On 10 October 2024, the Ministry of Economic Development and Trade (“MED”) introduced a new regulation solely governing the various aspects of the governance of private companies in the Maldives. The Private Companies Regulation (Regulation No: R-99/2024) is issued by the MED under the authority granted by Section 247(a) of the Companies Act (Law No: 7/2023). The Registrar of Companies (“RoC”) is mandated with enforcement of the new rules.
This new Regulation was made effective from 10 October 2024 and aims to clarify the rules contained under the Companies Act 2023. For more information on the Act, please refer to our Companies Act Guide.
KEY CHANGES INTRODUCED
registration process
Private companies are required to either adopt:
- Model Articles of Association published by the RoC; or
- Customized Articles of Association provided that a Compliance Statement in the prescribed format is issued by a licensed lawyer.
timeframe for registering corporate changes
Changes to the following corporate information must be registered with the RoC within 7 days from such change:
- directors’ identity and contact information;
- shareholders identity (individuals and entities) and contact information;
- change in company categories (large, medium or small);
- Information registered with the Maldives Inland Revenue Authority or Maldives Pension Administration; or
- Service address.
Additionally, changes to the Memorandum of Association or Articles of Association are to be registered with the RoC within 30 days from such change.
minimum requirements for customized articles
Customized Articles of Association must contain the following mandatory information/statements:
- private companies cannot sell shares or bonds to the public;
- the number of shareholders is limited to 50;
- information on shareholder general meetings (calling, notice, voting rights and resolutions);
- information on the board of directors (composition, appointment/ election, removal, and calling of board meetings);
- directors powers, responsibilities and obligations;
- dividends policy;
- maintenance of financial statements and records;
- auditors appointment, removal, powers, responsibilities and obligations;
- dissolution; and
- whether the company can raise finances through debentures.
company names
The Regulation introduces the following new rules regarding company names.
- Schedule 2 of the Regulation includes a list of various characters which can be incorporated into a company name.
- Company names can be reserved pending registration for up to 30 days and such reservation can be extended up to a period of 7 days in 3 consecutive cycles provided the application for such extension is requested 5 days prior to the expiration of the reservation.
- The reservation of a company name does not grant the authority of a business to conduct any communications or operations under such name and such action is prohibited.
- Third parties may file an objection to a company name with the RoC where such name is similar to the party’s company or business name or where a company name conflicts with any rule contained in the Regulation or Companies Act. Additionally, where such a party is dissatisfied with the RoC’s decision regarding the objection, they are given an opportunity to file a claim in court requesting to nullify such decision.
- A company name board made from a sturdy material is required to be affixed to the registered and service address (where different) of a company in a location where persons entering and seeking services in such company can clearly see such board.
shareholder general meetings
The minimum prescribed notice period for calling of general meetings is as follows:
- 14 days’ notice is required to be given to shareholder when calling for the Annual General Meeting (“AGM”); and
- 7 days’ notice to be given to shareholders when calling for an Extraordinary General Meeting.
Minutes of general meetings or circular resolutions are to be:
- prepared and recorded within a period of 14 days from such meeting or resolution being passed; and
- are to be made accessible to all shareholders without a fee charged for such access and to be made accessible within a period of 14 days from a request made by a shareholder.
directors
Private companies can only appoint a director to its board provided that the director issue a Notarized Declaration stating that he/she:
- consents to the appointment as a director; and
- has not experienced any disqualification criteria as prescribed under the Regulations.
Additionally, directors are required to maintain a ‘register of directors’ and record prescribed information and any changes to the board in such a register. Any changes to the composition of the board is to be registered with the RoC within 15 days from such change.
company secretary
Considering that the Companies Act 2023 no longer mandates the appointment of a Company Secretary, the Regulation states that from the date the Regulation comes into force (10 October 2024), Company Secretary’s presently appointed under the previous Companies Act will be removed from the RoC’s records.
prescribed formats for various declarations
A key feature of the new Regulation is that it introduces formats for the following declarations:
- Director’s Annual Declaration, to be incorporated into the Annual Directors Report;
- Liquidation Notice, during liquidation proceedings; and
- Compliance Statement to be issued by a licensed lawyer along with Customized Articles of Association.
financial records
Companies are required to maintain their financial records in a safe and secure manner either physically or electronically for a period of 5 years from the date of their creation or to such period stated under any other law. These records are to be made available for viewing or inspection by the directors or members of the company.
ANNUAL FINANCIAL STATEMENTS
The Annual Financial Statements are to be prepared:
- as per the standards determined by the Institute of Chartered Accountants of the Maldives;
- in English language; and
- signed and approved by the board of directors as per company’s articles.
Except for companies that have already filed Annual Financial Statements with the Maldives Inland Revenue Authority under the Income Tax Act, all other private companies are to file their Annual Financial Statements with the RoC within 15 days of holding an AGM or within a period prescribed by the RoC.
DIRECTORS REPORT
In addition to prescribing the mandatory information to be contained in a Directors Report, the Regulation also states that the following information must be included in the Directors Report:
- where dividends are to be declared, a solvency test in the prescribed method;
- any additional information can be prescribed in a circular issued by the RoC;
- the Directors Annual Declaration signed by the directors in the prescribed format given.
The Directors Report is to be filed with the RoC within 15 days of holding an AGM or within a period prescribed by the RoC. The RoC may instruct a company to amend its Directors Report for compliance within a period 7 days from such notice and failure of which may impose penalties against the company and its Managing Director.
audit requirements
The Regulations provide the following clarity on audit requirements:
- Companies that are qualified to be audited under the Income Tax Act must file their annual Audit Reports with the RoC in the manner specified under the Regulation.
- However, those companies that have already filed their Audit Reports with the Maldives Inland Revenue Authority pursuant to the Income Tax Act are exempted from making a separate filing with the RoC.
- Private companies which are not qualified to be audited as per the Income Tax Act are required to file their annual income and expense statements with the RoC.
- The annual income and expenses statements are to be prepared in a standard mandated by the Institute of Chartered Accountants of the Maldives.
auditor’s report
Companies that are qualified to be audited under the Income Tax Act are required to appoint an auditor licensed by the Institute of Chartered Accountants of the Maldives at their AGM.
The report is to be prepared as per the standards prescribed by the Institute of Chartered Accountants of the Maldives. Additionally, Auditors are required to prepare a solvency test and assessment in the manner described in the Regulations.
