Golden Land Holdings: Related-Party Lease and Minority Shareholder Remedies
Golden Land Holdings Co. Ltd is a family-owned Myanmar company with seven directors. The managing director, U Aung, owns 40% of the shares; his brother owns 15%; an institutional investor owns 20%; the remaining 25% is held by other family members. In February 2025, the board approved a 10-year lease of a warehouse from a company wholly owned by U Aung's brother. The rent is MMK 120 million per year, about 30% above the rent for comparable warehouses in the area. U Aung did not disclose his brother's ownership before the vote, and he voted in favour. The lease was approved by four of the seven directors; two directors were absent, and one abstained after the meeting had started. The institutional investor has just learned of the lease and has written to the board demanding cancellation and an independent review. The company has no audit committee and does not circulate board papers in advance.
1. Identify the corporate governance and legal issues raised by the lease approval under the Myanmar Companies Law 2017.
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The lease raises a clear conflict of interest. Under the Myanmar Companies Law 2017, directors owe duties of good faith, care and skill, and must avoid conflicts. A director who is interested in a transaction must disclose the nature and extent of the interest to the board, and should not vote on the transaction. U Aung did not disclose his brother's ownership and voted in favour. The lease is a related-party transaction; it should have been approved by disinterested directors after independent review, and disclosed to shareholders. The 30% premium over comparable rent suggests the terms may not be at arm's length. The absence of an audit committee and the failure to circulate board papers in advance weaken the governance process. The abstention by one director after the meeting started does not cure the defect. The transaction may be voidable, and the directors may be liable for any loss.
2. Recommend the process the board should now follow, including independent review and disclosure.
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The board should suspend the lease pending review. It should appoint a committee of independent, disinterested directors, with legal and valuation advisers, to obtain an independent fair rent assessment and compare the terms with market. The committee should review U Aung's disclosure, board minutes, and the negotiation process. The board should disclose the conflict, the review findings, and any corrective action to shareholders in the next general meeting. If the lease is above market, the board should renegotiate or terminate it and recover any excess payments. Going forward, the company should adopt a related-party transaction policy, require annual conflict declarations, establish an audit committee or independent review body, and circulate board papers at least seven days before meetings. All decisions should be minuted.
3. Advise the institutional investor on the remedies available if the board does not act.
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If the board does not act, the institutional investor can requisition a general meeting to consider the lease and board conduct. It can also seek a court order under the Myanmar Companies Law, including a derivative action on behalf of the company against the directors for breach of duty, or an oppression remedy if the affairs of the company are conducted in a manner oppressive to minority shareholders. It may apply for an injunction to restrain further payments under the lease and request an independent investigation. The investor should preserve evidence, write to the board setting out the breaches, and consider complaining to the regulator if disclosure obligations are breached. Legal advice should be obtained before litigation.