Are you ready for beneficial ownership reporting and its enhanced requirements?

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The Companies (Amendment) Bill 2023 (“Amendment Bill”) was passed by the Dewan Rakyat on 28 November 2023. It is anticipated that entities would need to report the information of its Beneficial Owners (“BO”) to the Suruhanjaya Syarikat Malaysia (“SSM”) (also known as the Companies Commission of Malaysia) through a new electronic filing platform within three (3) months from the enactment of the Amendment Bill.

The beneficial ownership reporting framework (“BO Guideline”) should not be foreign to entities incorporated/registered in Malaysia as it has already been implemented since 1 March 2020, though it is still in the transitional period until the gazette of the Amendment Bill.

During the transitional period, entities are required to only maintain the information of BO without having to report to the SSM. Post-transitional period, additional steps will be necessary to verify and notify the SSM of such information and any changes from time to time.

If you have not already done so, you will need to start identifying who the BO is so that such information is readily available for submission to SSM upon enforcement.

1. Consider if your entity is “exempted”

If your entity is exempted, you are relieved from the obligation to identify the BO(s). However, the entity should still make a declaration of its exempted status, bearing in mind that the exemption only applies to the entity itself and it does not exempt its subsidiaries from identifying the BO(s).

2. Identifying BO(s)

Continue to identify BO(s) of the entity by assessing all criteria stipulated in the BO Guideline and to include each intermediary shareholder within the group. This assessment should be performed at least on an annual basis or whenever there is a change in shareholders.

3. Submission of the BO information 

Ensure the BO information is up-to-date and properly recorded in the register of BO at the entity’s level for submission to the SSM post-transitional period.

In line with the intention to promote accountability and to strengthen corporate governance, the following enhancements are expected to be implemented in the Amendment Bill and the revised BO Guideline:

1. Revision of the definition of BO - “BO is a natural person who ultimately owns or controls a company and includes a person who exercises ultimate effective control over a company”

The revamping of the BO definition is to align with the criteria in the BO Guideline issued by the SSM, where the BO is not only limited to natural persons who have shareholding interest in the entity, but also any natural persons who could influence and exert control over the entity. 

2. Additional criteria in the definition of BO - “has less than 20% of shares or voting rights but exercises significant control or influence over the company.” 

With this enhancement, despite a shareholder owning less than 20% of shares in the entity, they would still be regarded as a BO if they could exercise control or influence over the entity.

3. Identification of BO cannot be “evaded”

When an entity has taken all reasonable measures to identify a BO but is unable to identify one, the entity may consider the natural person who holds the senior position (e.g. the Chief Executive Officer) as the BO of the entity.

Given the short time span of enforcement upon the implementation of the Amendment Bill, Directors should start taking the lead and ensure that the BO information is properly maintained at the entity’s level to avoid any unnecessary delays and non-compliance penalties from the SSM.

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