The corporate landscape in Malaysia is set to evolve significantly with the implementation of amendments to the Companies Act 2016, taking effect on 1 April 2024. One of the central pillars of these amendments is the strengthened framework for identifying and reporting beneficial ownership.
In this blog, we will explore what beneficial ownership means, the new obligations for companies under the amended law, and how these changes align Malaysia with global transparency standards.
What is Beneficial Ownership?
Beneficial ownership refers to the individual or individuals who ultimately own, control, or benefit from a company, even if their names do not appear in legal or public records. These individuals may exert control through direct ownership, indirect influence, or other arrangements such as nominee agreements.
The concept is critical in combating money laundering, tax evasion, and other illicit financial activities by ensuring transparency in corporate ownership structures.
What changes are in 2024?
The Companies Act 2016 (as amended in 2024) introduces new provisions to enhance the identification and reporting of beneficial ownership. Here are the key highlights:
1. Clearer definition of Beneficial Ownership
Beneficial ownership under the amendments includes:
- Individuals who own, directly or indirectly, more than 25% of shares or voting rights in a company.
- Individuals who have significant influence or control over a company.
- Beneficiaries of nominee arrangements or complex ownership structures.
2. Mandatory reporting obligations
- Companies are required to identify and maintain a register of their beneficial owners.
- They must report this information to the Registrar of Companies and notify of any changes within the prescribed time frame.
3. Increased accountability for non-compliance
- Companies that fail to comply with these requirements could face substantial penalties, including fines and potential legal action.
- Directors and officers may also be held personally liable for breaches of the beneficial ownership provisions.
4. Improved access to information
- Beneficial ownership information will be accessible to regulatory authorities and law enforcement agencies.
- Safeguards will ensure that the data is protected and used appropriately.
Why does Beneficial Ownership transparency matter?
The changes align Malaysia’s corporate governance framework with international standards, such as those set by the Financial Action Task Force (FATF). Enhanced transparency is a key tool in:
- Preventing financial crimes like money laundering and corruption.
- Attracting foreign investment by improving investor confidence.
- Building trust with stakeholders, including business partners and customers.
What should businesses do to prepare?
To ensure compliance with effect from 1 April 2024, companies should take the following steps:
1. Identify Beneficial Owners
- Conduct an audit of your company’s ownership structure to determine who qualifies as a beneficial owner under the new rules.
2. Update Registers and records
- Establish and maintain a detailed register of beneficial owners as required by the Companies Act.
3. Review nominee arrangements
- Analyse any nominee or proxy structures to ensure they are in line with the new regulations.
4. Develop compliance policies
- Create internal processes to ensure ongoing compliance, including regular updates to beneficial ownership records.
5. Seek professional advice
- Consult legal and corporate governance professionals to navigate the complexities of the new regulations.
What are the penalties for non-compliance?
Failure to comply with beneficial ownership requirements can result in significant penalties, which may include:
- Fines for the company and responsible officers.
- Criminal liabilities for directors and officers involved in breaches.
These penalties underscore the importance of acting proactively to meet the new standards.
A step towards greater transparency
The Companies Act 2024 amendments represent a critical step in Malaysia’s efforts to improve corporate governance, foster transparency, and build investor confidence. By embracing these changes, companies can demonstrate their commitment to ethical business practices and align with global standards.
Need help?
If your company requires guidance on meeting the new beneficial ownership requirements, our team of experts is here to assist. Contact us today to ensure a smooth transition and full compliance ahead of the April 2024 deadline.
