BENEFICIAL OWNERSHIP REPORTING FRAMEWORK IN MALAYSIA NORHAIZA JEMON - PowerPoint PPT Presentation

BENEFICIAL OWNERSHIP REPORTING FRAMEWORK IN MALAYSIA NORHAIZA JEMON Companies Commission of Malaysia

CCM’S POWERS & FUNCTIONS Companies Commission of Malaysia Act 2001 Established in April 2002 � Functions � To regulate companies, businesses and limited liability partnerships � To encourage and promote proper conduct amongst conduct amongst directors, company secretaries, managers and officers of a corporation; and � To enhance and promote the supply of corporate information of the laws under its purview based on the information filed or lodged. � To formulate, conduct and implement educational and training programmes relating to the laws under its purview 2

Legal Persons 3

CREATION OF LEGAL PERSONS LP LIMITED LIABILITY COMPANIES ACT REGISTRATION OF PARTNERSHIPS ACT 2016 BUSINESSES ACT 1956 2012 (CA 2016) (ROBA 1956) (LLPA 2012) DEVELOPMENT BO REPORTING FRAMEWORK STAGE 4

COMPANIES ACT 2016: BENEFICIAL OWNER Definition of ‘beneficial owner’ under Definition of ‘interest in shares’ under section 8(4) of the CA section 2 the CA 2016 2016 “The ultimate owner of the shares and “A person shall be deemed to have an interest in a share does not include a nominee of any where a body corporate has an interest in a share and— description.” (a) the body corporate is, or its directors are accustomed, or is under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of that person in relation to that share; (b) that person has a controlling interest in the body corporate; or (c) that person or his associates, or that person and his associates are entitled to exercise or control the exercise of not less than twenty per centum of the votes attached to the voting shares in the body corporate.” 5

APPLICABLE LAWS ON TRANSPARENCY OF BO � Section 56 of the Companies Act 2016 empowers a company to require a disclosure: from any member whether he is holding shares as beneficial owner or as trustee; i. from a person who has an interest in a share of a company whether he is has interest in shares as ii. beneficial owner or as trustee from any member whether the voting rights held by him is the subject of an agreement or an iii. arrangement under which another person is entitled to control those rights � Section 56 also details out the procedures in obtaining the BO information and how such information is to be recorded in the Register of Members � Under section 56(6), the Registrar may also invoke his powers to require a company to request BO information from its shareholders as and when necessary. � Any person who fails to comply with a notice by the company to disclose BO information or fails to comply with the Registrar’s direction is subject to a penalty of RM50,000 or imprisonment of 3 years or both. 6

APPLICABLE LAWS ON TRANSPARENCY OF BO � Section 68 requires a company to submit annual return in which the company must make a declaration as to whether or not its shareholders are holding shares as beneficial owner or as trustee. � If a shareholder is holding shares as trustee, then a separate annexure on the BO information must be lodged together with the annual return. � Failure to lodge annual return is subject to penalty of RM50,000 and RM1,000 each day for continuing offence 7

SANCTIONS � Sec. 584 CA 2016: Require a company or officer of the company including cosec to furnish information relating to shareholding of any person to the Registrar (penalty: a fine not exceeding RM1 million) � Sec. 584 CA 2016: Power to compel any person or individual to furnish information and particulars of shareholding, whether directly or indirectly, when required by the Registrar (penalty: maximum of 10 years imprisonment or a fine not exceeding RM3 million or to both) � Sec. 593 CA 2016: Any person who are making false or misleading statement or report commits an offence (penalty: maximum 10 years imprisonment or a fine not exceeding RM3 million or to both) � Sec. 27B CCMA 2001: Power to require information from any person (penalty: a fine not exceeding RM500,000 or maximum of 3 years imprisonment or to both) 8

CHALLENGES FACED BY THE INDUSTRY • Lack of guidance on the definition of BO Comprehensive • Who is responsible for the Guidelines on BO reporting Reporting • Timeliness, accuracy of reporting 9

BO REPORTING FRAMEWORK Policy Statement #1: Definition of BO (1) Companies with share capital (also include LLP) An individual is deemed to be a BO or have control over a company if he fulfills one or more of the tests below: (a) Directly or indirectly has interest in 20% or more of the shares; (b) Holds direct or indirect voting rights in 20% or more of the voting shares; (c) H the right to exercise significant control whether formal or informal over the company or its directors; (d) Is a member of the company and, under an agreement with another member of the company, controls the majority of the voting rights in the company; or (e) Has the right to exercise, or actually exercises dominant influence or control over the company. 10

BO REPORTING FRAMEWORK Policy Statement #1: Definition of BO (2) Companies without share capital An individual is deemed to be a BO or have control over the CLBG after fulfilling either one or more tests as follows: (a) Has the right to exercise significant control whether formal or informal over the company or its directors; (b) Has the right or power to directly or indirectly appoint or remove a director; or (c) Has the right to exercise, or actually exercises dominant influence or control over the entity has controlling interest. 11

BO REPORTING FRAMEWORK Policy Statement The following entities are within the scope of reporting: #2: Scope of (a) Companies incorporated under the CA 2016, unless exempted; Reporting (b) Foreign companies registered under the CA 2016, unless exempted; (c) LLPs registered under the LLPA 2012; (d) Foreign LLPs registered under the LLPA 2012, unless exempted. Policy Statement Exempted entities: #3: Exempted (a) Listed companies on a stock exchange either local or foreign exchange Entities (b) Financial institutions Policy Statement Access will be granted to the following person: #4: Access to BO (a) Competent authority and law enforcement agencies for the purpose of administering and enforcing their respective laws; Information (b) a beneficial owner whose name has been entered in the company’s register; (c) The legal owner whose BO has been disclosed. 12

BO REPORTING FRAMEWORK Policy Statement #5: BO Information Entry Point (1) Local Company (a) Existing companies - annual return (section 68); (b) New companies - within 30 days from the appointment of company secretaries; (c) Companies shall notify the Registrar of the changes in the particulars of the register within 14 days from the date of change. (2) Foreign Company (a) Foreign companies have the duty to submit annual return together with BO information within 30 days from the anniversary of its registration date; (b) New foreign companies will have the obligation to submit the BO information during the registration stage; (c) Foreign companies have the duty to submit an up-to-date BO information to the Registrar within 14 days from the date of the changes. 13

PROPOSED BO REPORTING FRAMEWORK Policy Statement #5: BO Information Entry Point (3) LLP (a) LLPs have the duty to lodge annual declaration together with BO information within 90 days from the end of the financial year; (b) New LLPs will submit the BO information during the registration stage; (c) LLPs have the duty to submit an up-to-date BO information to the Registrar within 14 days from the date of the changes. (4) Foreign LLP New foreign LLPs will submit the BO information during the registration stage. 14

BO REPORTING FRAMEWORK Policy Statement #6: Verification & Lodgement of BO Information (1) It shall be the duty of the following individuals to ensure BO information is lodged, accurate and up-to-date and can be accessed in timely manner: (a) Company - Company secretary (section 236 of the CA 2016) (b) Foreign company - Agent (individual) or corporate agent (company secretary) (section 563 of the CA 2016) (c) LLP - Compliance officer (section 27 of the LLPA 2012) (d) Foreign LLP – Compliance officer (section 46 of the LLPA 2012) (2) It shall be the duty of each company/LLP to keep supporting documents as their basis for the verification of information either in physical or softcopy form. 15

Legal Arrangements 16

CREATION OF LEGAL ARRANGEMENTS TRUST COMPANIES COMPANIES ACT UNDER REVIEW ACT 1949 2016 (TCA 1949) TRUST BUSINESS, LA ACTIVITIES OR ARRANGEMENT DEVELOPMENT BO REPORTING FRAMEWORK STAGE 17