Most shareholders in Malaysian companies focus on their rights: dividends, voting, returns. Far fewer are aware that once their shareholding crosses a specific threshold, they take on a legal obligation under the Companies Act 2016 that continues for as long as they hold shares, and the penalties for ignoring it are substantial.

Under Section 136 of the Companies Act 2016, a person becomes a substantial shareholder the moment they hold an interest in voting shares representing 5 percent or more of the total voting shares in the company. This is not limited to shares registered in their own name. It includes indirect interests and interests held through nominees or associates.

Once that threshold is crossed, Section 137 requires the substantial shareholder to give written notice to the company within five days. The notice must state their name, nationality, address, and full particulars of the voting shares in which they have an interest, including the name of the registered shareholder if the interest is held through another person.

The obligation does not end there. Under Section 138, every time there is any change in the substantial shareholder's interest in voting shares, whether through acquiring more shares, disposing of shares, or any other change in the nature of the interest, they must again notify the company in writing within five days. When they cease to be a substantial shareholder entirely, Section 139 requires a further notice within five days.

Any person who contravenes Sections 137 or 138 commits an offence under the respective subsections, liable on conviction to a fine of up to RM1 million, with a continuing daily fine of RM1,000 for each day the breach continues after conviction.

These disclosures are also directly relevant for income tax purposes. Where a substantial shareholder is also a director and owns 20 percent or more of ordinary share capital, Section 75A of the Income Tax Act makes them jointly liable for unpaid company tax, as covered in our earlier article.

Our CFO advisory team helps shareholders stay compliant across both the Companies Act and tax obligations. WhatsApp 010-246 2151.

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