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In brief

The Minister of Domestic Trade and Cost of Living (“Minister“) had appointed 1 April 2024 as the date of coming into force of the Companies (Amendment) Act 2024 (“CA 2024”), which was first tabled for reading before the Dewan Rakyat on 10 October 2023, and received Royal Assent on 24 January 2024. 


A summary of the key issues to be noted in respect of the CA 2024 is set out below. 

1. Beneficial Ownership (“BO”)

(a) Who is a beneficial owner (“BO”) pursuant to the CA 2024?

The definition of BO has been expanded to include: (a) in relation to shares, the ultimate owner of the shares and does not include a nominee of any description; and (b) in relation to a company, a natural person who ultimately owns or controls a company and includes a person who exercises ultimate effective control over a company.

(b) Is it mandatory for a company to obtain BO information and when is the reporting obligation triggered?

Yes. Commencing 1 April 2024, it will be mandatory for a company to obtain the BO information from its shareholders. CA 2024 also requires relevant steps be taken to disclose the BO of a company, if the company knows or has reasonable grounds to believe that (a) a person is a BO of the company; or (b) any shareholder or person knows the identity of the BO of the company.

(c) Does a company need to maintain a register of BO?

Yes, effective from 1 April 2024, it will be mandatory for a Malaysian incorporated company to maintain a register of BO. Such register is required to be kept at the registered office of the company or any other place in Malaysia, as notified to the Companies Commission of Malaysia (“CCM”).

(d) Who can access the BO information?

The Minister has the discretion to prescribe any person, including law enforcement agencies and competent authorities, to have access to the register of BO of the company or BO information lodged with the CCM.

(e) If a company has yet to obtain any BO information, would it be deemed to be non-compliant when the CA 2024 comes into force on 1 April 2024?

Yes. It is expected that the CCM will issue guidelines or practice directives relating to the implementation of the revised BO reporting obligations, which may or may not include the concept of a transition period for companies to identify and notify the CCM of their BOs.

Please refer to our client alerts issued on (i) 11 March 2024 and (ii) 24 October 2023 for details relating to the key changes to the BO provisions.

2. Corporate Rescue Mechanisms

(a) Will companies still be able to apply for restraining orders after the CA 2024?

Yes.  In fact, following the amendments from the CA 2024, a company will be automatically entitled to a moratorium from the date of filing of an application for a scheme of arrangement.  There is also now a mechanism for a related company of the distressed company to apply for a restraining order, subject to the meeting of relevant criterias.

However, the CA 2024 prohibits the grant of a restraining order to a company that has been the subject of a restraining order within the past twelve (12) months.

(b) I am a creditor of a company in distress, and the company is planning to enter into a scheme of arrangement.  How will the CA 2024 affect me?

The CA 2024 has introduced a “pre-pack” scheme mechanism, where a distressed company may apply directly for sanction of the scheme, without having to first apply to the Court to convene a meeting of creditors. 

The CA 2024 has also introduced a “cross-class cramdown” system, where an application may be made to the Court to bind all creditor classes to the scheme, even where there are creditor classes that voted against the proposed scheme. 

On the other hand, it is mandatory following the coming-into-force of the CA 2024, for the chairperson of the meeting of creditors to be a Court-appointed insolvency practitioner or a person elected by the majority in value of the creditors or members.  This should give more comfort to creditors as to the impartiality of the chairperson.

Further, as a scheme creditor, you are now also entitled to inspect other scheme creditors’ proof of debt.

(c) What is super priority rescue financing?

Super priority rescue financing is applicable to scheme of arrangement and judicial management proceedings. It enables rescue financiers to attain better priority or security over other creditors in distress.

(d) What additional protection can companies in distress expect with the CA 2024?

The CA 2024 introduced a restriction on a counterparty’s right to enforce a contractual clause allowing for the termination of a contract upon the occurrence of an insolvency-related event (e.g., when the company becomes subject of a scheme of arrangement proceedings), if the contract in question relates to the supply of essential goods and services. 

The CA 2024 also empowers the Court with a discretion to grant longer periods of judicial management.

(e) Can public listed companies avail themselves of all corporate rescue mechanisms pursuant to the CA 2024?

No. Although the CA 2024  is meant to allow for corporate voluntary arrangements to be made available to a larger group of companies (i.e. to remove the exclusion applicable to public listed companies from being able to apply for corporate voluntary arrangements pursuant to the Companies Act 2016), these provisions have been specifically excluded from the Minister’s order made regarding the coming into force of the CA 2024. Public listed companies will not be able to apply for a corporate voluntary arrangement after 1 April 2024.

Please refer to our client alert issued on 24 October 2023 for details relating to the key changes to the provisions concerning corporate rescue mechanisms.

Looking Ahead

We anticipate that the CCM will introduce new BO reporting guidelines and practice directives on the implementation of the revised BO reporting obligations, and we look forward to studying how the changes outlined above will take place in practice. We are also optimistic that the CA 2024 will better balance the rights and interests of both distressed companies and their creditors. 

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Author

Eddie Chuah is a partner with the Dispute Resolution and Compliance Practice Group. He is involved in all aspects of civil litigation, arbitration, industrial relations disputes and compliance. He undertakes a wide variety of briefs as lead counsel in complex litigation and arbitration matters. His briefs include all types' of commercial disputes including post M&A disputes, restructuring and insolvency litigation. He also focuses on compliance issues, in particular, anti-corruption investigation, government procurement, fraud, audit and prevention. Eddie was awarded Young Lawyer of the Year by the Asian Legal Business Malaysia Law Awards 2018. He has also been recognised by Benchmark Litigation as a Future Star in the areas of Commercial and transactions (2019 – 2021), Construction, Insolvency and Labour & Employment (2019 – 2021). He is regularly sought after for his ability to simplify complex disputes / legal issues and to provide strategic input to implement solutions to assist clients in achieving successful outcomes.

Author

Ee Von Teo is a partner in the Corporate, Commercial & Securities Practice Group of Wong & Partners. Ee Von is an experienced partner in the area of M&A and has worked on numerous award-winning deals across the years. She was also awarded Young Lawyer of the Year by the Asian Legal Business Malaysia Law Awards 2017, and recognized in the Asian Legal Business' 40 under 40 list of leaders in 2018. Ee Von has been recognized as a Notable Practitioner by IFLR1000 since 2018, and clients commend her for being "excellent."
She is a frequent speaker and moderator on the Malaysian corporate landscape and legislation at international conferences, including those organized by the American Chamber of Commerce (AMCHAM).

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Ee Na Teo is an Associate in Wong & Partners, Kuala Lumpur office.

Author

Mak Ming Jie is a Legal Assistant in Wong & Partners, Kuala Lumpur office.

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