Mandatory Disclosure of Beneficial Ownership
(Attention to all Company Directors)
The Companies Commission of Malaysia (CCM) has issued the Guideline for the Reporting Framework for Beneficial Ownership of Legal Persons. This guideline came into effect from 1 March 2020.
According to the guideline, all companies shall be required to
a. find out whether the shareholders are holding shares for themselves or for
others as a trustee, and who are the beneficial owners (BO) of the shares,
b. keep the beneficial ownership information (BO information) accurate and up-
to-date and can be accessed in a timely manner, and
c. notify the CCM of the BO information including any changes thereof as well as
provide access of the BO information to certain categories of persons.
Failure to comply with these requirements is an offence under the Companies Act
2016 and the penalty includes:
- Imprisonment of not exceeding 10 years;
- A fine not exceeding RM3 million or to both.
1. Who are the beneficiary owners?
The CA 2016 defines BO as “the ultimate owner of the shares and does not include a nominee of any description”.
According to the guideline, an ultimate holder is a natural person who meets any of the following criteria:
a. Has interest, directly or indirectly, in not less than 20% of the shares of the company;
b. Holds, directly or indirectly, not less than 20% of the voting shares of the company;
c. Has the right to exercise ultimate effective control whether formal or informal over
the company; or the directors or the management of the company;
d. Has the right or power to directly or indirectly appoint or remove a director(s) who
holds a majority of the voting rights at the meeting of directors; or
e. 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.
2. As a company, what do we need to do?
a. Consider all interests in the company or limited liability partnership which are held by
individuals, corporate entities and/or trusts;
b. Review all documents and information available at the company’s level (e.g. register of members, shareholders agreement, constitution, certificates of incorporation, etc.) or the limited liability partnership’s level (e.g. register of partners, limited liability partnership agreement, etc.);
c. 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 purposes of the submission of the annual return; *
d. Consider any evidence that may show interests or rights held through a variety of means that may ultimately be controlled by the same person;
e. Have an appropriate internal policy on BO reporting and to require shareholders to notify the company or partners to notify the limited liability partnership on the identity of the BO and when there are changes in the BO information. If necessary, such policy may be reflected in the constitution of the company, the partnership agreement of the limited liability partnership or such other documents deemed appropriate by the company or the limited liability partnership; and
f. Any other actions that may have to be taken depending on the circumstances of each
company or limited liability partnership.
3. Who is responsible for what?
(a) Board of directors
The board of directors is ultimately responsible in ensuring that the company has
exercised its powers in obtaining the BO information and ensuring that such BO
information is entered into a separate part of the register of members.
(b) Members of the company / Shareholders
Upon receiving a notice issued under Section 56, the member has an obligation to inform the company whether he is the BO or has met at least one of the criteria stated under paragraph 27 of this guideline, as a trustee or that the voting rights held by him is subject to an agreement or arrangement in which another person is entitled to exercise that voting rights.
The member has to also 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 other persons can be identified.
A person who fails to comply with a notice issued under section 56 or has provided a false information or has made a statement recklessly commits an offence (penalty upon conviction: imprisonment of not exceeding 10 years or to a fine not exceeding RM3 million or to both).
(c) Any other person who has been given notice under subsection 56(2)
If a person who is not a member of a company receives a notice from the company under subsection 56(2) of the CA 2016, the person has the obligation to inform the company whether he is the BO of the company as defined under the CA 2016 or has met at least one of the criteria stated under paragraph 27 of this guideline or as trustee. Failure to respond to the notice or providing false information is an offence.
(d) Company secretary / Agent
The secretary must ensure that the BO 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 BO information to the Registrar in accordance with the provisions under subsection 56(6) or 51.
i. CCM sets a new bar for disclosures in its anti-corruption and money laundering effort.
ii. This guideline is also applicable to Limited Liability Partnerships registered under the Limited Liability Partnerships Act 2012. The partners and compliance officers of LLPs must ensure the BO information are kept up-to-date.