Are you looking to invest by acquiring shares of an existing business in the Maldives? Foreigners can engage in existing local businesses by acquiring ownership stakes, provided the business operates in a sector open to foreign investment. For detailed information on open sectors, refer to Maldives Foreign Direct Investment Policy(FDI Policy).
If you are planning to acquire shares in an existing business, you may engage experts familiar with Maldivian corporate law to navigate the complexities of share acquisitions. In the meantime, here are some key considerations.
Legal and Regulatory Compliance
Ensure the sector is open for foreign ownership and understand the foreign investment requirements relevant to the sector. Compliance with Maldivian laws is crucial for a seamless completion of the transaction.
Due Diligence
Ensure to assess the viability and risks associated with the investment. This can be achieved by performing a thorough due diligence on the target company and/or the seller (shareholder). Due diligence typically includes reviewing the target company’s (and/or the seller, as applicable) financial statements, legal obligations, market position, and any potential liabilities. Before proceeding with due diligence, a Non-Disclosure Agreement (NDA) may need to be signed.
Reaching an Understanding on Key Terms
Share acquisitions may involve extensive due diligence and negotiation before the parties can enter into a binding contract. To ensure that parties remain committed to negotiating with each other during this period, it may be beneficial to execute a Head of Terms or Letter of Intent. These documents typically outline the key commercial terms of the share acquisition such as estimated price, shareholding percentage, scope of exclusivity, and any other conditions attached to the investment.
Formalizing the Arrangement
Share acquisition arrangements are typically formalized by signing a Share Purchase Agreement. This binding agreement outlines the responsibilities, rights, and actions required to complete the share acquisition, ensuring all parties are committed to the terms agreed upon.
Completing the Acquisition
To complete the transfer of shares, relevant document sets are to be filed with the Ministry of Economic Development and Trade for due processing. These include the Ministry prescribed forms and supporting documents required for foreign investment approval and corporate approval for the proposed share transfer.
If shares are acquired from a local company (a company 100% owned by Maldivians), along with the completed Share Transfer Form, documents to obtain foreign investment approval must be submitted to the Ministry. For information on steps to obtain foreign investment approval, refer to our incorporation guide #2.
If shares are acquired from a foreign investment company (a company registered in Maldives with foreign shareholding), along with the completed Share Transfer Form, declarations and documents prescribed for the foreign investor in the FDI Policy must be submitted.
Entering a Shareholders’ Agreement to Protect Interests
While there is no statutory requirement for the shareholders of a company to enter into a Shareholders’ Agreement, it may be beneficial to do so depending on your business objectives, and the level of control and oversight that you wish to exercise over the company. A Shareholders’ Agreement is an arrangement among the shareholders regarding their rights, privileges and obligations, as well as how the company must be managed and run. Having a Shareholders’ Agreement can also help effectively manage issues that may arise by outlining how certain matters should be dealt with and how disputes should be resolved. Typically, a Shareholders’ Agreement is entered into by the shareholders and the company, ensuring that the company is also bound by the arrangements made between the shareholders.
Navigating the complexities of investing in existing businesses in the Maldives can be challenging. Contact RCo Lawyers to ensure a smooth and successful share acquisition. Our experts are here to help you every step of the way.