Companies Act

Part 3 - Public Companies

The Maldives parliament has passed a new Companies Act 7/2023 (the “Act”) which has recently been assented to by the president. The law is set to replace the existing framework for company laws in Maldives and comes in force on 1 January2024.

Existing companies under the old law are automatically recognized and subject to the new law. Immediate action isn’t required, but certain actions outlined in the sections below must be taken within one year of the law coming into effect.

This memo series by S&A explores some of the key changes which has been brought by this Act. This memo series will be split up as follows with a separate memo for each of the following:

• Private Limited Companies.
• Foreign Investment Corporations.
• Public Companies.
• State Owned Entities; and
• Local Authority Companies.

Public Companies - Key Considerations

Multiple shareholders

Authorized to issue and sell securities to the public.

Explicitly identified as a public company in its constitutional documents

Liability

Shareholders are only liable for amounts due for subscribed but unpaid shares.

IPOs

A private company can become a public company by passing a special resolution; or submitting an application to the Registrar of Companies (ROC) and completing the registration process. Before submitting to the ROC, companies must register a company secretary as per upcoming regulations and pay the MVR 2000 registry fee.

The ROC application includes:

• a special resolution,
• amended constitutional documents approved by members; and
• a compliance statement (explained below).

Fulfilling the above shall result in an ROC-issued new registration certificate.

Company Secretary

Mandatory Requirements

If the company secretary is a person; 

• 18 years of age.
• Habitually resident in Maldives.
• Not a director of the company.
• Fulfills the requirements of a company director.

If the company secretary is a firm; 

• Law firm or accountancy firm or audit firm established in Maldives.
• Not involved in insolvency processes.

Compliance Statement

• Signed by lawyer or company secretary (not for private companies)
• Affirms compliance with Companies Act and regulations.
• Serves as prima facie proof of legal compliance.
• Template and requirements will be detailed in subsequent regulations

Conclusion

The recently enacted Companies Act maintains fundamental characteristics of public companies, emphasizing multiple shareholders and the ability to issue securities to the public.

Notably, the transformation from a private to a public entity continues to maintain a well-defined process, including a special resolution and amended documents with just the addition of a compliance statement.

The inclusion of company secretaries as firms, rather than solely individuals, codifies a position previously changed via an obscure circular.

The introduction of compliance statements adds a layer of assurance, streamlining adherence to legal requirements. Despite these changes, the essence of the previous public company laws endures, fostering continuity in the business landscape.