DBKL announced that effective 1 January 2017,  at least 50% equity in all businesses in Kuala Lumpur must be owned by Malaysians

DBKL announced that effective 1 January 2017, at least 50% equity in all businesses in Kuala Lumpur must be owned by Malaysians

DBKL’s recent announcement that at least 50% equity of all businesses in Kuala Lumpur must be owned by Malaysians starting 1 January 2017 may come as a shock to some. It has also been reported that DBKL will make it compulsory that at least 50% of the workers who are hired by such businesses are locals. Failure to meet these new requirements will result in their business premise licences being refused by DBKL. The purpose of this new ruling is purportedly to curb the “monopolisation” by foreigners in certain businesses.

However, will imposing a 50% minimum local equity requirement really increase the genuine ownership of such businesses, or will it merely encourage more Ali-Baba equity structures and sleeping partners? Will imposing a 50% minimum local hiring requirement really improve the job prospects for the locals (assuming they even want those jobs)?

Based on our informal telephone enquiries with DBKL, we understand that DBKL has yet to issue any clear guidelines on the manner of implementation or detailed information regarding this matter. However, we were informed that the ruling will only apply to new businesses. Also, businesses in the ‘service line’ (including banks, schools, hospitals, clinic, law firms, etc.) will be exempted from this new ruling. The types of businesses that DBKL will focus in enforcing the new requirements are primarily the hawkers and petty traders, but restaurants, boutiques and grocery shops were mentioned as well. It is further understood that DBKL will furnish more information in the coming weeks prior to the New Year, though an exact date was not given.

Therefore, those who of you are planning to start a business in KL falling within the mentioned categories may need to re-look into your equity and labour structure carefully, before committing to any major capital purchases or contracts like tenancies.

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This article was written by Shawn Ho & George Teng.

Note: This article is for information purposes only, and is not intended to act as, or substitute, legal advice. Certain requirements or positions may change depending on specific guidelines implemented by the relevant authority. Feel free to contact us if you have any queries.

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