Bhutanese Law - Corporate Law

Corporate Law

Bhutan has regulated corporations since 1989, most recently under the Companies Act of 2000. Corporations and other legal entities are overseen by the Ministry of Trade and Industry and its various subsidiary agencies. Within the government of Bhutan, the Minister of Trade and Industry represents his ministry in the Lhengye Zhungtshog (Executive Cabinet).

Bhutanese law regulates incorporation, capital, debentures, shares and issuance of stock and securities, corporate management and accounting, directorships, mergers and acquisitions, and dissolution. Notably, licensure to commence business as a Bhutan corporation requires the discretionary approval of the Minister of Trade and Industry; imposes joint and several liability upon directors for ultra vires conduct; and prohibits unsecured debentures. The bulk of Bhutanese corporate law, however, is identical to those of modern nations, including statutory shareholder inspection rights, the dichotomy between "equity shares" (common) and preference shares, and solvency doubly defined as the ability to pay debts as they become due and as the excess of assets against debts. (Cf. general corporate and insolvency laws)

Since 2007, Bhutan has separately regulated civil society organizations ("CSOs"). These include associations, societies, foundations, charitable trusts, nonprofit organizations or other entities outside government that do not distribute any income or profits to their members, founders, donors, directors or trustees. Excluded from CSO status are trade unions, political parties, cooperatives, and religious organizations devoted primarily to religious worship. Rather, the latter group is separately regulated under the Religious Organizations Act of 2007, which aims to protect and preserve the spiritual heritage of Bhutan through providing for the registration and administration of religious organizations. To meet those goals, the Act creates the Chhoedey Lhentshog as the regulatory authority on religious organizations. This body regulates, monitors, and keeps records on all religious organizations in Bhutan, which are in turn required to register and maintain specified corporate formalities.