Introduction

The 6th amendment to the Grant of Rights Regulation (Regulation No: 2023/R-66) (“6th Amendment”) came into force on 12th February 2023. The amendment has been brought into effect to eliminate the requirement of gaining permission from the Ministry of Tourism (“Ministry”) for share transfers.

Grant of Rights Regulation

The Grant of Rights Regulation (Regulation No: 2010/R-14) (“Regulation”) came into force on 9th December 2010. The Regulation governs the ways in which transfers of leasehold rights over tourist resorts. The Regulation generally deals with resort subleases, lease transfers, mortgages, share transfers, strata-title based leases and hotel management agreements.

6th Amendment 

Previous position as per Regulation:

A leaseholder had to obtain prior written approval from the Ministry for a transfer of shares and submit this to the registrar of companies for effective registration. The leaseholder was also required to subsequently provide the Ministry with a copy of the endorsed share transfer form within 7 days.

New position as per 6th Amendment:

Both requirements for prior written approval as well as the subsequent submission of the endorsed share transfer form have been removed.

Commentary

We are aware of criticism in the market noting that the 6th Amendment conflicts with the Maldives Tourism Act (Law No: 2/99) (“Tourism Act”).

Strictly speaking, this criticism is misinformed. Previously, s.12 of the Tourism Act required a leaseholder to obtain the Ministry’s written approval prior to registering a share transfer. This requirement was removed in the 11th amendment to the Tourism Act, which makes this amendment to the Regulation appropriate.

This change, of course, removes one administrative step which in practical terms was not an arduous one in the first place. Perhaps this has been removed because pursuant to the Income Tax Act (“ITA”) 2019, a share transfer would require the leaseholder to file a tax return and settle taxes with Maldives Inland Revenue Authority. The process under the ITA is lengthy and consists of multiple steps. When both the ITA and the Tourism Act are compared, the administrative hurdles to register a share transfer under the ITA is more extensive.

Hence, despite the 6th Amendment, red tape that leaseholders are subject to is still substantial and lengthy.