Established in 1996, Company Law of the Maldives, governs the formation, operation, and dissolution of companies within the country. The legal framework governing companies in the Maldives has recently undergone significant changes. The New Companies Act (Law No. 07/2023 Companies Act) has been implemented by Maldives, which was ratified by the President on 26th December 2023 and came into effect on 1st January 2024. The new Act expands the provisions of the Repealed Act (Companies Act Law No. 10/96) and also brings major developments that impact the companies in Maldives. All the existing companies under the Old Companies Act were given a period of one year from the effective date of New Companies Act to comply with new provisions i.e., by 31st December 2024.
KEY AMENDMENTS OF NEW COMPANIES ACT OF MALDIVES, 2023
The 2023 Companies Act generally maintains the compliance structure established under the previous Companies Act. As a major difference, the new Companies Act strengthens the enforcement regime allowing the Registrar of Companies to levy fines for non-compliance of the new Act. These amendments to the company law are part of the government’s ongoing efforts to enhance the business environment, ensure compliance with international standards, and facilitate economic growth.
- Types of Companies
In addition to the previously recognized categories of private limited companies, public limited companies, state-owned companies and reregistered companies, the new Act also introduces 2 new categories:- Local Authority Companies (LAC)
- Foreign Investment Companies (FIC) (This applies where entity has Foreign Shareholdings)
- Single Shareholding Companies
Abandoning the requirement of 2 Directors under the Repealed Act, the new Act allows single shareholders company to be incorporated. But, the requirement of at least 1 director to be resident in Republic of Maldives remains. Special provisions and exemptions apply to General Meeting, Board Meeting and generally conducting the affairs of single shareholding companies. - Board Composition and Responsibilities
Board of Directors of Private Companies may appoint 1 Director rather than 2 as required by the previous Act. The new Act abolishes the requirement for directors to be shareholder in a company as provided by the repealed Act, expressly allowing individual shareholder to appoint third person as a director. Locally owned Private companies (i.e., 100% Maldivian Ownership) should only have Maldivians as Director of the company, thus, shareholders are restricted from appointing foreign individuals to represent them on the Board. Also, new Act provides for the requirement to hold 4 Board Meetings annually whereas 2 Board Meetings were required previously. Further, the quorum for the same is 50% of the directors and Articles of Association may stipulate a higher quorum. - Significant Beneficial Owner
One of the major overhauls under the new Companies Act is the introduction of the requirement to register Significant Beneficial Owner. Under New Act, Significant Beneficial Owner is defined as individual who possess:- Direct or indirect control of 25% shares in the company; or
- Direct or indirect control of 25% voting rights of members in the company; or
- Direct or indirect right to receive 25% dividends in the company; or
- The right to exercise significant influence or control in the company without solely due to owning shares in the company. They hold the right, directly or indirectly, to be involved in the financial or operational decisions of the company. Significant Beneficial Owner must be registered in the company and the company must maintain a Register of Significant Beneficial Owners. Any changes to Significant Beneficial Owners must be notified to ROC within 30 (thirty) days.
- Objectives of a Company
Locally Owned Private Companies have unrestricted objectives as the scope of their businesses, in contrast to Previous Act where specific objectives were to be included in Memorandum of Association. Now, such companies may engage in any business not prohibited by Law. Model Articles are to be published by ROC and companies may choose to adopt the same. - Company Seal
Private Companies are not required to have a registered Company Seal under the new Act. However, where a Company Seal is registered, documents of the company can be executed by an authorized sole signatory with the company seal affixed to the document. If the Company Seal is not registered, then documents may be executed in the following manner:- Two authorized signatories executing the document; or
- A director of the company executing the document in the presence of a witness attesting to the signature; or
- Managing Director executing the document.
- Company Secretary
Contrary to the requirement of previous Act, it is no longer mandatory for a Private Company to appoint a Company Secretary. In addition to this, a company may appoint either an individual or a law firm as their Company Secretary. Additionally, the New Act requires an individual to be a resident and the firm to be registered in Maldives. Under the previous Act, Director could be appointed as Company Secretary but the new Act provides that Company Secretary should not be a director of the company. Any changes to Company Secretary must be notified to ROC within 15 (fifteen) days. - Compliance Statement
A Compliance Statement is to be submitted to the ROC, signed by an attorney or the Company Secretary (for companies other than private companies) in the following circumstances:- Conversion of company from private to a public company and vice versa;
- Amendments in Memorandum of Association and Articles of Association;
- Alteration in the authorized capital of the company.
- Directors Declaration
Annual Directors Report is required to be maintained and submitted to ROC annually under the new Act. The declaration by the director which confirms that the information provided in Business Register is accurate, must also be included as a part of the Directors Report. - Abolition of Annual Fees
Under the previous Act, an Annual Fee of MVR 2000 was applicable for each Private Company. Contrary to this, the new Act has abolished the requirement for payment of the annual fee. However, new service fees have been introduced for corporate applications to be made with the ROC.
Effects of New Companies Act:
- Enhanced Corporate Governance
- Flexibility in Company Structures
- Streamlined Incorporation Processes
- Improved Compliance and Reporting
- Enhanced Digitalization
Key Compliances for Business Owners
Following are some essential requirements a company has to adhere with from the effective date of the new Act. This checklist is not intended to be complete, and compliance matters may vary depending on the company.
| Section No. | Requirements | Details |
|---|---|---|
| 81 | Register of Members | A Register of Members with the following details must be kept by every company:
|
| 86 | Share Certificates | Each member of a firm must receive a share certificate, which must contain the following information:
|
| 102 | Online participation/ conducting meeting via electronic means | The approval of the majority of the members is required if the company wants to hold its annual general meeting virtually. |
| 125 | Changes to Register of Directors | Within 15 (Fifteen) days of making any changes to the Register of Directors, the Registrar of Companies must be notified of the changes. |
| 154 | Changes to Share Capital | Company shall notify Registrar of Companies within 30 (Thirty) of any modifications to its authorized share capital. |
| 178 | Changes to Significant Beneficial Owner | The Registrar of Companies must be notified of any changes to the company’s significant beneficial owners within 30 (Thirty) days. |
| 180 | Retention of Records | For a minimum of 5 (Five) years after the date of preparation, accounting records must be kept in physical or digital form at the company’s registered address or office. |
| 184 | Director’s Report | After the members meeting, every company has to create a Director’s Report that includes the minimal requirements outlined in the Act and submits it to the Registrar of Companies within fifteen (15) days. |
CONCLUSION
The recent amendments to the company law in the Maldives represent a significant step towards modernizing the business environment and aligning it with international best practices. Businesses operating in Maldives should familiarize themselves with these new regulations to ensure compliance and take advantage of the opportunities presented by these legal reforms.
Disclaimer
The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.
