1. Introduction

On 31 January 2025, the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia) announced the phased implementation of the Companies Act 2024 Amendment.

Limited Liability Partnerships (Amendment) Act 2024 to Come into Force in Phases Starting 31 January 2025

The Malaysian government is implementing major reforms to its Companies Act in 2024 with the aim of strengthening corporate governance and bringing it into line with international standards.
The main pillars of this amendment are to require reporting of beneficial owners (hereinafter referred to as "BOs"), strengthen corporate rescue mechanisms, and promote sustainable governance.
Below, we will first briefly explain the contents of the press release from SSM, then provide an overview of the amendments to the relevant parts of the Companies Act and provide key points that Japanese companies should take note of.

2. Summary of the press release from SSM

The summary of the press release is as follows:
(1) Implementation Schedule
The revised Companies Act will be gradually implemented from January 31, 2025, and is scheduled to be fully implemented by December 31, 2025.
(2) Beneficial Controller Reporting System
BO reporting will be made mandatory with the aim of improving corporate transparency.
(The aim is to increase corporate transparency and combat money laundering and terrorist financing.)
(3) Strengthening corporate rescue mechanisms
The cross-class cram-down system and pre-pack scheme have been introduced to make it easier for companies facing financial difficulties to restructure.
(It means providing a legal framework to help restructure businesses facing financial difficulties.)
(4) Promoting sustainable governance
It is recommended that company directors clarify their obligations and incorporate ESG factors into management decisions.
(We will review our corporate governance procedures to promote sustainable operations.)

Below, we will explain the contents of the 2024 revised Companies Act with respect to (2) to (4) above.

3. Summary of the revised Companies Act regarding beneficial owners

The revised Companies Act clarifies the definition of BO and reporting obligations.
A BO refers to a "natural person that ultimately owns or controls a company" and is specifically identified by the following criteria:

• A person who directly or indirectly holds 25% or more of the company's shares
• A person who directly or indirectly controls 25% or more of the voting power of a company
• Those with the power to influence the composition of a company's board of directors
• Other individuals who have substantial influence over the company's management and policies

All Malaysian registered companies are required to identify and report their BOs through the SSM's electronic system (Electronic Beneficial Ownership System (e-BOS)).
Reported information is kept confidential and is primarily accessible to law enforcement and regulatory agencies.
Failure to comply with reporting obligations may result in penalties, including fines.

4. Overview of the revised Companies Act regarding business rescue mechanisms

The 2024 Companies Act amendments strengthen and introduce the following business rescue mechanisms to assist in the restructuring of companies facing financial difficulties:
(1) Revision of the provisional preservation order system
The scope and procedures for "protection orders," which temporarily suspend legal action from creditors while a company formulates and implements a restructuring plan, have been reviewed.
(2) Introduction of Cross-Class Cram-Down
Cross-class cram-down is a system that allows a corporate restructuring plan to be enforced with court approval, even if some creditors oppose it.
Even if there are disagreements between different types of creditor groups, a restructuring plan can now be enforced with court approval.
This will prevent the plan from being derailed by opposition from a small number of creditors and will enable a smoother reconstruction.
(3) Introduction of the Pre-Pack Scheme
A pre-pack scheme is a procedure in which a restructuring plan is quickly submitted to the court for approval, based on prior agreement with major creditors.
A procedure will be introduced to quickly submit a restructuring plan to the court for approval, subject to prior agreement with key stakeholders.
This will expedite the corporate restructuring process and prevent prolonged insolvency proceedings.

5. Summary of the revised Companies Act regarding strengthening sustainable corporate governance

The 2024 Amendment to the Companies Act has strengthened the following points to promote sustainable corporate governance:
(1) Clarification of the duties and responsibilities of directors
Directors' duties of loyalty and care will be clarified, and management decisions will be required to take into account the long-term sustainability of the company.
(2) Consideration of Environmental, Social and Governance (ESG) Factors
Companies are encouraged to take environmental, social and governance factors into account when making business decisions, promoting the realization of sustainable management.
(3) Strengthening information disclosure
Companies are now required to disclose not only financial information but also non-financial information (ESG-related information), and are required to communicate with stakeholders in a highly transparent manner.

6. Points to Note for Japanese Companies

In light of the above, Japanese companies should take note of the following:
(1) Obligation to report beneficial owners
Malaysian subsidiaries of Japanese companies are required to fulfil the BO reporting obligations.
(2) Utilizing business rescue mechanisms
If you find yourself in financial difficulty, the new procedures can help you quickly restructure your business, so it is wise to be aware of this option.
(3) Strengthening ESG management and governance
It is necessary to put in place a system that enables Malaysian subsidiaries to properly disclose ESG information.
(4) Risk of non-compliance
Failure to report or misreport beneficial ownership or failure to comply with governance regulations may result in fines and sanctions.

7. Summary

The 2024 amendments to the Companies Act aim to improve corporate transparency and promote stable economic growth in Malaysia, and will also affect Japanese companies in the country.
As the SSM has now decided to gradually implement the 2024 Companies Act amendments, Japanese companies doing business in Malaysia will need to prepare for new compliance measures, such as the requirement to report beneficial owners, the establishment of a new corporate rescue mechanism, and strengthening sustainable governance, and will need to carefully check the implementation schedule for the upcoming amendments.
In particular, different amendments will be applied in three phases on January 31, March 31, and December 31, 2025, so it will be necessary to respond according to the implementation date.