Acquiring a Maldives Resort – 6 Factors to Consider

An incoming investor who wants to acquire a tourism island from an existing owner may want to focus on a few factors to ensure a successful transfer of property.First, the incoming investor may want to determine if the acquisition is to happen by way of asset sale or stock sale. Asset sale will be the sale of leasehold rights over the island, and stock sale would be the acquisition of shares of a company holding a tourism lease.Second, there is no sale of land. A tourism island is always given on lease by the Maldives Government. What the current owner holds would be the leasehold rights to the island. The relationship is governed by an Island Lease Agreement signed with Ministry of Tourism. Therefore, in an asset sale, what gets transferred from the current owner to the incoming investor is the leasehold rights and interests of that property. In a stock sale, it would be shares of the company that holds the leasehold rights to that property.Third, the lease period of an Island Lease Agreement is generally a total of 50 years counted from the date the original lease began. Whether by way of asset sale or stock sale, an incoming investor would be buying the remaining leasehold period. There is no legal basis to reset the leasehold rights from the date of the transfer or assumption of the lease by the incoming investor.Fourth, whether it is an asset sale or a stock sale, the transfer process is governed by a set of regulations on dealing in rights over a tourism property. We often identify those regulations as the ‘Grant of Rights Rules’.Fifth, if there is an asset sale, the incoming investor would have to identify a vehicle that will ultimately acquire the property from the current owner. That vehicle maybe the creation of a fresh company in the Maldives, or re-registering in the Maldives a company that is already created elsewhere. If there is a stock sale, the incoming investor may directly proceed to seek a transfer of shares without having to incorporate a company or re-register a company.Sixth, whether a company is incorporated, re-registered, or shares of a company are bought, the incoming investor will be subject to foreign investment approvals. That is a process by itself.