Parliament yesterday rejected at the preliminary stage a bill proposed by the government to modernise the existing Companies Act as part of its 18-bill economic reform package.
The bill was narrowly rejected 37-36 in a vote to send the draft legislation to committee for further review.
Jumhooree Party (JP) Leader Gasim Ibrahim – who voted with the ruling Maldivian Democratic Party (MDP) in August to pass the Goods and Services Tax (GST) legislation, the first of the 18 economic reform bills to be passed – cast the swing vote against the proposed company law.
According to the government, the purpose of the bill was to modernise bureaucratic procedures for formation and registration of companies and facilitate ease of doing business.
Among the main changes proposed to the existing law were enabling formation of companies with a single shareholder or a single director (the law currently requires at least two); abolishing the annual companies fee; specifying procedures for seeking authorisation from government agencies along with registration procedures for foreign investment companies; enabling the registration of branches of foreign or multi-national companies in the Maldives; outlining criteria for company directors and managing directors; specifying procedures for public disclosure; streamlining the process for dissolving registered companies; and delegating the tasks of the companies registrar to local councils.
During the preliminary debate stage, opposition MPs however contended that as a Companies Act was enacted in 1996, the government could not propose a bill under the same name.
MP Abdulla Yameen, who served as Trade Minister and chairman of the State Trading Organisation (STO) under the previous government, objected to a provision stipulating that the minimum capital required to register a company would be Rf2,000.
With the country’s level of development and an annual budget in excess of Rf12 billion, said Yameen, the figure was too low especially if directors’ and shareholders’ liability would be limited.
“The bill also proposes the creation of companies for a particular project. For a particular period,” he continued. “Private companies or limited liability companies are not formed for certain periods. They exist for perpetuity […] Therefore you cannot create a company to reclaim land in Gulhifalhu or a company for a three-year project.”
Moreover, Yameen added, the proposed law would give legal discretion to the registrar of companies or an official appointed by the President to deny requests for company registration if it is believed to pose a threat to national security.
“However, under the existing laws in the Maldives, a court of law shall determine that national security is endangered,” he said. “It is not something a registrar, a single person, could decide.”
Granting such discretion to a single state official, including the power to dissolve companies if it is believed to be in the public interest, was “how things are done in uncivilised countries,” he said.
MP Mariya Ahmed Didi, former chairwoman of the Maldivian Democratic Party (MDP), meanwhile argued that the concept of limited liability was “the means that advanced nations used to reach modern development.”
“Because we are unfamiliar with this concept what happens is that people are reluctant to invest their money in a business,” she explained, adding that the law would ensure that shareholders would be liable to the company’s debt only to the extent of their shareholding.
Speaking to Minivan News today, MP Dr Abdulla Mausoom, deputy parliamentary group leader of the opposition Dhivehi Rayyithunge Party (DRP), said that the bill was framed to “give extra powers to the executive” and “open up the country to foreign businesses.”
Mausoom noted that there was an existing law that governed company formation and registration.
The DRP also objected to the government’s proposed amendments to the Immigration Act to grant resident visas to skilled expatriates as well as a bill to abolish existing foreign investment laws, Mausoom said.
“We voted against [the proposed company law] because we didn’t see anything positive in the bill,” he said.
Economic Development Minister Mahmoud Razi told Minivan News that the proposed company law was important to “level the playing field” and streamline business registration procedures to “make them simpler and more cohesive.”
As parliament had rejected the bill at the preliminary stage, said Razi, the government could not submit the bill again during the ongoing session.
“But we will consult with the legal people and stakeholders to propose the bill as amendments to the existing Company Act for the next session,” he said.
While it would have been “ideal” to pass all the component bills of the reform package on schedule, Razi continued, yesterday’s vote did not constitute a serious setback to the reform programme.
“It will have an impact, yes, but it will not be a very negative impact,” he said.