmar)
⚖️ Key Features of Myanmar's Insolvency Law 2020
1. Corporate Rescue and Rehabilitation
Objective: To provide financially distressed companies with an alternative to liquidation by facilitating restructuring and rehabilitation. (New Myanmar Insolvency Law allows companies to opt for corporate rescue and rehabilitation alternative to liquidation : Allen & Gledhill)
Process: A company can initiate rehabilitation proceedings by appointing a Rehabilitation Manager—an insolvency practitioner registered under the law. The manager prepares a rehabilitation plan to be approved by creditors within a specified timeframe. During this period, the company benefits from a moratorium on legal actions, and secured creditors require court or manager approval to enforce their security interests. (New Myanmar Insolvency Law allows companies to opt for corporate rescue and rehabilitation alternative to liquidation : Allen & Gledhill, Myanmar set to adopt new insolvency laws including a corporate rescue procedure - KRyS Global)
2. Micro, Small, and Medium Enterprises (MSMEs) Insolvency
Definition: MSMEs are defined as enterprises with debts not exceeding 10 million kyats (approximately US$7,500) for incorporated entities or 1 million kyats (approximately US$750) for unincorporated entities. (Myanmar set to adopt new insolvency laws including a corporate rescue procedure - KRyS Global)
Simplified Process: MSMEs can opt for a streamlined rehabilitation process. Unlike larger companies, MSMEs appoint a Rehabilitation Adviser who assists in preparing the rehabilitation plan but does not assume personal liability for the enterprise's debts. (Myanmar set to adopt new insolvency laws including a corporate rescue procedure - KRyS Global)
3. Personal Insolvency
Voluntary Arrangements: The law encourages individuals to reach voluntary arrangements with creditors, allowing for debt restructuring or partial debt forgiveness. These arrangements are subject to judicial approval and are legally binding. (Myanmar set to adopt new insolvency laws including a corporate rescue procedure - KRyS Global)
Bankruptcy Proceedings: If voluntary arrangements are not feasible, individuals can be adjudicated bankrupt. A bankruptcy notice must be served, and if unpaid within 21 days, a creditor can petition the court for bankruptcy. The debtor must owe at least 1 million kyats (approximately US$733) for the proceedings to commence. (Myanmar set to adopt new insolvency laws including a corporate rescue procedure - KRyS Global, Myanmar's 2020 Insolvency Law - Tilleke & Gibbins)
4. Corporate Liquidation
Voluntary Liquidation: Shareholders can initiate voluntary liquidation by passing a special resolution and making a statutory declaration of solvency, stating the company's ability to pay its debts within a year. A liquidator is then appointed to wind up the company's affairs. ([Myanmar] Voluntary Winding up under Myanmar's Insolvency Law 2020)
Involuntary Liquidation: Creditors or the court can petition for winding up if the company is unable to pay its debts. A company is presumed insolvent if it fails to satisfy a statutory demand within 21 days. (Myanmar's 2020 Insolvency Law - Tilleke & Gibbins)
5. Cross-Border Insolvency
UNCITRAL Model Law: Myanmar's Insolvency Law adopts the UNCITRAL Model Law on Cross-Border Insolvency, facilitating cooperation between Myanmar and other jurisdictions in cases involving international creditors or assets. This framework aims to protect investments and employment across borders. (Sweeping Changes to Myanmar’s Insolvency Law Regime - CharltonsMyanmar, A Guide on Myanmar’s New Insolvency Law)
📌 Practical Considerations
Insolvency Practitioners: Individuals wishing to act as insolvency practitioners must be registered with the Myanmar Insolvency Practitioners’ Regulatory Council and hold a current practicing certificate. As of December 2022, there were 166 registered members. ([Myanmar] Who can be a liquidator under the Insolvency Law 2020?)
Legal Framework: The law provides a structured approach to insolvency, balancing the interests of debtors and creditors while promoting economic recovery.
Implementation: The law's effectiveness depends on the establishment of supporting regulations and the capacity of the judiciary and insolvency practitioners.
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