GUIDE ON THE MALDIVES

COMPANIES ACT 2023

IN RELATION TO PRIVATE
AND FOREIGN INVESTMENT
COMPANIES
TABLE OF CONTENTS

Executive Summary 3

INTRODUCTION 4

PRIVATE COMPANIES 4

FOREIGN INVESTMENT COMPANIES 5

ANNUAL REQUIREMENTS 6

RECORDS MAINTENANCE 7

BOARD OF DIRECTORS 8

SHAREHOLDERS 9

CORPORATE REQUIREMENTS 10

Company Secretary 10

Company Seal 10

Service Address 10

Model Articles 11

Company Name 11

SHARE TRANSFERS 12

CALL ON SHARES 13

SECURED TRANSACTIONS 13

INACTIVE COMPANIES 14

REGULATORY FEES 14

NON-COMPLIANCE PENALTIES 15

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EXECUTIVE SUMMARY
This guide highlights the significant changes brought about
the Companies Act 2023, which replaces the previous Maldives
Company Act of 1996. The following summary presents essential
changes applicable under the new Act to private and foreign
investment companies in the Maldives.

PRIVATE COMPANIES SHAREHOLDERS

The Act introduces pivotal changes enabling the The Act provides clarity on AGM requirements,
formation of single shareholder companies with proxies, voting procedures, and resolutions.
simplified management structures. It removes
the obligation to maintain a company secretary SHARE TRANSFERS
and company seal. Also, offers the flexibility to The introduced changes grant the right of first
designate a service address and opt for model offer to existing shareholders and clarify the
articles of association. rules relating to registering share transfers.

FOREIGN INVESTMENT COMPANIES CALL ON SHARES

The Act classifies companies with foreign The Act clarifies rules and procedures for calling
shareholding as ‘foreign investment on unpaid shares and the forfeiture of shares.
companies’, detailing specific requirements for
their incorporation and operation. SECURED TRANSACTIONS
The Act introduces a framework for companies
ANNUAL REQUIREMENTS to raise funds using shares and assets as
The Act retains previous mandates for AGMs, security, necessitating registration of charges.
Directors Report, Annual Accounts, Audits
(if applicable) while modernizing relevant INACTIVE COMPANIES
provisions. The Act specifies the circumstances under
which the Registrar of Companies can
RECORDS MAINTENANCE designate a company inactive as and outlines
Companies are mandated to maintain various the subsequent consequences.
registries, including those for members,
directors, charges, significant beneficial REGULATORY FEES
owners, and more. The Act replaces the annual fee structure with
a service-based fee for various regulatory
BOARD OF DIRECTORS services.
The Act permits the appointment of
representative directors, outlines minimum NON-COMPLIANCE PENALTIES
eligibility requirements, defines rules on Companies, directors, managing directors, third
appointment and removal, stipulates directors’ parties are subjected to reporting obligations
obligations and fiduciary duties, and mandates and compliance with Registrar’s directives.
a minimum number of annual meetings. Non-compliance results in penalty fines.

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 INTRODUCTION
The new Companies Act (Law No: 7/2023) (“New Companies Act”) was published on 27th
December 2023 and became effective on 1st January 2024. This new law replaces the previous
Maldives Company Act of 1996. Noteworthy changes introduced by the New Companies
Act encompass simplified procedures for company registration, the introduction of single
shareholder companies, abolition of the company annual fee and replacing it with regulatory
service fees, and clarification of fundamental concepts pertaining to shares, membership,
directorship, derivative actions, and the dissolution of companies.

Existing companies are given a period of one year from the effective date to comply with the
new rules, that is by 31st December 2024.

Further, regulations to be formulated under the New Companies Act are to be published
within 90 days from the effective date of the new law. These regulations will provide detailed
guidance and clarity on the rules prescribed under the new law.

In this guide we delve into the new rules outlined in the New Companies Act pertaining to
private companies including locally owned and foreign investment companies.

PRIVATE COMPANIES
While previously at least 2 shareholders were required to form a private company, under the
New Companies Act a private company can be registered with a single shareholder, holding a
single share, and managed by a single director.

The maximum number of members allowed in a private company remains the same as in the
previous Act, which is 50. Individuals, the Government, or legal entities (such as companies,
partnerships, state institutions, local councils, or registered associations) are eligible to hold
membership (become shareholders) in private companies.

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FOREIGN INVESTMENT COMPANIES
The New Companies Act classifies any company (whether private or public) with foreign
shareholding as ‘foreign investment companies’. Foreign investment companies are either locally
incorporated companies with foreign shareholding or re-registered foreign entities (whether legal
entities, charities, foundations, or associations incorporated abroad).

A foreigner, or a company or partnership with foreign shareholding can hold shares in a locally
incorporated company after obtaining foreign investment approval as per the Foreign Investment
Act and policies.

An entity incorporated abroad can be incorporated in the Maldives by re-registering it. To re-register,
the foreign entity must first obtain Foreign Investment Approval as per the Foreign Investment Act
and policies. Once a foreign entity is re-registered, they are typically called re-registered companies.

Re-registered companies must appoint a local agent in the Maldives. The local agent must be of
18 years of age and ordinarily resident in the Maldives, and if declared bankrupt or insolvent or
convicted for fraud, dishonesty or money laundering offense, 5 years must have elapsed from such
an event. The local agent’s primary role is to ensure compliance with the New Companies Act and is
personally accountable for non-compliance. Unless the re-registered company specifies otherwise,
the local agent is the focal point to receive correspondence from the Registrar of Companies
pertaining to the re-registered company.

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ANNUAL REQUIREMENTS
All companies are required to carry out the following compliance
requirements on an annual basis, failure of which, may become liable to
penalties under the New Companies Act:

Similar to the previous law, an AGM of

Annual General Meeting (AGM) shareholders is to be held annually. Refer to the
section on AGM’s in this guide.

A company’s Directors Report is to be filed with

the Registrar of Companies within 15 days of
Directors Report
holding a company’s AGM or within a period
prescribed by the Registrar.

A company’s Annual Accounts is to be filed with

the Registrar of Companies within 15 days of
Annual Accounts
holding a company’s AGM or within a period
prescribed by the Registrar.

An audit report is to be prepared by a licensed

external auditor and is to be presented at the
Audit (for applicable companies) AGM. Regulations to be formulated under the New
Companies Act will specify the company eligibility
criteria for audit requirements

At least 4 board meetings must be held annually.

Board Meetings Board meetings can be convened online or by

using electronic means in accordance with Articles
of Association.

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RECORDS MAINTENANCE
The New Companies Act requires each company to maintain the
following records.

Companies must maintain a members’ registry. It must include the

following information of all those who were shareholders within the
previous 5 years:

• name, permanent address, and service address of the shareholder

• national identity card number or passport number and nationality, or
if the shareholder is an entity, it’s registration number
• date on which the shareholder was registered on the members’
Members’ registry registry
• number of shares allotted to the shareholder, and if a series number
is given to each share, the serial numbers
• class of shares
• amount paid on shares or amount the company acknowledges to
have been paid
• date on which the shareholder was removed from the members’
registry

Companies must maintain a directors’ registry. It must include the

following information of all directors appointed within the previous 5
years:

• name, permanent address, and service address of the director

Directors’ registry
• national identity card number or passport number and nationality
• date of appointment
• if the director is a shareholder, details of it
• date of removal or resignation

Companies are required to maintain financial statements in a manner

Financial records
that a true and fair audit can be undertaken.

Companies are required to maintain all accounting records for a period

Accounting records of 5 years and such records must be made available for inspection by
directors and members (shareholders).

To be maintained in accordance with the regulations to be enacted

Registry of charges
under the New Companies Act.

If a shareholder is an entity, companies are required to maintain the

Information of ultimate beneficial
information of ultimate beneficial owners in the manner prescribed
owners
under the regulations to be enacted under the New Companies Act.

Significant beneficial owners are those individuals who hold at least

25% shares in the company, holds the right to receive at least 25% of
the dividends disbursed in a financial year or has the right to exert
Registry of significant beneficial owners significant influence or control over the company.

Companies are required to maintain a registry of significant beneficial

owners and share such information with the Registrar of Companies.

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BOARD OF DIRECTORS
MINIMUM REQUIREMENT APPOINTMENT
All private companies must have at least 1 director. Directors must be appointed by members’ general
This is a change from the previous requirement of 2 meeting or resolution. If the Articles of Association
directors. gives the power to a specific shareholder to appoint
a director(s), then by the resolution of such a
MANDATORY REQUIREMENTS shareholder a director(s) can be appointed.
All private companies must appoint a managing
director. At least 1 director must be ordinarily resident The composition of the board of directors must be
in the Maldives. determined by the Articles of Association.
Natural persons who are shareholders can now
NATIONALITY appoint individuals other than themselves as
Except for foreign investment companies, all private representative directors, which was previously
companies must appoint Maldivians as directors. permissible only for entity shareholders. This
Foreign investment companies can have all foreigners change paves the way for shareholders to appoint
as directors. professionals from various backgrounds to the
position of directors.
ELIGIBILITY REMOVAL
A person appointed as a director: Directors must be removed in accordance with the
• of a 100 % locally owned private company, must be Articles of Association.
a Maldivian national; Additionally, director’s position is considered vacant
• must be 18 years of age; if a director resigns, is removed from the position
in accordance with the Articles of Association,
• must not be the company’s auditor or liquidator; if a director is disqualified, upon death, or if the
• must not be barred from holding the position of a position becomes vacant in accordance with the
directorship by law or by an agreement; and company’s constitution (Articles of Association and
Memorandum of Association).
• must not fall within a disqualifying criterion stated
below. FREQUENCY OF MEETINGS
Companies must hold at least 4 board meetings
DISQUALIFICATION within a year. Board meetings can be convened online
The Registrar of Companies holds the authority to or by using any other electronic means in accordance
disqualify a director if any of the following criteria are with Articles of Association.
met.
QUORUM OF MEETINGS
• if declared bankrupt or insolvent (disqualification The quorum of board meetings is more than 50% of
applies for 5 years); the existing directors of the company. A company
• if convicted of dishonesty, fraud or money may decide a higher limit for quorum in its Articles of
laundering offense (disqualification applies for 5 Association.
years); Companies that have a single director are exempt
• if directors have unpaid fines imposed under the from this quorum requirement.
New Companies Act;
VOTING
• serves as the company’s auditor or liquidator; or Each director present in a board meeting can cast one
• is barred from holding the position of a director by vote.
law or agreement.
RESOLUTIONS
Existing companies have a grace period of 1 year from Resolutions of the board of directors must be passed
1 January 2024 onwards to ensure compliance with by majority vote. However, a company may prescribe
director’s qualification requirements. a different minimum threshold in its Articles of
Association.
Circular resolutions can be passed by a majority
of more than 50% of existing directors. However,
a company may prescribe a different minimum
threshold in its Articles of Association.
The New Companies Act enables resolutions to be
passed by using electronic means.

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SHAREHOLDERS
The New Companies Act introduced the following EXTRAORDINARY GENERAL
new changes: MEETINGS (EGM)
Directors of a private company with more than
• Single shareholder companies; and
a single shareholder are required to arrange an
• Where a shareholder is an entity, a registry extraordinary general meeting of its members on
is to be maintained containing information request by shareholder(s) who hold more than
of the beneficial owners and significant 10% of shares in the company.
beneficial owners (holding at least 25%
shares). Refer to the records maintenance PROXY APPOINTMENT
section of this guide for more information. Every shareholder is entitled to appoint a proxy
in their place for attendance to general meetings
Additionally, previous rules on shareholder’s and such a proxy is entitled to speak on behalf of
liability are carried forward in the Act. the shareholder and vote on their behalf.
Shareholders are liable only to the amount if
any is unpaid on the shares acquired by the ELECTRONIC MEETINGS
shareholder from the date the shareholder has General meetings may be held by electronic
acquired such share(s). means provided the quorum required for such
meetings consent to such electronic means.
Where a previous shareholder has failed to
fulfil any obligation related to share(s) held in QUORUM
a company, and subsequently such shares are The quorum of a general meeting is
forfeited, then the unfulfilled liability in respect shareholder(s) representing more than 50% of
of such shares will remain with the previous the shares in a private company.
shareholder. Refer to the call on shares section of
this guide for more information. VOTING
Voting at a general meeting is to be by a poll
ANNUAL GENERAL MEETINGS (AGM) where each shareholder has one vote for each
All companies must hold an AGM of their share held in the company. The articles of
members. association can also prescribe voting by a show
of hands or by electronic means.
Where a company has a single shareholder, such
a company is not required to hold an AGM of its
members. However, where a company has more
CIRCULAR RESOLUTIONS
Ordinary resolutions of the members can be
than a single shareholder, such a company is
passed in circulation without the need for
required to hold an AGM of its members.
a physical meeting provided it is passed by
For a single shareholder company, a resolution shareholders representing more than 50% of the
passing the required annual documents shares in a company.
(directors report, annual accounts, audit
Special resolutions of the members can be
report (where applicable) signed by such single
passed in circulation without the need for
shareholder and sent to the Company will be
a physical meeting provided it is passed by
considered as having fulfilled the requirement
shareholders representing more than 75% of
of annual approval by such shareholder.
the shares in a company or a higher percentage
Requirements applicable to companies with
if it is provided for in a company’s articles of
more than a single shareholder such as,
association.
requirement for prior written notice, quorum,
voting rights and proxy rights will not be
applicable for single shareholding companies.

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CORPORATE REQUIREMENTS
COMPANY SECRETARY COMPANY SEAL
Under the New Companies Act, it is no longer Companies are no longer required to maintain
mandatory for private companies to appoint a a company seal. However, if a company opts
company secretary. When a private company to maintain one, the seal must be registered in
chooses to appoint a company secretary, they accordance with the regulations enacted under
can appoint a natural person or a professional the New Companies Act. A registration fee of
services firm. MVR 100.00 is required for the company seal.

• For natural persons to be appointed as a company Companies that maintain a seal have the
secretary, such person:
option to execute various company documents
• must be 18 years of age; with the signature of one authorized person,
• must be ordinarily resident in the Maldives. accompanied by the affixation of the company
• must not be a director the company
seal on those documents. Alternatively, company
documents can be executed with the signature
• must not be the company’s auditor or liquidator
of two authorized persons. They can also be
• must not be barred from holding the position of a authenticated by the managing director, or by
directorship by law or by an agreement; and a director of the company in the presence of a
• must not fall within a disqualifying criterion applicable witness, with the affixation of signatures from
for directors. both the witness and the director.
For professional service firms, they must be
registered in the Maldives and can be either law SERVICE ADDRESS
firm, accountancy, or audit firm. However, such Under the New Companies Act, companies now
firm should not have declared bankruptcy or have the option to maintain a service address in
resolved to dissolve. addition to the registered address. However, re-
registered companies are required to maintain a
RESPONSIBILITIES OF A COMPANY service address in the Maldives.
SECRETARY INCLUDE: When a service address is registered with the
• ensuring a company complies with the rules of the New Registrar of Companies, all correspondence
Companies Act, regulations made thereunder and the from the Registrar and third parties will be
company’s memorandum and articles of association; directed to the company’s service address.
• ensuring the directors are made aware of their Companies can designate the service address
responsibilities under the law; to be the address of a firm (law firm, audit
• arranging and managing board meetings and general or accountancy firm) appointed by them. In
meetings; the absence of a registered service address, a
• preparation and maintenance of board and shareholder company’s registered address will be considered
minutes and resolutions; the service address for the purpose of sending
• preparation of regulatory documentation to evidence correspondence to the company.
board and shareholder resolutions;
• preparation of all regulatory filings to be made to the
Registrar of Companies;
• liaising with the Registrar of Companies on regulatory
matters; and
• preparation and maintenance of all registries and
relevant documents mandated under the law.

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MODEL ARTICLES COMPANY NAME
The New Companies Act envisions model articles The New Companies Act provides a
of association (“Model Articles”) tailored for comprehensive set of rules on the use of the
private companies. These Model Articles are company’s name. Previously, a similar but brief
designed to offer standard default provisions set of rules applied in this regard under the
governing the structure and operation of former Company’s Regulation.
a company. The Registrar of Companies is
mandated under the Act to enact the Model Companies must now disclose or use their
Articles. complete registered name on the following:

When the Model Articles are enacted by the • official letters or documents of the company;
Registrar of Companies, existing companies • notices issued by the company or official company
can adopt them by passing a special resolution. publications;
New companies, on the other hand, have the • bill of exchange, promissory note, endorsement, or any
option to adopt the Model Articles by explicitly other documents executed by the company that which
cheque, money, or goods are released;
stating their adoption in the Memorandum of
Association. • invoices, receipts, letters of credit;
• all documents issued by the company that create legal
liabilities on the company;
• company seal;
• at the company’s office in a publicly visible manner in
accordance with the regulations to be enacted under
the New Companies Act.

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SHARE TRANSFERS
The New Companies Act modernizes the share transfer provisions in the previous Act.
The new guidelines are stated below.

Right of first offer Unless otherwise stated in the company’s Articles of Association, existing
shareholders must be granted the right of first offer before shares can be
transferred to a third party.

Board of directors’ approval Under the previous law, share transfers were subject to the approval of
the board of directors. However, under the New Companies Act, no such
approval is required, and the board of directors’ functions remains an
administrative one in registering the share transfer.

Process To transfer shares, parties must complete a share transfer document that
contains information relating to the transferee and transferor, details of
the shares transferred, share consideration, and any other information
stated in the regulations to be enacted under the New Companies Act.

The executed share transfer document must be sent to the company’s

service address.

When share transfer is deemed to be Unless otherwise stated in the company’s Articles of Association, share
completed transfer is deemed to be completed at the time the transfer is registered in
the company’s records and the change in membership is registered in the
members’ registry.

Registration of the share transfer Within 30 days of receiving the share transfer document, the board of
directors must register the share transfer in the company’s records and
register the change in membership in the members’ registry accordingly.

Registration of the share transfer can be refused if the transfer is

prohibited under the Articles of Association, the transferee has any unpaid
money or debt to the company, including their share subscription, or the
share transfer was carried out without granting the right of first offer to
the existing members.

The decision relating to the registration of the share transfer must be

communicated to both the transferee and transferor within 3 days of the
decision along with a copy of the decision citing reasons.

A decision not to register the share transfer can be challenged at court.

If the court finds such a decision was made in violation of the company’s
Articles of Association and regulations enacted under the New Companies
Act, the court holds the power to quash the decision and order to register
the share transfer.

Notification of the share transfer to Companies must notify the Registrar of Companies of any changes made
the Registrar of Companies to the membership registry pursuant to transfer of shares within 15 days of
such change.

Failure to notify the Registrar does not invalidate the share transfer. If the
shares were transferred in accordance with the New Companies Act and
the Articles of Association, the share transfer and the respective changes
to the membership registry will remain valid.

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CALL ON SHARES
In contrast to the previous Act, the New Companies Act provides clarity on the rules concerning the
call on shares. A call is a demand made by the company on its shareholders to pay in whole or part
the unpaid amount on shares held by them within a specific duration. When shares are allotted or
sold for cash consideration, the board of directors is empowered to make a call on shares. However,
if the terms of the allotment specify the manner and date by which the consideration must be paid,
the board of directors is not obligated to make a separate call.

Should a call remain unpaid after its due date, the New Companies Act obligates the board of
directors to issue a statutory forfeiture notice to the defaulting shareholder. The notice must allow a
14-day period for the shareholder to settle their share consideration and explicitly state that failure
to comply will result in the forfeiture of the shares corresponding to the notice.

Forfeited shares must be recorded in the members’ registry and the New Companies Act states
that such records shall constitute evidence of forfeiture. If all the shares held by a shareholder are
forfeited, the shareholder must be removed from the company’s members’ registry as well. Even if a
shareholder is removed due to forfeiture of shares, they will not be relieved from their liability to pay
their share consideration to the company. Forfeited shares are deemed to be treated as unallotted
shares of the company’s share capital.

SECURED TRANSACTIONS
The New Companies Act paves way for companies to raise funds by introducing a secured
transactions framework concerning shares and assets of the company. Charges created over the
following assets of the company are required to be registered with the Registrar of Companies within
30 days of the creation of such charge:

• debentures

• charge over unpaid share capital;

• share charge over shares held in a subsidiary company;

• floating charge over company’s asset or undertaking; and

• any other charge prescribed under the regulations to be enacted under the New Companies Act.

• Additionally, companies are required to maintain a separate registry of charges.

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INACTIVE COMPANIES
The Registrar of Companies has the power to declare a company as inactive where a company fails
to:

• have the minimum number of directors in its board for a period of more than 3 consecutive
months;

• file the newly prescribed declaration as part of its Directors Report for a period of more than 1
year;

• file its annual filings to the Registrar for a period of more than 2 consecutive months; or

• settle any financial penalties imposed for non-compliance for a period of more than 1 year.

REGULATORY FEES
The New Companies Act has abolished the payment of the company annual fee of MVR 2000.00 and
replaced it with the following regulatory service-based fees.

REGULATORY SERVICE FEE

Private company registration fee MVR 2000.00 (Maldivian Rufiyaa Two

Thousand)

Registration of changes to the memorandum or

articles of association

Registration of changes to the registered or

service address

Issuing copies of the memorandum or articles of

association to on request by shareholders

Registration of changes to the authorized

capital
MVR 100.00 (Maldivian Rufiyaa One Hundred)

Registration of changes to shareholders or

shares (share transfers)

Registration of changes to the managing

director, directors, or company secretary

Registration of the company seal

Reservation of company or business names and

extensions (7-day period)

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NON-COMPLIANCE
PENALTIES

OFFENSE OF NON-COMPLIANCE PENALTY FINE

Company for non-compliance of the prescribed MVR 2000.00 for each instance
new rules

Directors for non-compliance of the prescribed MVR 1000.00 in the first instance
new rules
MVR 2000.00 in the second instance
and/or
MVR 5000.00 for the third instance and
Managing Director for non-compliance of instances in excess
Annual Filings

Third parties for non-compliance of the MVR 1000.00 in the first instance
following matters:
MVR 2000.00 in the second instance
• Failure of the shareholder or the significant
beneficial owner to register their interests MVR 5000.00 for the third instance and
and any changes made; and instances in excess

• Failure of the liquidator to notice the

Registrar of their appointment within 7 days
from the date of appointment

Non-compliance of the Registrar of Companies MVR 1000.00 to MVR 100,000.00

directions

Misinformation, falsified records or hinderance Criminal penalties

of investigations by the Registrar of Companies

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CONTRIBUTORS

SHAFEEA RIZA SHYMA SHAMEEM

[email protected] [email protected]

Shafeea is the co-founder and Managing Partner Shyma provides legal advisory services at RCo
at RCo Lawyers. She specializes in corporate and Lawyers within the practice areas of corporate
financial services law, and focuses on corporate, law, foreign investment, tourism acquisitions
commercial, and financial services legal and commercial regulatory compliance matters.
advisory, drafting and dispute resolution. Her full Additionally, she provides corporate set up
profile is available at www.rco.attorney/firm. and support services to private and foreign
investment companies. Her full profile is
available at www.rco.attorney/firm.

ABOUT US
RCo Lawyers is a law firm registered under Riza & Co. LLP providing legal services in the areas of
corporate and commercial law since 2018.

We are a dynamic team of trusted legal advisors driven by our passion to find modern and holistic
solutions to corporate and commercial issues in the Maldives.

DISCLAIMER
All information contained in this publication is meant to serve as a guide and should not be considered as legal advice. Information
contained in this publication is current at the date of publication, that is 15 January 2024.

RIZA & CO.LLP

T: +960 7911744
E: [email protected]
W: www.rco.attorney

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