Current No. of listed companies

16 listed on the Malawi Stock Exchange (MSE)

Corporate Governance Code

The Malawi Code II as set out in the Schedule to the Companies (Corporate Governance) Regulations, 2016 – made under the Companies Act, 2013.

Exchange

Malawi Stock Exchange

Listing Rules 

Malawi Stock Exchange Listing Requirements

Principal legislation

Securities Act 2010

Companies Act 2013

Financial Services Act 2010

Exchange Control Act and Regulations

Credit reference Bureau Act

Public offers / disclosure regulations

Securities Act 2010

Regulatory body or bodies

Reserve Bank of Malawi

Malawi Stock Exchange

Credit Reference Bureau

Takeover / Merger regulations

Companies (Panel on Takeovers and Mergers) Rules made under the Companies Act.

Competition and Fair Trading Act and the Regulations made thereunder.

Malawi is also a Member State of COMESA and therefore subject to the COMESA Competition Regulations. Please see the COMESA summary in the AG section of the app to be found at the page AG in Africa.

Impact of regulatory regime on business

Mergers and takeovers must be notified to the Competition and Fair Trading Commission prior to implementation if they are likely to substantially lessen competition. The applicable filing fee is 0.05% of combined turnover or total assets, whichever is higher, of the enterprises proposing to effect the merger or takeover. Where it is found that a merger or takeover that has not been notified to the Competition and Fair Trading Commission prior to implementation is likely to result in substantial lessening of competition, the said merger will have no legal effect and no rights or obligations imposed on the participating parties by any agreement in respect of the merger or takeover shall be legally enforceable. Further, any person, whether as principal or agent, who participates in effecting such merger in the absence of authority from the Competition and Fair Trading Commission, is guilty of an offence, the sanction for which is a fine of K500,000 or an amount equivalent to the financial gain generated by the offence if such amount is greater and to imprisonment for five years.

Legislation

The relevant legislation is the Competition and Fair Trading Act (Cap 48:09)

Scope

The Competition and Fair Trading Act covers all anti-competitive trade practices which include any category of agreements, decisions and concerted practices which are likely to result in the prevention, restriction or distortion of competition to an appreciable extent in Malawi or in any substantial part of it, namely:

• trade agreements for collusion in setting uniform prices to eliminate competition, collusive tendering or bid- rigging, market or customer allocation, and allocation of quota as to sales and production;
• anti-competitive trade practices by associations where they unjustifiably exclude any person in a trade in relation to which the association was formed and recommend prices to be charged and terms of sale;
• mergers and takeovers;
• misuse of market power by eliminating or damaging a competitor, preventing the entry of a person into a market or deterring or preventing a person from engaging in a competitive conduct; and
• unfair trading by withholding goods or production or distribution to bring price increase, excluding liability for defective goods, limiting warranties and false representation in respect of goods.

Corruption Perception Index rank worldwide for 2022

110

Corruption Perception Index score for 2022

34

Ratified?

Yes

Signatories to the African Union Convention on Preventing and Combating Corruption?

Yes

Signatories to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions?

No

Signatories to United Nations Convention Against Corruption (UNAC)?

Yes

UNAC ratified?

Yes

Arbitration

The principal arbitration legislation is the Arbitration Act (Cap 6:03) which is not based on the UNCITRAL Model Law. An award on an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order to the same effect and, where leave is given, judgment may be entered in terms of the award. A foreign arbitration award may be enforced either by action or with leave of the court in the same manner as a local judgment to the same effect. An arbitration award is final and binding.

Effectiveness of the court system

The court timetable is often congested and it can take a long time to progress cases through the courts. There is, however, a mediation process to promote settlement agreements between parties in dispute before matters proceed to trial. It can take between one to five years to obtain a judgment in the General Division of the High Court and up to twelve months to obtain a judgment in the Commercial Division. There is a mandatory mediation procedure for all matters before the Commercial Division, mediated by a Judge. The Commercial Division is the most efficient court in Malawi. It can take up to five years to obtain a judgment from the Supreme Court of Appeal. Enforcement of judgments continues to be a problem.

Enforcement of arbitral awards

Recognition and enforcement of foreign arbitration awards is governed by the Arbitration Act. The schedules to the Arbitration Act incorporate the Protocol on Arbitration Clauses signed on behalf of the United Kingdom at a meeting of the Assembly of the League of Nations on 24 September 1923, and the Convention on the Execution of Foreign Arbitral awards signed on behalf of the United Kingdom on 26 September 1927. A foreign arbitration award may be enforced either by an action or with the leave of the court in the same manner as a local judgment and, where leave is so given, judgment may be entered in terms of the award. Execution of the judgment would then follow the usual processes. A party seeking to enforce a foreign award must produce the original award or a copy, duly authenticated in the manner required by the law of the country in which it was made, and evidence proving that the award has become final, and such evidence as may be necessary to prove that the award is a foreign award and that the conditions mentioned in Section 38 (1) (a), (b), and (c) of the Arbitration Act are satisfied.

Under section 38 of the Arbitration Act in order that a foreign award may be enforceable it must have:

• been made in pursuance of an agreement for arbitration which was valid under the law by which it was governed;
• been made by the tribunal provided for in the agreement or constituted in a manner agreed upon by the parties;
• been made in conformity with the law governing the arbitration procedure;
• become final in the country in which it was made; and
• been made in respect of a matter which may lawfully be referred to arbitration under the laws of Malawi and the enforcement thereof must not be contrary to the public policy or the laws of Malawi.

A foreign award shall not be enforceable if the court is satisfied that any of the following conditions apply:

• the award has been annulled in the country in which it was made;
• the party against whom it is sought to enforce the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case;
• the party against whom it is sought to enforce the award was under some legal incapacity and was not properly represented; or
• the award does not deal with all the questions referred or contains decisions on matters beyond the scope of the agreement for arbitration.

Malawi is a member of the International Centre for Settlement of Investment Disputes and accepts binding international arbitration of investment disputes between foreign investors and the state in written contracts.

Enforcement of foreign judgments

It is possible to enforce foreign judgments in Malawi. The Service of Process and Execution of Judgments Act (Cap 4:04) provides for enforcement in Malawi of judgments of the courts of Zambia and Zimbabwe. A party in whose favour such a judgment has been given may obtain registration in Malawi of the certificate of such judgment by the production of a certificate of judgment to the proper officers of the courts in Malawi. If an attempt is made to enforce a foreign judgment more than 12 months after the date of the original judgment, leave of the court must be obtained. A foreign judgment from the superior courts of the United Kingdom can be registered in the High Court under the provisions of British and Commonwealth Judgments Act provided that it is registered in the Malawi High Court within 12 months of the date of the judgment (or such longer period as may be allowed by the High Court).

However, the court will not register the judgment under the following circumstances:

• if the original court acted without jurisdiction;
• if the judgment debtor, being a person who was neither carrying on business nor ordinarily resident within the jurisdiction of the original court, did not voluntarily appear or otherwise submit or agree to submit to the jurisdiction of that court;
• the judgment debtor, being the defendant in the proceedings, was not duly served with process of the original court and did not appear, notwithstanding that he was not resident or was carrying on business within the jurisdiction of the court or agreed to submit to the jurisdiction of the court;
• the judgment was obtained by fraud;
• the judgment debtor satisfies the High Court either that an appeal is pending, or that he is entitled and intends to appeal against the judgment; or
• the judgment was in respect of a cause of action which for reasons of public policy or for some other similar reason could not have been entertained by the High Court.

The effect of the registration is to confer on the judgment the same force and effect, and to render the judgment subject to the same control as if it had originally been given in the registering court. Foreign judgments from other jurisdictions can be enforced by commencing an action in the High Court of Malawi using the foreign judgment as a cause of action. The Plaintiff must adduce evidence before the court to prove that the judgment was issued in the relevant jurisdiction. The court must also be satisfied that the first four conditions outlined above have not been breached. If the court is satisfied, it will then issue its own judgment, based on the foreign judgment, which can then be enforced in Malawi.

Judiciary

The judiciary is independent of the influence or direction of any other person or authority. The Chief Justice is appointed by the President and confirmed by the National Assembly. Judges of the Supreme Court of Appeal and the High Court are appointed by the President on recommendation of the Judicial Service Commission and they hold office until the age of 70. Magistrates and persons appointed to other judicial offices are appointed by the Chief Justice on the recommendation of the Judicial Service Commission and hold office until the age of 70.

There Supreme Court of Appeal constitutes 9 Justices of Appeal. Interlocutory matters may be heard by a single Justice of Appeal. All final matters are heard by a full panel consisting of all 9 Justices of Appeal.

Perception of the local courts

In general, the courts are perceived to be fair and are seen as the best way of administering justice.

Structure of the court system

There is a Supreme Court of Appeal, a High Court, and subordinate courts consisting of the Magistrates Court (Civil and Criminal matters) and the Industrial Relations Court (employment matters). In constitutional matters, the High Court sits as a constitutional court with not less than three judges presiding. An appeal from the Constitutional Court or the High Court goes to the Supreme Court of Appeal. An appeal from the Magistrates Court of the Industrial Relations Court goes to the High Court. The High Court has a Commercial Division and a Financial Crimes Division.

Foreign investment incentives

The following incentives are offered, which apply equally to domestic and foreign investors:

• a 100% investment allowance on qualifying expenditure for new and unused buildings, plant and machinery;
• allowances of up to 40% for used buildings, plants and machinery;
• an allowance for manufacturing companies to deduct all operating expenses incurred up to 25 months prior to the start of operations; and

Companies operating in priority industries as so designated by the Minister for that purpose are subject to either:

• 0% tax for such period, not exceeding 10 years, as the Minister may grant; or
• 15% indefinitely.

Currently, priority industries are:

• Agro-processing industries; and
• Electricity generation, transmission and distribution industries.

Advertising regulation

Consumer Protection Act (Cap 48:10)

Capital gains tax

Capital gains are treated as ordinary income and subject to income tax at the applicable rate. There are a number of exemptions relating mainly to group restructurings, principal residence, transfers between spouses and shares listed on the stock exchange, provided it had been held for more than one year, as well as personal and domestic assets.

Corporation tax

Only income from a source within or deemed to be within Malawi is subject to tax. Corporate tax is levied on resident companies at a rate of 30% and on non-resident companies at a rate of 35%.

Dividends

Tax is withheld at source at a rate of 10% and is final for dividends paid to resident, non-resident and listed companies.

Exchange control

The Reserve Bank of Malawi administers exchange controls in terms of the Exchange Control Act (Cap 45:01) and the regulations and directives made thereunder. Authorisation is required for all remittances of profits, dividends, interest, royalties and fees. The mandatory conversion requirement for proceeds of exports is 60% though a lower ratio may be permitted on legitimate grounds. Most goods can be freely imported under the open general licence system.

Export processing zone

Investors qualify for Export Processing Zones (EPZ) privileges by operating at an approved location and by acquiring a licence to manufacture goods under bond. This requires approval by an appraisal committee.

Incentives for establishing operations in an EPZ include:

• no withholding tax on dividends;
• no duty on capital equipment and raw materials;
• no excise tax on the purchases of raw materials and packaging materials made in Malawi; and
• no value added tax.

Incentives for manufacturing under bond include:

• an export allowance of 12% revenue for non-traditional exports;
• a transport tax allowance equal to 25% of international transport costs, excluding traditional exports;
• no duties on imports of capital equipment used in the manufacture of exports;
• no surtaxes;
• no excise tax or duty on the purchase of raw materials and packaging materials; and
• a timely refund of all duties on imports of raw materials and packaging materials used in the production of exports.

Interest

A withholding tax of 15% applies to interest payments made to non-residents, and of 30% (of which 20% is withheld at source) to residents.

Losses

Trading losses may be carried forward for six years, unless derived from manufacturing, mining, or agriculture, in which case they may be carried forward without restriction. Capital losses of assets that attracted capital allowances are fully deductible. Other capital losses may be deducted only against capital gains realized in the same or future years.

Payroll tax and social security

A 1% tax-deductible levy of payroll costs is payable annually to the Technical, Entrepreneurial and Vocational Education and Training Authority. The minimum employer pension contribution is 10%; the minimum employee contribution is 5%.

Personal income tax

Personal income tax is charged on a graduated scale. The first MWK 1,200,000 of annual income is tax free; the next MWK 4,200,000 is taxed at a rate of 25%; the next MWK 24,600,000 is taxed at a rate of 30%; and income over MWK 30,000,000 at 35%.

Real property tax

Real Property taxes (for both residential and commercial property) are assessed by local authorities, based on land valuations.

Royalties

Withholding tax of 20% is charged on royalties.

Stamp duty

Stamp duty is charged at nominal or ad valorem rates on a variety of financial instruments and transfer of real and personal property.

Technical service fees

Tax is applied to technical service fees at a rate of 15% for non-resident companies and at a rate of 30% for resident companies.

Thin cap regulations

There are thin capitalisation rules in Malawi. The rules set an acceptable debt-to-equity ratio of 3:1. Consequently, interest deductibility is limited to this threshold.

Transfer pricing

There are transfer pricing regulations in Malawi. The legislation requires taxpayers to have mandatory contemporaneous transfer pricing documentation. Malawi transfer pricing regulations follow the Organisation for Economic Co-operation and Development (OECD) transfer pricing guidelines.
The transfer pricing legislation further provides for the definition of related parties, as well as general transfer pricing regulations.

There is also a tax anti-avoidance provision that is used to check transactions between related parties. If transactions between related parties result in profits that are lower than what would be expected if the company was trading with an independent party, then the tax authorities can challenge the transaction.

Value added tax

Value Added Tax is charged at the rate of 16.5% of the value of goods or services supplied or imported.