Restructuring and winding up

Background point: During the first half of 2020, the Myanmar government passed a new Insolvency Law and Insolvency Rules to deal with the restructuring and/or liquidating of insolvent companies and businesses. The Insolvency Law and Rules also provide for solvent companies to be liquidated by way of a voluntary winding up with the approval of the shareholders of the company. The Insolvency Law states that once it has been passed by the Myanmar government, all windings up must be conducted under the Insolvency Law rather than under the Myanmar Companies Law 2017 (MCL), which also contains provisions for windings up of companies. However, the Insolvency Law and Rules have not yet been implemented in practice. Instead, the Myanmar Directorate of Investment and Company Administration (DICA) is currently still allowing company windings up to be conducted under the MCL (notwithstanding that windings up should now be conducted under the Insolvency Law). It is possible that the Insolvency Law and Rules will be more fully implemented in the near future and that DICA will commence administering windings up under the Insolvency Law. As the winding up process under the Insolvency Law is relatively similar to that under the MCL, there will hopefully be little practical impact on voluntary windings up from any changeover in the governing legislation.

If a company has entered – or is expected to soon enter – into constrained financial circumstances that may mean its business is no longer viable, it may be useful to look closely at its contractual and creditor relationships to try to identify plans for promptly closing off expenditure in the event that a winding up becomes necessary. This exercise can reduce the risks of illegal insolvent trading occurring, and allow a future winding up process to be faster and less painful. It may also be possible to identify ‘staged shutdown’ plans that allow certain activities or business units to be ceased or suspended first, while other more essential and/or complicated areas of activity are kept running. If available, this staged approach may allow the overall business to ‘keep the lights on’ for longer while the owners and managers look at new investment or restructuring processes that could make the company viable again.

Combining our experience in management and strategy consulting with our core accounting expertise, we can work with your team to review the operations of your business and its creditor profile and assist with formulating and executing a plan to reduce the expenditure and insolvency risk, with a view to either restructuring the business or preparing for a controlled and orderly liquidation through winding up.

If a decision is made to undertake a winding up, we can help you to source a Myanmar CPA with the licence and experience to act as a liquidator. We can also assist in managing the overall winding up process – from the pre-liquidation auditing and solvency assessment right through obtaining tax clearances, deregistering the company and closing bank accounts and remitting any surplus funds to the shareholders. We will provide a single point of contact for inquiries and updates to minimize the involvement required from the client and remove the confusion from the process.