AXIS e-service

AXIS e-service: P R E V I O U S A R T I C L E S

Companies: The annual fee is due now!

All companies registered in the Maldives need to pay an annual fee of MRF 2000/- every year.

The fee is payable before March end. If the fee is not paid in time, the Registrar of Companies has the right first to suspend the business operation of the defaulting Company until settlement of the fee due. And if payment is not made by May end, then to apply to the Court to dissolve that Company.

Annual fee when paid in April is subject to a late payment fine of MRf 1000/-. If the payment is made in May it is subject to a late payment fine of MRF 2500/-.

This rule is the result of the second amendment to the Maldives Companies Act. The amendment came into effect on 7 July 2001. The Maldives Companies Act was introduced on 7 October 1996.

partnerships: have you paid your annual fee?

Every partnership operated under the Maldives Partnership Act is to pay MRf 2000/- by end of February each year.

A late payment fine of 300/- is charged if the fee is paid in March. And a late payment fine of MRF 1000/- is levied for fee paid in April.

If a partnership is in default even by April end, it is subject to suspension of business and dissolution by the Ministry of Trade.

The Partnership Act was introduced on 28 October 1996 to regulate creation, registration and operation of partnerships in the Maldives.

TOURISM LEASES: 21… 25 … 35 OR 50 YEARS?

All tourism lease agreements signed before 1999 were signed for a period of 21 years. And the lease period of 21 years was replaced by a longer period of 25 years on 16 May 1999. That was when the new Maldives Tourism Act came into being.

According to the Act, all lease agreements will be signed for a period of 25 years if the initial investment proposed to be made on the resort island is below US$10 million. The law also added 4 years across the board to all existing leases so that resort operators will get to enjoy the benefit of the new law.

Since this is provided directly by law, the rights of a resort operator to operate on the basis that he has those 4 years with him is quite legal and legitimate.

If the initial investment is above US$10 million, the government has the discretion to extend the lease period for 35 years maximum. Two things are important here. The investment shall be the “initial investment” and not any investment made for redevelopment purposes. 35 years is “not automatic” and is at the discretion of the government. That discretion is exercised or the actual lease period is determined based upon the “size of the investment”. This means that the larger the investment, the closer you will be to getting 35 years.

The Tourism Act also talks about a 50 year lease. You have to be a public company qualified to get a lease of 50 years according to the law.

If you are already a private company, then you may go public and apply for the extended period of the lease. The period of extension will entirely depend on when you become public and when you apply for the extension.

If you are an existing lessee and apply before May 2003 or if you are a new lessee under the new law and apply within the first 4 years of that lease, then you may get 25 years straight.

If you apply after 4 years have lapsed on the lease but before half the current lease period has expired, then you will get 20 years extra.

And if you apply after half the current lease period has expired, then you will only get an equivalent to the number of years remaining in that lease.

All resorts return to the government at the end of the lease.

FOREIGN DIVE SCHOOLS: WHAT RULES APPLY?

Some resorts have diving schools operated by foreign nationals in the following manner:

The resort operator will provide the premises. The foreign party would bring the necessary equipment. He would lease the operation. Often with two conditions: proceeds of the diving school would be shared between the resort and diving school. And an advance of a few hundred thousand dollars would be paid in the beginning to the resort. A percentage of what the resort gets from division of proceeds of the school will be adjusted against that advance in due time. The foreign party will run the school on his name and address overseas or on the name of a company he owns outside the Maldives. All that he imports would be brought in to the country under the resort’s name. The resort operator would clear from customs but the school operator would pay the duty. The base leader, dive master and other instructors and masters will be employed on the work permit of the resort while the salary would be paid by the school operator.

The law here is simple. According to the Tourism Act of 1999 no foreigner can engage in any tourism activity in the Maldives unless he has registered himself with the Ministry of Tourism and obtained permission to carry out that activity.

What is investment then? According to the Foreign Investment Act of 1979, an investment includes goods, money and services brought into the Maldives by foreigners with a view to conducting any business.

FOREIGN INVESTMENT IN THE MALDIVES

The fundamental rules on foreign investment in the Maldives are found in the Foreign Investments in Maldives Act of 1979.

Two main areas of investment can be understood from that Act. They are (1) tourism and (2) non tourism areas.

If the investment relates to tourism the focal point is the Ministry of Tourism. If it relates to a non tourism area, the relevant authority is the Foreign Investment Services Bureau (FISB) of the Ministry of Trade and Industries.

Under the Maldives Tourism Act of 1999, it is important that a foreign investor in the tourism sector is registered with the Ministry of Tourism. And if the investment relates to a non tourism area, it is important that the approval of the FISB is sought.

It can be said that in matters of tourism, the government has given a wide latitude of foreign investment opportunities. Put another way, a foreigner can generally invest in almost every area of the tourism industry. Foreigners are allowed to have direct lease of resort hotels from the government, or sublease from an existing lessee, or operate such a resort under a management or operation contract. Diving schools and water sports centres are also areas where there is tremendous foreign investment.

As far as non tourism areas are concerned, FISB is quite flexible and looks at each and every proposal for the merits involved in the grant of the project to a foreign investor. They do not have rigid and published categories reserved for locals and foreigners. However certain general guidelines are followed by FISB quite objectively. For example preference may be given to projects that would add on to the economic and social infrastructure of the Maldives; projects which cannot be commenced by locals due to the size of the investment or the technical expertise required of them; and projects which are based in outer atolls rather than the capital of the country; or projects whose products could be marketed locally as well thus reducing their imports.

FISB has clear cut guidelines and procedures for filing an application for foreign investment in that Bureau. You may wish to meet with the officials of FISB for an in depth understanding of their requirements as regards the project you have on mind. In the alternative, you may consult your lawyer for guidance.

BUYING & SELLING RESORTS IN THE MALDIVES

A resort in the Maldives is a self contained hotel on an otherwise uninhabited island.

There are two elements to a resort. The island, and the resort hotel on it.

The island on which the resort is situated is not private property. It is given on lease by the government. The government is represented in this lease by the Tourism Ministry. There is a comprehensive lease agreement that regulates the terms and conditions of the lease. The lease is generally granted for 25 years if the initial investment is below US$ 10 million. And if it is above US$ 10 million, then a longer period of lease is granted. It can go up to a maximum of 35 years depending on the size of the investment. When the life of the lease expires, the island returns to the government.

Then there is the resort. The infrastructure of the hotel, the development on the island, the buildings, the installations, the facilities, the amenities and other property that form part and parcel of the operation of the resort. They belong to the lessee. The government gives a value to that property and pays compensation to the lessee at the end of the lease when the resort returns to the government.

When a transfer occurs by way of sale or otherwise occurs, there is an effective transfer of both the lease rights to the island and the property rights to the hotel property.

No transfer is valid until and unless the Tourism Ministry has approved the transfer. The approval is given only after it has studied the terms of the transfer, and after it has satisfied itself that there are no existing dues or obligations on the part of the transferor or until it is proven that an agreement is reached between the transferor and the transferee on how to settle those dues and fulfill those obligations.

The transfer is deemed concluded when a deed of assignment of lease rights is signed amongst three parties: the transferor, the transferee and the Ministry of Tourism.

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