MALAYSIA: Companies Act 2016 Amendment Bill 2023 Seeks to Enhance Beneficial Ownership Disclosure

Malaysia’s Companies Act 2016 Amendment Bill 2023 has been tabled for implementation on April 1st, 2024, aiming to enhance corporate transparency and combat money laundering. The bill addresses four key areas, including gaps in the Beneficial Ownership (BO) Reporting Framework for local and foreign companies.

Defining Beneficial Ownership

Under the proposed amendments, a beneficial owner is defined as a natural person who exercises ultimate effective control over a company, regardless of whether they hold direct or indirect ownership of shares. Six criteria have been outlined to determine ultimate effective control:

• Direct or indirect holding of at least 20% of company shares
• Ability to exercise control over directors and management
• Significant influence over the company despite holding less than 20% of shares

Requirements for Companies

Companies will be required to maintain a database of all beneficial owners and submit it to the Companies Commission of Malaysia (SSM) as part of their annual submissions. The bill proposes that companies:

• Send notices to beneficial owners annually to verify details
• Record communications with beneficial owners
• Report changes in beneficial owner details to SSM within 14 days
• Allow access to the register by authorities and those named as beneficial owners

Foreign Companies

Foreign companies will also be required to verify and submit their beneficial ownership information to SSM during the registration stage. Additionally, companies will be authorized to request confirmation from relevant persons to preserve or restore the accuracy of the beneficial owner register in certain situations.

Penalties for Non-Compliance

The bill introduces new penalties for non-compliance, including fines and imprisonment, to deter non-cooperation.

Expert Insights

Experts warn that companies must take extra attention in maintaining accurate records and designating a reliable company secretary who can handle beneficial ownership reporting. MISHU, a leading provider of company secretarial services, emphasizes the importance of staying up-to-date with the latest laws and regulations to ensure compliance and mitigate risks.

Conclusion

The Companies Act 2016 Amendment Bill 2023 aims to meet the Financial Action Task Force’s (FATF) 2015 evaluation of Malaysia and enhance the country’s corporate transparency standards to global benchmarks. Companies must be aware of the changes and take necessary steps to comply with the new regulations to avoid penalties and maintain a good reputation.