The Securities Commission Malaysia (“SC”) has updated the Guidelines, which came into effect on 30 March 2026. The revision regulates the issuance of private debt notes and Islamic private debt notes by private companies to specified persons. This update strengthens Malaysia’s private capital market by broadening fundraising options while enhancing regulatory clarity, investor protection, and market transparency.
Overview of the Key Changes
The central feature of the revision is the expansion of the existing framework to facilitate the issuance of private debt notes and Islamic private debt notes by private companies (“Notes”) to specified categories of eligible investors.
To support this expansion, Paragraph 2.01 Section A of the Guidelines now introduces two definitions:
- Private Company – adopts the meaning assigned under subsection 2(1) of the Companies Act 2016.
- Private Debt Notes and Islamic Private Debt Notes – refers to debt instruments, including corporate bonds or sukuk (which means “debentures” under the Capital Market and Services Act 2007), issued or offered by private companies to eligible investors.
Eligible investors now include:
- SC-registered venture capital firms;
- SC-registered private equity firms;
- Private equity or venture capital funds managed by persons registered with the SC;
- wholesale funds; or
- fund management companies pursuant to an investment mandate agreed with sophisticated investors.
(collectively known as “Eligible Investors”)
Key Regulatory Enhancements
1. Scope of Debt Instruments
Previously, Part 5 of Section B of the Guidelines focused mainly on convertible notes. The revised Guidelines now broaden the scope to cover private debt notes, including both:
- convertible instruments; and
- non-convertible instruments.
This gives private companies greater flexibility in structuring their fundraising exercises.
2. Investor Base
Under the previous framework, issuances were largely limited to persons registered under the Guidelines on Registration of Venture Capital and Private Equity Corporations and Management Corporations.
The revised Guidelines now extend participation to:
- wholesale funds; and
- fund management companies pursuant to an investment mandate agreed with sophisticated investors.
3. Conditions for Exemption
An exemption from compliance with paragraphs 3.04, 3.05, 3.06 and 3.08 of Section A, Part 1, and Section B, Part 3 of the Guidelines (which generally apply to corporate bonds and sukuk) is available, provided that the issuance and offering of the Notes satisfy the following conditions:
- are issued solely to Eligible Investors;
- are not tradable;
- shall only be transferred to Eligible Investors; and
- where applicable, may only be convertible into shares of the issuer.
4. Disclosure and Use of Proceeds Controls
Paragraph 2.03 of Part 5 of Section B of the Guidelines introduces additional obligations requiring issuers to ensure that proceeds raised are utilised strictly in accordance with the purposes previously disclosed to Eligible Investors and SC. This reflects a stronger emphasis on governance, accountability, and investor confidence.
5. Lodgement and Withdrawal Process
Chapter 3 of Part 5 of Section B of the Guidelines has been amended to require issuers of the Notes to furnish Eligible Investors or relevant fund managers with a copy of the lodgement acknowledgement receipt, and to file a withdrawal notice with the SC if the Notes are not issued within 90 business days from the date of lodgement.
6. Supervisory Powers of the SC
New Paragraphs 1.01 to 1.03 of Section C of the Guidelines expressly empower the SC to issue directions to any responsible person or any other relevant party where necessary to protect:
- market integrity;
- investors; or
- the public interest.
Such directions may include requiring a person to:
- cease or refrain from certain conduct;
- take specified actions; or
- comply with any measure the SC considers necessary.
These powers apply across the entire Guidelines and are not limited only to private debt notes issuances.
Impact on Startups, Small and Medium-sized Enterprises (“SMEs”) which are Private Companies
The revised framework introduces a broader fundraising avenue for private companies such as startups and SMEs through structured debt instruments including convertible notes, enabling them to raise working capital in the form of debt, to support expansion, acquisitions, and transformation needs, while deferring valuation discussions to a later stage and avoiding immediate equity dilution.
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This article was written by Jocelyn Lier (Associate) from Donovan & Ho’s corporate practice.
Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.
