Beneficial Ownership Disclosure of a Malaysia Company
Unless otherwise indicated, the Malaysia company stated in this article refers to a private company limited by share(s) (identified through the words ‘Sendirian Berhad?or ‘Sdn. Bhd.? formed and incorporated in Malaysia in accordance with the Malaysia Companies Act 2016.
Since the early 2000s, there has been growing concern on the misuse of corporate vehicles for criminal purposes. Criminals have been relying on different corporate vehicles to conceal their illegal assets by maintaining a legitimate front. This includes, among others, the usage of shell companies and the creation of companies, partnerships, foundations, trusts and other types of corporate vehicles with complex ownership and control structure, to avoid detection by authorities. The lack of transparency on the ultimate beneficial owners (BOs) of these corporate vehicles became a hindrance to governments around the world in their effort to effectively combat criminal activities.
In response, the Financial Action Task Force (FATF), an intergovernmental body responsible for combatting money laundering, terrorism financing and other related threats, has issued the FATF Recommendations requiring countries to ensure that adequate, accurate and timely information on the beneficial ownership of corporate vehicles is available and can be accessed by competent authorities in a timely fashion. This includes the requirements to identify and verify beneficial ownership information.
As such, the reporting institutions under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA), including the company secretaries, play an important role by obtaining beneficial ownership information which helps prevent the misuse of corporate vehicles in the financial system.
To this end, the Companies Commission of Malaysia (CCM) has invoked his power under the Companies Commission of Malaysia Act 2001 to provide a general guidance on beneficial ownership reporting framework for all business entities registered under the respective laws governed by CCM.
- Who are Beneficial Owners
BOs are always natural persons who ultimately own or control a legal entity or arrangement. Section 2 of the Companies Act 2016 (CA 2016) defines BO as the ultimate owner of the shares and does not include a nominee of any description. The definition of BO must also be read together with Section 8 of the CA 2016.
CCM has issued a guideline (Guideline) to clarify the phrase “the ultimate owner of the shares?to include both from the perspective of ownership and effective control.
- Type of Entities that are subject to the Beneficial Ownership Reporting
The beneficial ownership reporting is applicable to all the companies (local and foreign companies), limited liability partnerships (local and foreign limited liability partnerships) and businesses (sole proprietors and partners) unless they are exempted entities, i.e. companies that are regulated or licensed by Bank Negara Malaysia, Securities Commission or traded on a stock exchange. Government-owned or state-owned companies are also required to comply with the Guideline unless exempted.
- Persons Responsible for the Beneficial Ownership Information
As there are various parties involved in ensuring that the beneficial ownership information is obtained and the accuracy of the beneficial ownership information is verified, it is imperative that they fully understand their roles and responsibilities.
In the case of a company, the various parties responsible for the beneficial ownership information are as follows:
(1)
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Board of Directors
The board of directors is ultimately responsible in ensuring that the company has exercised its powers under subsection 56(1), (2) or (3) of the CA 2016 in obtaining the beneficial ownership information. The obligation also extends to ensure that once the beneficial ownership information is received, such information must be entered into the separate part of the register of members.
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(2)
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Members of the Company
If a member of the company has received a notice issued under subsection 56(1) or (3) of the CA 2016, the member has an obligation to inform the company whether he is the BO or has met at least one of the criteria stated in the Guideline, as trustee or that voting rights held by him is subject to an agreement or arrangement in which another person is entitled to exercise that voting rights.
The obligations of a member also extend to the need to provide the particulars of the persons for whom the member holds the voting shares or the parties to the agreements or arrangements, as the case may be, to the extent that such persons can be identified.
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(3)
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Any other person who has been given notice under subsection 56(2)
If a person who is not a member of the company received a notice under subsection 56(2) from the company, the person has the obligation to inform the company whether he is the BO of the company or has met at least one of the criteria stated in the Guideline. The obligation of such person also extends to the need to provide the particulars of the persons for whom the person holds the voting shares in his capacity as trustee to the extent that such persons can be identified.
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(4)
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Company Secretary/Agent
In line with the duty of a secretary to properly keep and regularly maintain the register of members, the secretary must ensure that the beneficial ownership information is entered into in accordance with the requirement set out under subsection 56(4). In addition, a secretary is also responsible to lodge the beneficial ownership information to the Registrar.
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- Disclosure Criteria of BO
The ultimate owner of the shares is an individual (natural person) who meets one or more of the following criteria:
(1)
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Has interest, directly or indirectly, in not less than 20% of the shares of the company;
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(2)
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Holds, directly or indirectly, not less than 20% of the voting shares of the company;
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(3)
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Has the right to exercise ultimate effective control whether formal or informal over the company; or the directors or the management of the company;
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(4)
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Has the right or power to directly or indirectly appoint or remove a director who holds a majority of the voting rights at the meeting of directors; or
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(5)
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Is a member of the company and, under an agreement with another member of the company, controls alone a majority of the voting rights in the company.
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- Entry Points of the Beneficial Ownership Information
(1)
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New companies (Prior to the obligation to submit the first annual return)
(a) To obtain the beneficial ownership information within 30 days after the appointment of a company secretary.
(b) To enter the beneficial ownership information into the register of BO within 60 days after the beneficial ownership information has been obtained or received. The 60-day period shall include the below 14-day period to notify the Registrar.
(c) To notify the Registrar within 14 days from the date the beneficial ownership information is entered into the register of BO.
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(2)
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Existing companies (Commencing from obligation to submit first annual return and subsequently)
(a) To notify the Registrar of the changes in the register of members within 14 days from the date the beneficial ownership information is recorded in the register of BO.
(b) To lodge annual return together with the beneficial ownership information not later than 30 days from the anniversary of its incorporation date.
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- Reasonable Measure to Identify the BOs
Companies must take reasonable measures to identify their BOs by employing at least one or more of the following actions:
(1)
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Consider all interests in the company which are held by individuals, corporate entities and/or trusts;
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(2)
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Review all documents and information available at the company’s level, i.e. register of members, shareholders agreement, constitution, certificates of incorporation etc;
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(3)
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Send out notices pursuant to subsection 56(1), (2) or (3) of the CA 2016. Further, companies are required to send a notice under subsection 56(1) at least once in a calendar year for the purpose of the submission of the annual return;
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(4)
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Consider any evidence that may show interests or rights held through a variety of means that may ultimately be controlled by the same person;
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(5)
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Have an appropriate internal policy on beneficial ownership reporting and to require shareholders to notify the company on the identity of the BO and when there are changes in the beneficial ownership information. If necessary, such policy may be reflected in the constitution of the company or such other documents deemed appropriate by the company; and
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(6)
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Any other actions that may have to be taken depending on the circumstances of each company.
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- Obtaining and Keeping the Beneficial Ownership Information
(1)
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Obtain the beneficial ownership information by sending out notices pursuant to subsections 56(1), (2) or (3) of the CA 2016. Companies are required to send a notice under subsection 56(1) at least once in a calendar year for the purpose of submission of annual return;
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(2)
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Take reasonable steps to identify the BO of the company who meets one or more of the disclosure criteria;
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(3)
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Keep the beneficial ownership information in the separate part of the register of members (register of BO) and to ensure the information is accurate and up-to-date;
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(4)
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Have an appropriate internal policy on beneficial ownership reporting and to require shareholders to notify the company on the identity of the BO and when there are changes in the beneficial ownership information. If necessary, such policy may be reflected in the constitution of the company or such other documents deemed appropriate by the company; and
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(5)
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Give access to competent authorities, law enforcement agencies, the BO whose name has been entered in the register of BO and any other persons authorised by the BO. For the avoidance of doubt, a BO shall only be given access to the beneficial ownership information relating to him.
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In a situation where a company is unable to obtain the beneficial ownership information, the company must show proof that attempts to obtain such information by sending at least 2 notices have been made to the shareholders. The record of such attempts must be kept at the same location with the register of BO.
- Transitional Period
This Guideline came into effect on 1 March 2020 and established a transitional period between 1 March 2020 to 31 December 2020. During the transitional period, the companies are required to obtain, keep and update the beneficial ownership information at the companies?level. After the transitional period, the companies are required to submit the beneficial ownership information to CCM.
On 17 December 2020, CCM announced that the transitional period stated in this Guideline has been extended to a later date to be determined by CCM to coincide with the enforcement date of the proposed Companies (Amendment) Bill and Limited Liability Partnerships (Amendment) Bill. During the extended transitional period, companies shall continue to identify and verify the beneficial owners to ensure the beneficial ownership information is accurate and up to date. It is also important that the information kept at the companies?level can be accessed in a timely manner. Please take note that companies are required to lodge the beneficial ownership information together with the annual return.
Kaizen, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professionals in Kaizen for further clarification.
See also：
Malaysia Company Incorporation Procedure and Fees
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