Beneficial Owners l October 2020

Beneficial Owners Framework

October 2020

Beneficial Owners l October 2020

Framework One of the significant regulatory policies introduced under the Companies Act 2016 (“CA 2016”) is the concept of Beneficial Owners (“BO”). Since its enforcement on 31 January 2017 there has been a requirement to notify and submit the BO information to the Registrar.

Section 56 of the CA 2016 provides a framework to obtain BO information. The underlying principle empowers companies to request, obtain, and record such information. Once obtained and recorded, companies are required to notify the Registrar.

Under this reporting framework, all legal persons such as companies (local and foreign), limited liability partnerships (local and foreign) and businesses (sole proprietors and partnerships) are required to:

(a) take reasonable steps to identify, obtain and verify the BO information; (b) record the BO information into the register of BO; (c) keep the BO information accurate and up-to-date and can be accessed in a timely manner; (d) update the BO information whenever there is a change to the particulars of the BO and notify the Registrar; (e) keep the BO information and supporting documents at the registered office or where the register of

members/register of partners is being kept; and (f) give access to competent authorities, law enforcement agencies, the BO whose name has been entered in the

register of BO, and any other person authorised by the BO.

Who are BO

BO are always natural persons who ultimately own or control a legal entity or arrangement. CA 2016 defines BO as “the ultimate owner of the shares and does not include a nominee of any description (the definition of BO must be read in congruence with section 8 of the CA 2016). The concept of beneficial ownership is not limited to ownership through the holding of “interests” in a legal entity but extends beyond ownership structure. As such, this includes companies limited by guarantee and limited liability partnerships.

The timeline for compliance is as follows:

Persons responsible for BO information Companies (a) Board of directors

The board is ultimately responsible in ensuring that the company has obtained the BO information and that the information is entered into the register.

(b) Members of the company

A member who has received a notice has an obligation to inform the company whether he/she is the BO. This extends to providing particulars of the persons for whom the member holds the voting shares or the parties to the agreements or arrangements.

(c) Any other person who has been given notice under subsection 56(2)

1 March - 31 December 2020 From 1 January 2021

TRANSITION PERIOD POST-TRANSITION PERIOD

Maintain and update BO information at entity level Maintain and update BO information at entity level as well as notify Registrar

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A person who is not a member of a company but receives a notice from the company has the obligation to inform the company whether he/she is the BO of the company. The obligation extends to providing the particulars of the persons for whom the person holds the voting shares in his/her capacity as trustee.

(d) Company secretary/Agent

A company secretary is responsible for the proper and regular maintenance of the register, and lodgement of the BO information to the Registrar.

Limited Liability Partnerships (a) Partners

Each partner is responsible in providing the BO information by confirming whether he/she is the BO in respect to the capital contribution held by him/her. They also have an obligation to ensure that the BO information is recorded in a register that is to be kept at the registered office.

(b) Compliance officer

A compliance officer must ensure that the BO information is lodged with the Registrar.

Entities subjected to the framework The BO reporting framework applies to all companies incorporated or registered under the CA 2016, all limited liability partnerships registered under the LLPA 2012, and government-owned or stated owned companies, unless exempted as follows:

Companies (a) Companies which are licensed by Bank Negara Malaysia under the Financial Services Act 2013, Islamic Financial

Services Act 2013, a prescribed development financial institution under the Development Financial Institutions Act 2002 or a licensed money services business under the Money Services Business Act 2011;

(b) Persons regulated under the securities laws as follows: i. Entity licensed or registered under the Capital Markets and Services Act 2007

ii. Stock exchange, derivatives exchange, clearing house and central depository approved under the securities laws; iii. Recognised self-regulatory organisation (SRO) under the CMSA 2007; and iv. Private retirement scheme administrator approved under the CMSA 2007; v. Companies whose shares are quoted in a stock exchange, either local or foreign exchange; vi. Companies whose shares are deposited in the central depository pursuant to the Securities Industry (Central

Depositories) Act 1991. This exemption is only applicable if all the shares in a company remain deposited with the central depository.

Limited Liability Partnerships The only limited liability partnerships which are exempted from the BO reporting framework are those which are licensed or regulated under the laws stated under paragraph (a) or (b) above.

The exemption is only applicable to notify the Registrar of BO information and not from the duty to provide the BO information to other authorities.

Exempted entities must make a declaration of their exempted status to the Registrar.

Initiation point of BO information The initial point for companies with respect to BO information is as follows:

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A company which is no longer exempted must comply within 60 days from the date when exemption ceases and notify the Registrar within 14 days from the date BO information is recorded; the 60-day period includes the 14 days to notify the Registrar.

Identifying, obtaining, recording and maintaining the BO information The reporting entity must be able to provide evidence that reasonable measures has been taken to identify, obtain, record and maintain the BO information.

To comply with its obligations, requirements of the reporting entities include the following:

(a) Send out a notice at least once a year for the purpose of submitting the Annual Return/Annual Declaration; (b) Where a reporting entity is unable to obtain the BO information, the reporting entity must show proof that attempts

to send at least 2 notices have been made, the proof is to be kept at the same place as the register of BO; (c) To verify the information when there is an obligation to enter a name into, or to change particulars in the register of

BO. It should be noted that this obligation is not extended to the Company Secretary and Compliance officer if verification has been carried out by the reporting entity;

Local Companies

New Companies Obtain information within 30 days from appointment of Company Secretary.

To enter BO information into register of BO within 60 days of receiving/obtaining BO information.

To notify Registrar within 14 days of entering information in to register

Existing Companies To notify Registrar within 14 days of entering information in to register

To lodge Annual Return, with BO information, within 30 days of anniversary

Foreign Companies

New Companies To obtain BO information at registration stage

To enter BO information into branch register

To submit BO information to the Registrar.

Existing Companies To enter BO information into register of BO within 60 days of receiving/obtaining BO information.

To notify Registrar within 14 days of entering information in to register

To lodge Annual Return, with BO information, within 30 days of anniversary

Limited Liability Partnerships (Local & Foreign)

New LLPs To obtain BO information for purpose of registration

Existing LLPs To notify Registrar within 14 days of changes

To lodge Annual Return, with BO information, within 90 days from financial year end.

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(d) Documents supporting the verification of the BO information must be kept until seven years after an individual ceases to become a BO; and

(e) The register of BO cannot be empty.

Transitional period During the transition period, which ends on 31 December 2020, reporting entities are required to obtain and maintain accurate, and up-to-date BO information.

After the transition period, reporting entities are required to submit the BO information to the Registrar within 14 days after the transitional period.

Implications of the reporting requirement All companies and LLPs are required to comply with this reporting requirement. Companies and LLPs with corporate shareholders and MNCs in Malaysia will be particularly affected.

This is especially critical for family owned MNCs and certain investment structures as many such entities may have used a nominee/proxy to incorporate the local entity and the share is still held by this nominee/proxy.

Who will be implicated Directors/Partners will be held responsible and liable for compliance, regardless of whether the nominee/proxy discloses the relationship with the UBO.

How we can hep Given that there is only 4 months till deadline, companies will have to move quickly. Deloitte is able to assist in the following:

(a) Train and brief the board of the requirements under Sec. 56 of the Act; (b) Brief the ultimate holding company and UBO of this requirement; (c) Establish an internal framework to identify, obtain, update and maintain BO information; (d) Develop an appropriate internal policy on BO reporting and to require shareholders to notify the company on the

identity of the BO and when there are changes in the BO information.

Deloitte need not be the Company Secretary to provide advisory services on UBO compliance. For enquiries, please contact:

Name Email address Contact number

Julie Tan jultan@deloitte.com +60 3 7610 8847

Eugene Chow euchow@deloitte.com +60 5 254 0288

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