This article has been published in IBA Banking Law Committee Publications.

Insolvency laws in Myanmar

Myanmar insolvency legislation is interspersed with and revolves around the Rangoon Insolvency Act 1910 (‘Rangoon Act’), the Burma Insolvency Act 1920 (‘Burma Act’) and the Myanmar Companies Law 2017 (MCL). Like the majority of laws in the country, both the Rangoon Act and the Burma Act originated from Indian Laws and are collectively called ‘Insolvency Laws’. The Rangoon Act is applicable only in Yangon, whereas the Burma Act applies across the whole country.

Though the Insolvency Laws are primarily applicable to individuals, the MCL explicitly states that the rules and respective rights of secured and unsecured creditors pertaining to debts, valuation of annuities, future and contingent liabilities under the Insolvency Laws will also be applicable in the event of winding up proceedings of an insolvent company.[1]

A company, inter alia, may be wound up by the court, if it is ‘unable to pay its debts’. The MCL further elucidates the circumstances where a company will be deemed unable to pay its debts, being:

  • where a company has outstanding liabilities towards its creditors of a sum exceeding MMK[2] 250,000 that has remained unpaid for three weeks;
  • if an action or other process directed through the issuing of a decree or order from any court in favour of a creditor of the company is returned unsatisfied in whole or in part; or
  • considering the contingent and prospective liabilities of the company, it is proved to the satisfaction of the court that the company is unable to pay its debts.

Under the Burma Act, an insolvency petition may be presented by a creditor or by a debtor itself. If a petitioning creditor is a secured creditor, he or she may either relinquish security for the benefit of the other creditors or may give an estimated value of the security in his or her name. In the latter case, he or she may be admitted as a petitioning creditor to the extent of the balance of the debt due to him or her after deducting the estimated value and will rank pari passu with other unsecured creditors.[3]

A ‘secured creditor’ has been defined as a creditor of a company that holds security over the property of the company in respect of his or her claim. The definition has been kept wide enough to include a mortgage, charge or lien on the property of the company or any part thereof as security for a debt due to the secured creditor from the company.

It further states that the power of any unsecured creditor to realise or otherwise deal with his or her security (as he or she has been entitled to) will be unaffected by any order of the court adjudging a debtor as insolvent.[4]

Under the Burma Act, a secured creditor has three options:

  • he or she can realise the security interest and prove the balance, if any;
  • give up his or her security interest in favour of the other creditors and prove his or her whole debt; or
  • have his or her security interest valued and receive dividends on the balance after deduction of the value so assessed.

Section 51 (1) of the Burma Act states that where execution of a decree has been issued against the property of a debtor, no person shall be entitled to the benefit of the execution against the official assignee but this shall not affect the right of a secured creditor in respect of property against which a decree is executed.

The Burma Act further states the following order of priorities regarding distribution of the property of the insolvent:

  • all debts due to the government or to any local authority, accrued benefits owed to employees, taxes, debts
  • due to state banks and the Central Bank (all ranking equally in priority over other debts) should be paid first;
  • debts due under a registered mortgage of immoveable property should be paid second;
  • debts due under a registered fixed or floating charge should be paid third;
  • debts due to unsecured creditors (trade) should be paid fourth; and
  • the remainder (if any) to go to contributories (shareholders) should be paid last.

The Myanmar Insolvency Bill

Since the legislative framework is at a transformational stage in Myanmar, the government is considering the enactment of the Myanmar Insolvency Bill 2018 (MIB), thereby replacing the country’s antiquated Insolvency Laws. The MIB is currently under public consultation and is intended to regulate proceedings aimed at rescuing businesses in dire financial straits, in due alignment with international standards. The MIB aims to promote access to financial security and provide a streamlined set of rights for both debtors and creditors.

Under the MIB, companies that are financially distressed have recourse to following the generally acceptable route of liquidation or alternatively choosing to pursue a rehabilitation process, whereby the company can obtain a moratorium from legal proceedings. The rehabilitation plan will be overseen by an insolvency practitioner called the rehabilitation manager of the company.

This individual will take on the responsibility of formulating a rehabilitation plan for the company which will be approved by the creditors within three months of the appointment of such a rehabilitation manager. The primary objective of the rehabilitation plan is to rescue the company as a going concern. The rehabilitation proceedings may be initiated by the company itself, a secured creditor or the court.

In the absence of leave from the court or the written consent of the rehabilitation manager, the MIB restricts any steps that could be taken during the rescue stage to enforce or continue to enforce security over the company’s property. Furthermore, except for property subject to floating or fixed charges, the rehabilitation manager should not deal with property wherein any such dealings may prejudice the interest of the secured creditor in such property.

The MIB[5] allows a secured creditor, whose security is over all or substantially all of the company’s assets, to replace the appointed rehabilitation manager with an insolvency practitioner of his or her choice within five business days of receiving the notice sent by the appointed rehabilitation manager.

To further this line of thought, the law has proposed that it is the duty of the rehabilitation manager to investigate – in the event of a plan being proposed to the creditors – that it should be for the benefit of the secured creditors.[6] Even for removal of a rehabilitation manager, the MIB provides that such removal by a resolution carried at a duly convened creditors’ meeting can only apply with the consent of the secured creditor where that rehabilitation manager was appointed by him or her.[7]

During the rehabilitation process, if a written consent is given by the rehabilitation manager, the security of the company could be enforced by the secured creditor.[8] As we have seen, the huge control that the secured creditor may have over the rehabilitation manager could render the manager little more than a rubber stamp in the hands of the secured creditor to enforce security interests even during the rehabilitation process.

When the rehabilitation plan fails due to any of the circumstances mentioned in the MIB, there is a transition period from rehabilitation to the winding up of the insolvent companies. In such a situation, section 204 of the MIB provides that in cases of winding up an insolvent company, a secured creditor needs to prove the entirety or a part of the secured debt only to the extent provided as per the provision and in writing.

In such an event, the secured creditor surrenders security to the liquidator for the benefit of the creditors generally, the secured creditor is entitled to prove the entirety of the amount of the secured debt. When the secured creditor realises the security, he or she has the right to prove any balance due after deducting the realised net amount.

If the secured creditor has not realised or surrendered the security interest, the creditor may estimate its value and prove the balance due after deducting the value so estimated. The provision also allows a secured creditor to amend his or her proof of debt and if he or she has received less than the amount due, the balance amount would be duly paid to him or her.

Additionally, the MIB has also adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency (Insolvency Model Law). The MIB explicitly states that the Insolvency Model Law will have the force of law in Myanmar with the modifications stated therein.

As much as the proposed process involves an active role in efforts to revive financially distressed companies, the secured creditors have an overwhelming sense of security in terms of their interests. The MIB has proposed several rights and benefits to the secured creditors not only in the rehabilitation or rescue process of the company, but also when there is a transition from rehabilitation to winding up, followed by liquidation of the company.


[1] Section 390 of the MCL.
[2] Myanmar Kyat, the lawful currency of Myanmar.
[3] Section 9 (2) of the Burma Act.
[4] Section 28 (6) of the Burma Act.
[5] Myanmar Insolvency Bill 2018, section 48 (2).
[6] Myanmar Insolvency Bill, 2018, section 51.
[7] Myanmar Insolvency Bill, 2018, section 70.
[8] Myanmar Insolvency Bill, 2018, section 56

DFDL Contacts


Bhawna Bakshi

Legal Adviser

DFDL Myanmar


Rohan Bishayee

Junior Legal Adviser

DFDL Myanmar

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

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