The implementation of Beneficial Ownership in Malaysia was regarded by some people as a necessity, as in recent times, there has been a focus on corruption and money laundering, in which opaque or anonymous business ownership structures are utilized to conceal ties to sources of cash, creating the illusion of legality. One might ask, how does Beneficial Ownership help combat business dealings in Malaysia? Read our guide for today to find out!
What is beneficial ownership?
According to the Companies Act 2016, the beneficial owner (BO) is the ultimate owner of the shares and does not include any type of nominee. An ultimate owner is a natural person with a direct or indirect interest in not less than 20% of the company’s voting shares or possessing less than 20% of the company’s voting shares.
What is the purpose of a Beneficial Ownership Declaration in Malaysia?
- Business entities have a critical role in promoting economic progress. The legal structure of corporate companies such as Sdn. Bhd. or Limited Liability Partnership, on the other hand, is vulnerable to being abused for unlawful activities such as money laundering, terrorist funding, and other serious crimes.
- Individual criminals hiding behind such corporate companies frequently use ingenious methods to escape detection of their identity.
- As a result, the Malaysian government is enforcing new Beneficial Ownership disclosure rules in order to guarantee that the business ecosystem is free of criminal activities and to enhance legislation in this area to meet international standards.
What are the important timelines that I should know of?
Transitional period and post-transitional period.
- Companies and LLPs must collect, preserve, and update Beneficial Ownership information at the entity level throughout the transition period, which runs from 1 March to 31 December 2020.
- Companies and LLPs must receive, preserve, and update BO information and notify the “Suruhanjaya Syarikat Malaysia” (SSM) throughout the post-transitional period, which begins on January 1, 2021.
Gathering and presenting Beneficial Ownership information
- Gather information regarding Beneficial Ownership within 30 days of the company secretary’s appointment.
- Submit the information pertaining to the Beneficial registry within 60 days of receiving the information.
- Notify the SSM of the Beneficial Ownership information and any updates within 14 days of the BO information will be recorded in the BO register.
- Submit the yearly return along with the Beneficial Ownership information no later than 30 days after the company’s anniversary.
- During the registration stage, new foreign enterprises must get the BO information, submit the BO information into the Bo register, and notify the SSM.
- During the registration process, provide the Beneficial Ownership information.
- Notify the SSM of any changes to the registered particulars within 14 days of the day the BO information changes.
- Within 90 days at the end of the fiscal year, submit the annual declaration together with the BO information.
What are the rules for Beneficial Ownership (BO) disclosure?
- Determine the beneficial owners
- Examine whether shareholders are holding shares for themselves or are acting as trustees
- Maintain up-to-date and correct information on the Beneficial Owner
- Grant law enforcement access to the beneficial owner’s information and notify the Registrar of any changes to the information
Who is the Beneficial Ownership, and what is the threshold/criteria for disclosure?
- A Beneficial Owner is a natural person who owns or controls a legal company or arrangement in the long run.
- The Beneficial Owner must state if he/she:
- Holds a direct or indirect interest in at least 20% of the shares, or
- Own at least 20% of the company’s voting stock, either directly or indirectly, or
- Has the authority to exercise ultimate effective control over the corporation, its directors, or its management, whether direct or indirect, or
- Has the authority or ability, directly or indirectly, to nominate or remove a director who has a majority of voting rights at a board meeting, or
- Is a company member who, by an agreement with another company member, controls a majority of the voting rights in the business.
Who has access to the information related to the Beneficial Ownership?
It is recommended that information on beneficial ownership in the registry of beneficial owners be made available exclusively to:
- Designated competent authorities (such as the Royal Malaysian Police, Malaysian Anti-Corruption Commission, Bank Negara Malaysia, and Securities Commission);
- The beneficial owner whose name is in the registry of beneficial owners;
- Those who are authorized by the beneficial owner
This is done to guarantee that such information is kept private and not made public.
What type of companies are required to comply with Malaysia’s Beneficial Ownership (BO) declaration?
- Company Limited by shares (Sdn Bhd)
- Company Limited by Guarantee (Bhd)
- Foreign Company
- Local Limited Liability Partnership (LLP)
- Foreign Limited Liability Partnership
What are the steps that companies should take?
- Consider the company’s interests held by individuals, corporate entities, and trusts.
- Examine all documents and data at the entity level.
- Issue notices in accordance with Section 56 (1), (2), or (3) of the Companies Act 2016.
- Take into account any evidence that might demonstrate interests or rights held via a number of channels that the same individual may ultimately control.
- Establish an internal policy requiring shareholders/partners to notify the entity of beneficial ownership information or changes to beneficial ownership information.
- Any further steps that may be required based on the conditions of each company.
If you would like to know more about Beneficial Ownership in Malaysia, you can contact our experts at firstname.lastname@example.org.