New bill proposes sole shareholder companies

Government has submitted a bill to the parliament to amend the long-standing Company Act. If the bill is passed, the Maldives will have a completely new, modern legal framework for the businesses. While the Parliament's Economic Committee has commenced work on the new bill, economic minister Fayyaz Ismail and his team attended a committee session on Wednesday and read the 16 chapters of the bill.

According to the new bill, a company can be established with just one shareholder. Currently, a company can be established with more than one shareholder.

Minister Fayyaz said that sole shareholder companies are now registered in many developed countries around the world. Fayyaz said that the government's aim is to shape the Maldivian commerce systems like the trending businesses in developed nations. 

The bill also mandates companies established under presidential decrees to be officially registered. Fayyaz said that some companies established by the government are facing issues from being unregistered, and that it caused disorientation.

According to the new bill, foreign investments registered in the Maldives will be given a special classification number and public companies will also be numbered for easy identification. 

The minister also said that the government is preparing to submit a separate bill on foreign investments. Fayyaz said that the aim behind this was to oversee all matters related to foreign investments under a separate law.

The bill also proposes to classify businesses-operations in the basic regulations approved by the board. Having a service address where business documents can be sent to the company will be made mandatory in the new bill.

Minister Fayyaz said at the committee that the biggest problem now is the fine imposed on companies for not paying their annual fees. He also said that it was a matter of great concern that many companies that did not pay their annual fees had reached the point of being dissolved and that the list keeps growing.

For this reason, the bill submitted by the government states that companies do not have to pay annual fees. Currently, the annual fee is set a MVR 2,000. 

Fayyaz said that instead of the annual fee, the government will charge fees for business permits obtained by companies for their commercial activities. He said that he believes it is not right to charge a fee every year regardless of profitable commerce. The minister said that the government's intention is to make it easier to conduct business.

"This is a good step towards increasing the status of Maldives in the Ease of Doing Business Index. They have always recommended abolishing the annual fee to facilitate businesses," Fayyaz said.

The new bill also proposes major changes regarding a company's shareholders.

Addressing it, Fayyaz said that the bill includes provisions to hold shareholders and directors of companies more accountable. He said that the bill includes plans to ensure that those who neglect the company's affairs are not allowed to remain as directors for a certain period of time.

As the biggest change regarding shareholders, Fayyaz noted that shareholders of a company are given the opportunity to appoint others to represent them. Current law dictates that a representative director can only be appointed if the shares are held by a company. 

"There is a big obstacle because an ordinary person cannot be chosen to replace a business shareholder. Shareholders are granted delegation rights everywhere, so the purpose of this amendment is to ensure equality," Fayyaz said.

The bill also seeks to end the company's registrar’s job of passing a company's articles and memorandum of association. The minister said that it is not practical to have a registrar approve the documents, and that there are issues rising with the articles and memorandum of association endorsed by the registrar when it comes to court cases related to companies. 

"Civil issues are laid on the Registrar that endorsed the company’s regulations. The purpose of this change is to bring an end to such things," Fayyaz said.

Maldives hopes to see the company's bill passed and receive new, modern laws for companies before the end of this year. The parliament is scheduled to pass the bill before the end of its term in November. If the project is completed by that date, a new company law will come into place in December.