The Companies (Amendment) Bill 2023 (“Bill”) was passed by the Dewan Rakyat (House of Representatives) of the Malaysian Parliament on 28 November 2023. It will be tabled before the Dewan Negara (Senate) and if passed, will be presented for Royal Assent and be gazetted into law. Thereafter, the Bill will come into operation on a date to be appointed by the Minister of Domestic Trade and Cost of Living (“Minister”) by notification in the Gazette.
 
The Bill seeks, amongst others, to introduce a framework for the reporting of beneficial ownership of companies and to enhance the existing provisions on schemes of arrangement and reconstruction, and corporate rescue mechanisms in the Companies Act 2016 (“Act”).
 
We will provide a summary of the main amendments to be introduced under the Bill in our two-part article. Part 1 will examine the proposed framework for the reporting of beneficial ownership of companies, whilst Part 2 will highlight the proposed amendments to the provisions on schemes of arrangement and reconstruction and corporate rescue mechanisms.¹
 
Definition of “beneficial owner”
 
The definition of “beneficial owner” in section 2 of the Act will be amended by introducing a sub-paragraph (b) to state that in relation to a company, the beneficial owner means a person as provided for in section 60A of the Act, which will be discussed below. The existing definition of a beneficial owner in relation to shares is retained as sub-paragraph (a) of the definition.
 
The reporting of beneficial ownership framework
 
The Bill introduces a new Division 8A (sections 60A to 60E) to Part II of the Act.
 
Beneficial owner of company
 
Elaborating on the expanded definition of “beneficial owner” in section 2 of the Act, section 60A(1) provides that “A person is a beneficial owner of a company if he is a natural person who ultimately owns or controls over a company and includes a person who exercises ultimate effective control over a company.”
 
The new section 60A(2) empowers the Registrar of the Companies Commission of Malaysia (“Registrar") to issue guidelines for the purpose of identifying a beneficial owner of a company.
 
Register of beneficial owners of a company
 
The new section 60B, inter alia, sets out the following requirements:

• the full name, addresses, nationality, identification and usual place of residence of a person who is a beneficial owner of the company;
• the date the person becomes a beneficial owner of the company;
• the date the person ceases to be a beneficial owner of the company; and
• such other information as the Registrar may require, 

(collectively “BO information”).
 
For this purpose, section 60B(10) provides that the expression “identification” means in the case of any person issued with an identity card under the National Registration Act 1959, the number of the identity card, and in the case of a person not issued with an identity card, particulars of his passport or other similar evidence of identification as is available.

Section 60B also provides as follows:

• the person or class of persons who may access the BO Register or the said information; and


• the manner and terms and conditions for accessing the BO Register or the said information, 

(section 60B(9)).
 
Duty of company to require member to disclose beneficial owner
 
Section 60C(1) imposes a duty on a company to require any member of the company to:

Duty of company to require confirmation by beneficial owner
 
Section 60C(2) requires a company which knows or has reasonable grounds to believe that any person is a beneficial owner of the company to require such person to:

Duty of company to require any member or person to confirm beneficial owner
 
Where a company knows or has reasonable grounds to believe that any member or person knows the identity of a person who is a beneficial owner of the company, section 60C(3) imposes a duty on the company to require such member or person to:

Duty of company to seek confirmation of change to particulars of beneficial owner
 
Section 60C(5) requires a company that has reasonable grounds to believe that a change has occurred to the particulars of a beneficial owner of the company that are stated in the BO Register, to give notice to the beneficial owner:

Duty of company to seek confirmation whether information in BO Register is correct
 
If a company has reasonable grounds to believe that any of the particulars of a beneficial owner stated in the BO Register may be incorrect, the company is required under section 60C(6) to give notice to the beneficial owner to confirm whether the particulars are correct, and if not, to provide the correct particulars.
 
Matters relating to notices issued
 
A notice to be issued under section 60C(1), 60C(2) or 60C(3) is to be in writing and the person to whom it is issued is required to respond to the notice within such reasonable time and manner as specified in the notice.
 
A company which receives information from the person to whom a notice is issued under section 60C(1), 60C (2) or 60C(3) is required under section 60C(4) to record in the BO Register, the date on which the notice requiring such information was issued, and the particulars of the information received from the person within 14 days from the date on which the information is received.
 
Offences
 
A company and every officer who contravene section 60C(1), 60C(2), 60C(3), 60C(4), 60C(5) or 60C(6) commit an offence (section 60C(7)).
 
Any person who contravenes any notice under section 60C commits an offence unless he proves that the information in question was already in the possession of the company or that the requirement to give the information was for any other reason that is frivolous or vexatious (section 60C(8)). Further, any person who in purported compliance with any notice issued under section 60C makes any statement which he knows to be false or recklessly makes any false statement commits an offence (section 60C(9)).
 
Duty of beneficial owner to provide information
 
Section 60D(1) requires a person who has reason to believe that he is a beneficial owner of a company to, as soon as practicable, notify the company that he is a beneficial owner of the company, and provide such information as may be prescribed.
 
A beneficial owner of a company is required under section 60D(2) to notify the company of any changes to his particulars in the BO Register.
 
Section 60D(3) requires a person who ceases to be a beneficial owner of a company to notify the company, as soon as practicable, of the change by stating the date the cessation occurred, and the particulars of the cessation.
 
Any person who contravenes section 60D commits an offence (section 60D(4)).
 
Exemption from Division 8A
 
The Minister may, by order published in the Gazette, exempt any class of companies from the application of Division 8A of Part II either unconditionally or subject to such terms as the Minister may impose, if such companies are subject to any requirements under any other written laws similar to those in Division 8A (section 60E).
 
Information to be included in annual return
 
Section 68(3) of the Act which sets out the information to be included in an annual return will be amended to include the BO information and the address at which the BO Register is kept if it is not kept at the company’s registered office.
 
Foreign companies
 
The requirements relating to foreign companies under Division 1 of Part V of the Act will be amended in the manner set out below.
 
Additional information for registration
 
In addition to the information set out in section 562(1) of the Act, a foreign company will be required to provide the BO information for the purpose of its registration as a foreign company under the Act.
 
Beneficial ownership of foreign company
 
A new section 573A will extend the provisions in Division 8A of Part II of the Act to a foreign company.
 
Annual return of foreign company
 
Section 576(2) of the Act which sets out the information to be included in an annual return of a foreign company will be amended to include the BO information and the address at which the BO Register is kept if it is not kept at the foreign company’s registered office.
 
Comments
 
Presently, the framework for the reporting of beneficial ownership is founded on the revised Guideline for the Reporting Framework for Beneficial Ownership of Legal Persons issued by the Companies Commission of Malaysia on 17 December 2020 (“Revised Guideline”) which replaced a similar guideline issued in February 2020. The Revised Guideline is based on section 56 of the Act which confers a right on a company to require members and other persons to disclose beneficial ownership in voting shares of the company.
 
However, the Revised Guideline appears to have exceeded the scope of section 56 as it provides, inter alia, that “the right to exercise ultimate effective control whether formal or informal over the company; or the directors or the management of the company” as one of the criteria in which a person is deemed to be a beneficial owner of a company. The Revised Guideline also applies to companies limited by guarantee which do not have voting shares. It is respectfully submitted that the foregoing circumstances fall outside the ambit of section 56 which applies only to beneficial ownership in voting shares of a company and not control under other circumstances. This anomaly will be overcome when the Bill passes into law and comes into operation as the new section 60A(2) empowers the Registrar to issue guidelines for the purpose of identifying a person who is a beneficial owner of a company without being tied to ownership of shares in a company.
 
While the Bill sets the framework for the reporting of beneficial ownership of a company, the full impact of the new provisions will only be known after details of the following information are made available through the issuance of subsidiary legislation or guidelines:

The Revised Guideline exempts nine categories of companies, including entities licensed under the Financial Services Act 2013 or the Islamic Financial Services Act 2013, entities licensed or registered under the Capital Markets and Services Act 2007 and companies listed on a local or foreign stock exchange, from complying with the reporting framework for beneficial ownership.² It remains to be seen whether the list will be replicated for the purpose of the reporting framework under Division 8A. In this regard, it should be noted that the Minister may only exercise his powers under section 60E to exempt any class of companies from the application of Division 8A “if such companies are subject to any requirements under any other written laws similar to (Division 8A).”
 
It is rather curious that amendments have not been tabled before the Malaysian Parliament to amend the Limited Liability Partnerships Act 2012 to introduce a framework for the reporting of beneficial ownership in respect of limited liability partnerships. Not only does the Revised Guideline include such a framework, but the Companies Commission of Malaysia had in mid-2020 issued a Consultative Document on the Proposed Limited Liability Partnerships (Amendment) Bill 2020 to seek public feedback on, among others, proposals to introduce a beneficial ownership reporting framework and corporate rescue mechanisms, namely corporate voluntary arrangement and judicial management, for limited liability partnerships.³
 
Article by Phua Pao Yii (Partner), Kok Chee Kheong (Partner) and Tan Wei Liang (Senior Associate) of the Corporate Practice of Skrine. 

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