Key Summary
The Companies (Amendment) Act 2024 introduces significant changes to the Companies Act 2016, particularly in establishing a disclosure and reporting framework for beneficial ownership in companies. The term “beneficial owner” has been expanded to include “a natural person who holds ultimate ownership or control over a company, including those who exert effective control”.
To clarify the scope of a ‘beneficial owner’ and the concepts of ‘ultimate ownership or control’ and ‘effective control,’ the Companies Commission of Malaysia (CCM) has issued Guidelines for the Reporting Framework for Beneficial Ownership of Companies following the enactment of the Companies (Amendment) Act 2024. A beneficial owner of a company limited by shares is defined as an individual who meets one or more of the following criteria:
- Criteria A: holds, directly or indirectly in not less than 20% of the company’s shares;
- Criteria B: holds, directly or indirectly in not less than 20% of the company’s voting shares;
- Criteria C: has the right to exercise ultimate effective control, whether formal or informal, over the company, its directors, or its management;
- Criteria D: has the right or power to directly or indirectly appoint or remove a director who holds a majority of the voting rights at directors’ meetings;
- Criteria E: is a member of the company and, through an agreement with another member, controls a majority of the voting rights in the company; or
- Criteria F: holds less than 20% of the shares or voting shares but exercises significant control or influence over the company.
Impact on Businesses
With the introduction of Section 60B of the Companies Act 2016, companies are now required to:
- maintain a register of beneficial owners containing detailed personal information;
- keep the register at the company’s registered office;
- notify the Registrar of any changes in the particulars within 14 days from the date the change is recorded in the register; and
- retain information on former beneficial owners for a period of 7 years.
In addition to Section 56 of the Companies Act 2016, the Companies (Amendment) Act 2024 also imposes an obligation on beneficial owners to notify the company that they are a beneficial owner and to provide the necessary information. Furthermore, beneficial owners must notify the company of any changes in their particulars, including when they cease to be a beneficial owner. Failure to do so will be an offence under the Companies Act 2016.
Failure to comply with these obligations constitutes an offence, and the company, along with its officers, may be liable upon conviction to a fine not exceeding RM20,000. For a continuing offence, an additional fine not exceeding RM500 may be imposed for each day the offence continues after conviction.
CCM has now extended the initial 3-month time frame for updating and lodging beneficial ownership information with the CCM from 1 April 2024 to 30 June 2024, to another three months ending 30 September 2024. All companies must ensure they update and submit their beneficial ownership information to the Electronic Beneficial Ownership System (e-BOS) by the extended deadline. Timely compliance is crucial to avoid potential penalties associated with the late lodgement of beneficial ownership information.
Non-compliance with these requirements could result in significant fines for both the company and its officers, highlighting the critical importance of adhering to the new regulations. Businesses must now prioritize compliance to mitigate legal and financial risks associated with these amendments.
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This article was written by Toh Jia Yi (Associate) from Donovan & Ho’s corporate and commercial practice group.
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.
