CNI News

26 Jan 2023

Although the Directorate of Investment and Company Administration announced that it would no longer allow nominal directors and shareholders in companies, they will not vanish, according to economists.

As people who act as nominal directors conduct company operations in terms of finance and responsibility, it is difficult to scrutinize them, Economic Observer U Thet Zaw told the CNI.

He said, "Authorities issued rules and regulations to prevent scapegoating. If there is a problem in a company, nominal directors will be scapegoats. There are disadvantages caused by nominal directors depending on their involvement. People are taking shortcuts without complying with rules and regulations. However, it is difficult to distinguish between real directors and nominal ones because no one will admit they are nominal directors. Some people act as nominee directors because they get money for doing so while others act as nominal directors because they are responsible to do so. It is difficult to expose them.

A garment factory.

The DICA announced on 17th January that Chapter 18 of the Myanmar Companies Law stipulates regarding the rights and responsibilities of directors, officials and those who direct corporate affairs are considered directors even if the position of the director is not appointed. Additionally, the appointment of alternate directors is allowed under the existing law. Appointing nominal directors is not officially approved.

Prohibition of nominal directors and shareholders will prevent tax evasions and money laundering, according to an economic observer, who requested not to be named.

He told the CNI, "There will be fewer cases of tax evasions and money laundering. However, it is not a regulation in favour of companies but a regulation to protect the government."

 A scene in Yangon.

Companies that hold 35 percent of foreign shares are considered as local companies and those with more than 35 percent of foreign shares are regarded as companies owned by foreigners. However, some foreigners are acting as nominal directors as they want to take more than 35 percent of their company shares, according to entrepreneurs, who think that nominal directors have been banned to protect the rights of citizens.

However, the DICA would need to cooperate with other government departments to take action against nominal directors and just issuing statements will not work, according to economic observers.