Demonstrating Financial Capacity in Foreign Investments
Published on February 18, 2025 | Foreign Investments
The Government of Maldives with the implementation of the new Foreign Investment Act (Law No.: 11/2024) have mandated improved requirements particularly in the area on demonstrating financial capacity of foreign investors seeking to establish their investments in the Maldives. Prior to the enactment of this Act, the Ministry of Economic Development and Trade (the ‘Ministry’) accepted a financial credibility letter issued by foreign investors’ bank or financial institution as evidence for the financial capacity of the investor. The Ministry has now discontinued this practice and foreign investors are required to submit more concrete documents to demonstrate their financial capacity. As per Section 6 of the Foreign Investment Act, foreign investors prior to the establishment of their investments are required to obtain foreign investment approval from the Ministry.
The law recognizes foreign nationals, foreign companies and partnerships either owned completely by foreigners or joint ventures with both foreign and local shareholding as eligible parties to invest in the Maldives. It further recognizes businesses registered in the Maldives either as a partnership registered by foreign nationals or entities, companies with foreign shareholdings and companies re-registered in the Maldives. The routes available for foreign investors when seeking approval are categorized into an automatic route and a Government route. Foreign investors are granted automatic approval for their application if it reflects a commitment to meet the investment requirement or investment threshold as per the Foreign Direct Investment Policy during the first 5 (Five) years and if the applicant meets the shareholding percentage reflected in the Policy. In the event a foreign investor seeks approval in a sector which is considered sensitive by the Government of the Maldives, then Government approval instead of automatic approval is given after consulting with the relevant stakeholder agencies concerned with the proposed sector or industry.
Foreign investors, prior to establishing their investments must first obtain approval either from the automatic or Government route. Furthermore, foreign investment companies already registered in the Maldives must obtain approval if they were to engage in new business activities apart from and in addition to what has already been approved by the Government. If a new foreign individual or entity wishes to acquire or purchase shares in an existing foreign investment company, they must obtain the approval from the Ministry as well.
Foreign investors are required to submit the duly executed foreign investment or foreign contractor form based on the sector they seek to engage in along with the supporting documents. While the nature of supporting documents required for the foreign investment approval process differs from sector to sector, this article focuses on the documents required to demonstrate financial capacity and the ability to mobilize capital for the investment, which are required regardless of the sector or route. The foreign investor is required to demonstrate their capability to raise equity or debt for the intended investment. They are further required to provide details of the key components of the investment and provide evidence to the fact. The documents the Ministry accepts depends on whether foreign investor is injecting equity or raising debt to finance their investment in the Maldives. Provided below are the details of the commonly accepted documents by the Ministry.
Documents to Demonstrate Financial Capacity
Foreign investors may provide any one of these documents to demonstrate their capacity to contribute equity for their investments.
| Document | Description |
|---|---|
| Bank Statements (last 6-12 months) | Foreign investors may submit their bank statements to establish the availability of funds to establish their investments. |
| Audited Financial Statements (last 3-5 years) | Audited financial statements may be submitted to demonstrate the financial health, profitability and net worth of the foreign investor. |
| Net Worth Statement | A personal net worth statements in the case of foreign individuals and a corporate net worth statement in the case of foreign entities detailing assets, liabilities and overall net worth of the foreign investor certified by an auditor may be submitted to demonstrate financial capacity. |
| Proof of Liquid Assets | Foreign investors may submit evidence of readily accessible cash such as deposits, treasury bills or other short-term investments. |
| Tax Returns (last 3-5 years) | Tax returns may be submitted to demonstrate stable income and financial stability of the foreign investor. |
| Proof of Equity Contribution | Foreign investors may submit supporting documents which demonstrates the investors own capital already committed to the project. |
Documents to Demonstrate the Ability to Mobilize Capital for the Investment
In the case of debt financing the investment, foreign investors may submit any one of the following documents.
| Document | Description |
|---|---|
| Letters of Intent (LOI) from Lenders or Investors | Foreign investors may submit formal documents from banks, financial institutions, or financially capable partners indicating willingness to fund the investment. |
| Term Sheets / Indicative Offer Letters | Documents from prospective banks or lenders with key funding terms and conditions may be submitted to demonstrate the capital mobilization ability of the investor. |
| Commitment Letters | Foreign investors may submit formal, binding commitment letter from financial institutions and/or investment funds to provide funding for the investment. |
| Loan Approval Letters / Pre-Approved Loan Facilities | Documents evidencing the access to ready credit facilities or pre-approved loans may be submitted by the investor. |
| Equity Subscription Agreements | Agreements with equity investors, venture capital firms, private equity funds or mutual funds etc may be submitted to demonstrate the ability to mobilize capital for the investment. |
| Capital-Raising Track Record | Documents evidencing successful fundraising for previous investments or ventures may be submitted by the investor. |
| Proof of Relationships with Investment Banks, Lenders or Institutional Investors | Foreign investors may submit documents of existing partnerships or relationships detailing the interest to fund the proposed investment. |
| Crowdfunding or Public Offering Documentation | Foreign investors may submit proof of campaign preparation or documents depicting past success in the events where funds are raised via public offerings or crowdfunding. |
The documents discussed above are not an exhaustive list of documents the Ministry accepts as proof of financial capacity and alternative documents may be accepted at the discretion of the Ministry.
This novel approach by the Ministry ensures that foreign investors are able to submit varying documents depending on the route undertaken to finance their investments in the Maldives. It further enables the Ministry to better analyze the capacity of foreign investors seeking to engage in the Maldives.
For more information, please contact:
Associate Attorney, Ms. Maleesha Hassan
Email: [email protected]