The Company Act, passed by Parliament on December 5, 2023, significantly changes business entity registration in the nation. Previously requiring a minimum of two shareholders, the newly passed act allows a single individual to initiate company registration.
The Company Act is pending law status, awaiting the President’s ratification and Gazette publication. It covers registration procedures for private, public, government, local authorities, and foreign investment companies. Additionally, it outlines processes for a public company transitioning into a private entity and a government company converting into a private entity.
Under the Company Act, a company can be formed with a single shareholder, and private companies can now have up to 100 shareholders. The legislation requires annual general meetings for companies with more than one shareholder.
Addressing foreign companies, the Act stipulates compliance with the Foreign Investment Act, eliminating the previous requirement for a local agent. Modern measures include provisions for electronic meetings, and every non-private company must appoint a secretary to ensure legal compliance.
The fee structure changes, with the annual fee abolished and replaced by a one-time MVR 2,500 fee at company registration. Notable fee categories include:
- Private Company – MVR 2,000.
- Public Company – MVR 2,000.
- Local Company – MVR 1,000.
- Change basic/operating rules, register – MVR 100.
- Change of company registration address – MVR 100.
- Change of service address – MVR 100.
- Directors providing a copy of basic/operating rules – MVR 100.
- Capital Transfer Fee – MVR 100.
- Company members / Transfer of shares – MVR 100.
- Change of Directors / MD – MVR 100.
- Reservation of Name / Extension of Reservation (Seven Days) Fee MVR 100.
- Viewing information in the register – MVR 100.
The Company Act simplifies company liquidation, offering a straightforward procedure for self-dissolution with approval from the Board of Directors and the General Meeting. The Registrar of Companies can dissolve a company if its name remains on the Register of Inactive Companies for two years.
Additional powers for the Company Registrar include the potential appointment of a deputy registrar and the authority to search premises in case of suspected violations. The Registrar is mandated to maintain the online Registrar Gazette to publish general notifications and notices.
The enactment of the new Company Act repeals the previous law, with any new formalities required within one year of the act’s commencement. Challenges faced under the previous law include dissolving companies, with over 14,000 private companies, predominantly paper companies, listed in the company registry.
