MCRB Submits Feedback on the draft Myanmar Companies Law
MCRB has submitted feedback on the draft law which has been available for consultation at http://dica.gov.mm.x-aas.net/
Our feedback welcomed the transparent consultation process and in particular the provision of a public briefing paper, explanatory notes, and the commentary, since this enables stakeholders to provide informed comments and to understand the background to the proposals which the Directorate of Investment and Companies Administration (DICA) is making with the support of the Asian Development Bank.
In view of MCRB’s mandate to promote responsible business our comments focussed on PART IV (Management and Administration). We proposed that in the proposed Section 83A(10), which covers a director’s or officer’s duty to act in good faith, this section be supplemented with an elaboration of what “good faith” refers to. For this, we look towards the well-established UK Companies Act 2006 (Cap. 46) (“UKCA”). The UKCA provides a clear scope of considerations that directors must take into account when deciding on a course of action. It makes clear that those considerations must include the broader operating framework for the company and its responsibilities in that framework, as this ultimately can have an important impact on the success or failure of the company itself and is hence at the heart of the good faith obligation.
We therefore proposed that a modified version of Section 172 of the UKCA be adopted, which would better reflect the clear commitments that the Government of Myanmar has made to ensuring the companies registered and operating in the country operate in a responsible manner:
(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—
(a) the likely consequences of any decision in the long term,
(b) the interests of the company's employees,
(c) the need to foster the company's business relationships with suppliers, customers and others,
(d) the impact of the company's operations on the community and the environment, [including on the observance of international norms on human rights ascribed to in Myanmar],
(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
(f) the need to act fairly as between members of the company.
Additionally, under PART VI (Registration Office and Fees), we made a technical point concerning Evidentiary Value of the Copies Certified by the Registrar, which we believe is relevant to the promotion of transparency in transactions in Myanmar.
Finally, we encouraged DICA to adopt a similar systematic approach to the current consultations on the draft Investment Law (on which MCRB will also submit comments by the 26 March deadline). We encouraged DICA to accompany the proposed changes to the merge the two Investment Laws with clear explanations of the intent of the changes, and precedents.
We also encouraged DICA to prioritise the transmission of the draft Companies Law to this Parliament, and await its adoption before submitted draft Investment Law to a future Parliament (most likely be in 2016), since a refreshed Companies Law is essential before embarking on the creation of a new Investment Law.
On 29 March, MCRB submitted an additional proposal that the Myanmar Companies Act should include in Article 131A (Directors report) a new requirement for non-financial reporting for large Myanmar companies. Such a requirement would complement the work which MCRB has been doing through its annual Pwint Thit Sa (Transparency in Myanmar Enterprises) survey to encourage large Myanmar companies to increase the amount of information they make public on issues such as corruption, company organisation, HSE, labour, human rights. Reporting on non-financial risks is also increasingly becoming either a requirement or is being encouraged by many jurisdictions, including many stock exchanges. It is also a part of the debate around businesses’ contribution to the post-2015 Sustainable Development Goals.
MCRB suggested that when designing such a requirement, the Myanmar government should look to the requirement for a Strategic Report in the UK Companies Act and specifically draw on key elements of Article 4141A of The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. Article 19A (Non-financial statement) of the EU Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large undertakings and groups which applies to large undertakings with more than 500 employees is also relevant. This requires large companies to include in the management report a non-financial statement containing information to the extent necessary for an understanding of the undertaking's development, performance, position and impact of its activity, relating to, as a minimum, environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters.