Decoding Beneficial Ownership in Malaysia: A 2024 Update

Significant changes to beneficial ownership reporting in Malaysia took effect on April 1, 2024, with the implementation of the Companies Amendment Act 2024. These changes aim to combat financial crime and align with global standards by expanding the requirements for reporting beneficial ownership information. We're updating our previous insights on beneficial ownership in Malaysia to help you navigate evolving regulations. This article will delve into the concept of beneficial ownership, its legal framework, and the steps your business needs to take to ensure compliance.

Understanding Beneficial Ownership

A beneficial owner is the natural person who ultimately owns or controls a company, even if their ownership is not directly apparent through the company's shareholding structure. This could be through direct or indirect ownership, control over voting rights, or the ability to exert significant influence over the company's decision-making. The concept of beneficial ownership aims to prevent illicit activities like money laundering, tax evasion, and corruption, by lifting the veil of anonymity often associated with complex corporate structures.

Criteria for Beneficial Ownership

• An individual who holds directly or indirectly no less than 20% of the shares of a company

• An individual who holds directly or indirectly no less than 20% of the voting shares/rights of the company

• An individual who has to exercise ultimate control over the company, directors and/or management of the company

• An individual who has the power to appoint or remove directors who hold majority of voting rights

• An individual who is a member of the company and controls a majority of the voting rights (under agreement with another member of the company)

• An individual who has less than 20% of shares or voting rights, but holds significant control or influence over the company

Introduction of e-BOS

Simultaneously, the Companies Commission of Malaysia (SSM) launched the electronic Beneficial Ownership System (e-BOS), a digital platform accessible through the SSM4U portal. This system offers a streamlined process for companies and Limited Liability Partnerships (LLPs) to submit, update, and manage their beneficial ownership information, ensuring ongoing compliance with the new regulations. Further reinforcing these changes, the SSM issued a Practice Directive on May 13th, outlining the procedures for lodging beneficial ownership information. This directive, available on the SSM website (www.ssm.com.my), provides detailed guidance for businesses navigating the new reporting framework.

Four Step Guide for Businesses

1. Identify Beneficial Owners:

• Understand the Criteria: Familiarize yourself with the definition of a beneficial owner under the Companies Act 2016 as amended. This includes individuals with direct or indirect ownership of 25% or more of shares or voting rights, or those who exercise significant control over the company.

• Conduct Due Diligence: Take reasonable steps to identify the natural persons who meet these criteria. This might involve reviewing shareholding structures, company documents, and potentially obtaining information from relevant individuals.

2. Maintain a Register of Beneficial Owners (RBO):

• Create and Update: Prepare a register containing detailed information about each beneficial owner, including their name, nationality, date of birth, residential address, and nature of control or ownership.

• Keep at Registered Office: Ensure the RBO is kept at the company's registered office or another designated location.

3. Submit Information via e-BOS:

• Access e-BOS: Use the SSM4U portal to access the electronic Beneficial Ownership System (e-BOS).  

• Submit Details: Enter the required information about each beneficial owner into the system.

• Update as Necessary: Regularly update the information in e-BOS to reflect any changes in beneficial ownership.

4. Stay Informed and Compliant:

• Review SSM Guidelines: Refer to the SSM's Practice Directive and other relevant guidelines for detailed procedures and requirements.

• Seek Professional Advice: If you have any uncertainties, consult legal or compliance professionals to ensure proper identification and reporting of beneficial owners.

• Monitor for Updates: Stay informed about any future changes to the beneficial ownership framework or the e-BOS system.

These legislative and technological developments signify a significant step forward in strengthening corporate transparency in Malaysia. They empower regulatory authorities with improved oversight capabilities while also streamlining compliance processes for businesses. The e-BOS system and accompanying Practice Directive represent valuable tools for companies seeking to stay compliant and contribute to a more transparent business environment.

Disclaimer: This article is intended for informational purposes only and should not be considered as legal or financial advice. The information in this article is considered correct and true as at the date of publication.