Beneficial ownership in Malaysia refers to the individuals or entities that ultimately own or control a company or asset, regardless of whether they are listed as legal owners.
In Malaysia, beneficial ownership is a key focus of the government’s efforts to combat money laundering and terrorism financing.
The Malaysian government has implemented various measures to increase transparency and combat corruption, including the Companies Commission of Malaysia (CCM)’s Beneficial Ownership Register, which requires companies to disclose information about their beneficial owners.
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 who has a direct or indirect interest in not less than 20% of the company’s voting shares or possesses not 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. On the other hand, Bhd. or Limited Liability Partnership 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 the detection of their identity.
As a result, the Malaysian government is enforcing new Beneficial Ownership guidelines Malaysia for disclosure 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 about 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 anniversary of the company.
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.
Unless they are exempted, all businesses incorporated and registered under the Companies act 2016 must comply with the framework for disclosing beneficial ownership.
Companies governed or licensed by Bank Negara Malaysia, the Securities Commission, or traded on a stock market would be exempt from the framework under the proposed new section 56A of the Companies Act 2016. This is because these businesses already have to disclose various interests and obligations.
This exemption does not, however, exempt these businesses from disclosing beneficial ownership details to the appropriate authorities in compliance with other written laws.
REGISTER OF MEMBERS OF FOREIGN COMPANIES
The current section 568 of the Companies Act 2016 mandates that foreign corporations maintain a branch register in Malaysia for registration purposes that only includes the details of members who have a local shareholding.
There is no requirement to record information about foreign shareholdings, which FATF has flagged as an information gap.
As a result, FATF advised foreign businesses to record information on both domestic and foreign shareholdings, comparable to the register of members policy outlined in Section 50 of the Companies Act 2016.
In order to replace the existing provision that requires foreign corporations to maintain a “register of members of foreign companies” in Malaysia for the purpose of documenting information about local and foreign shareholders, a proposed new section 568 of the Companies Act 2016 is to be established.
It is suggested that international corporations register by providing information about their beneficial owners.
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 BENEFICIAL OWNERSHIP IN MALAYSIA?
It is recommended that information on beneficial ownership in the registry of beneficial owners be made available exclusively to:
- A 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 IS THE TYPE OF COMPANIES THAT 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 may ultimately be controlled by the same individual.
- Establish an internal policy requiring shareholders/partners to notify the entity of beneficial ownership of Malaysia information.
- Any further steps may be required based on the conditions of each company.
Reach out to us at Relin Consultants for more information.
Are there any types of company exemptions?
What about annual returns?
Under the current Company Act 2016, firms do not need to report beneficial ownership information to the Registrar annually.
It has been recommended that firms be obligated to give information on beneficial ownership as part of their annual report. This is to guarantee that such information is submitted at least once a year and that it is updated on an annual basis.
In Malaysia, who is in charge of the Beneficial Ownership Declaration?
- Board of Directors
- A shareholder who has received a disclosure notice under S56 (1),
- Other people who have received a disclosure notice under S56 (2)
What is the register of Beneficial Ownership Malaysia?
The Beneficial Ownership Register in Malaysia is a centralized registry that collects information about the beneficial owners of companies incorporated in Malaysia.
This is a part of the government’s efforts to increase transparency and combat corruption by identifying the true owners and controllers of companies.
What types of companies are required to disclose their beneficial owners?
Under the Companies Act 2016, all companies incorporated in Malaysia are required to identify and disclose their beneficial owners to the Companies Commission of Malaysia (CCM). This includes companies that are publicly traded, privately held, or owned by a single individual.
What information is required for disclosure of beneficial ownership Malaysia?
Companies are required to provide information about their beneficial owners, including their names, nationalities, addresses, and percentage of ownership or control. They are also required to update this information on a regular basis.
Who can access the Beneficial Ownership Register in Malaysia?
The Beneficial Ownership Register in Malaysia is accessible to law enforcement agencies, regulatory bodies, and other authorized parties.
This aims to provide law enforcement agencies with the information they need to investigate and prosecute illegal activities related to money laundering, corruption, and terrorism financing.
What are the benefits of beneficial ownership disclosure in Malaysia?
Beneficial ownership disclosure in Malaysia increases transparency and accountability in the business environment, making it more difficult for criminals to hide their illicit activities behind complex corporate structures. It also promotes investor confidence and helps to create a level playing field for all businesses.