Financial Crime World

New Companies Act in Maldives: A Comprehensive Guide

Introduction

The Maldivian parliament has recently passed a new Companies Act, aimed at strengthening corporate governance and transparency in the country’s business sector. The act comes into effect on January 1, 2024, and existing companies will be automatically recognized under the new law.

Key Highlights of the New Companies Act

  • Flexibility for Private Limited Companies: Private limited companies can register with a single shareholder and director, eliminating the need for nominee directors. However, companies must still appoint a full-time managing director who cannot be left vacant.
  • Beneficial Ownership Disclosure Required: Companies must disclose the ultimate beneficial owners (UBOs) and persons with significant control (PSCs). A UBO is defined as someone who owns or controls 25% of a company’s shares or has influence over its strategic decisions.
  • Shareholder Rights Strengthened: Shareholders have the right to examine the company’s register of shareholders and can pursue legal claims if the registry is not up-to-date.
  • Corporate Criminal Responsibility Introduced: Failure to accurately disclose required information or submitting false documents can result in severe penalties, including fines and imprisonment.

Requirements for Private Limited Companies

  • One locally resident director is required for all private limited companies, including foreign investment corporations (FICs).
  • FICs must also have a formally appointed local agent, while non-FICs are required to have an all-local board.

Compliance and Enforcement

  • Companies must inform the registrar about any changes in their PSCs or UBOs, failure to which can result in fines ranging from MVR 1,000 to MVR 5,000.
  • As businesses adapt to the new regulations, it is essential for them to pay close attention to the changes and comply with the outlined timelines and requirements.

Conclusion

The new Companies Act aims to promote transparency, accountability, and good corporate governance practices in Maldives. By understanding the key highlights of the new act, companies can ensure compliance and take advantage of the flexibility provided.