Companies incorporated under the Companies Act 2016 in Malaysia have mandatory annual compliance filings that need to be lodged with the regulator, Suruhanjaya Syarikat Malaysia (SSM). In general, this includes the Annual Return and Financial Statements.
Annual Return is carried out through an online filing through the Malaysian Business Reporting System (MBRS) portal that must be made by qualified individuals such as appointed company secretaries/ local agents within 30 days from the anniversary of the registration date. Upon submission, this document would be publicly available, with basic information of the entity. This includes among others, the nature of business, address of the company, the particulars of directors and shareholders, and the shareholding structure.
On the other hand, audited/unaudited Financial Statements refer to a set of documents that reflect and summarise the financial position and performance of an entity during the financial year, which is prepared in accordance with the applicable approved accounting standards. These financial statements need to be circulated to the relevant parties and submitted to the SSM within a prescribed time frame. Certain types of entities may opt for audit or lodgement exemptions, if they qualify.
All companies from privately-owned to multinationals are not spared from their annual compliance duties.
What are some common pitfalls or challenges faced by business owners and organisations?
These include:
- Navigating the complex online submission requirements
- Lack of a dedicated resource to oversee these time consuming tasks including the paperwork required
- Lack of knowledge and best practices to comply with stringent procedures
- Risk of overlooking important deadlines or milestones
Failure to comply with the filing requirements and the Companies Act 2016 would result in financial and legal implications to the company and its directors. With the enhanced enforcement by the SSM, we are also seeing an increase in the number of compounds being issued to the companies and directors who are in breach of the Companies Act 2016.
In extreme cases, the non-compliance would lead to forceful shut down of the entity by the regulator especially for repeat or serious offenders, resulting in a costly, tedious and lengthy process to reinstate the entity. In addition, companies will need to be aware of constantly changing regulations and business practices and keep up with global developments and market trends.
What are some benefits of maintaining statutory compliance obligations?
Companies that are able to do so often benefit from improved performance and have better control over procedures and processes in their business. The secretarial function may not be seen as a core function in a business but it is critical to minimise risks and limit exposure to the consequences of non-compliance, such as fines, prosecution, reputational damage or director disqualifications. Having the right support would enable you to have peace of mind to focus on your core duties, business strategy, growth and profitability.
Ensuring compliance and other requirements under the Companies Act 2016 should be a priority for all companies but could be easily overlooked and overstretch your resources unnecessarily if one is not familiar with the local legislations. The regulations and requirements would be updated regularly following global market trends where the SSM has heightened legislative enforcements such as the upcoming revision of the beneficial ownership regulations to increase transparency of an entity’s structure.
Commentary by the Corporate Services Team at PWC
