Central Bank of Myanmar updates criteria for approval of offshore loans
The Central Bank of Myanmar (“CBM”) has recently updated the criteria it will employ in considering applications for its approval to obtain an offshore loan (“Updated Criteria”). The CBM provides that, in accordance with the Foreign Exchange Management Regulations, Myanmar residents are unable to procure a foreign loan or conduct other types of borrowing from outside Myanmar without first obtaining the approval of the CBM.
Certain foreign investments require Myanmar Investment Commission (“MIC”) approval and successful investors are provided with an MIC permit (“MIC company”). Companies not requiring an MIC permit are only required to be registered with the Directorate of Investment and Company Administration (“non-MIC company”). The amendments to the Updated Criteria differentiate between the requirements for an MIC company and non-MIC companies.
The offshore loan criteria published by CBM previously stipulated that all companies seeking approval for an offshore loan must have at least US$500,000 in equity capital. Under the Updated Criteria, this requirement is retained for MIC companies but the equity capital requirement for non-MIC companies has been reduced from US$500,000 to US$50,000.
MIC companies are also required to stipulate in the application to CBM whether it has brought in to Myanmar at least 80% of its equity capital as approved by MIC.
The Updated Criteria now distinguishes between the maximum debt to equity ratio required for offshore loan applicants. Previously, the CBM required applicants to have a ratio of 3:1 to 4:1. The Updated Criteria now sets the debt to equity ratio for MIC companies at 4:1 and 3:1 for non-MIC companies.
