Enhancing Transparency and Accountability: Key Amendments to the Limited Liability Partnership Act 2012

On 1 April 2024, we welcomed the introduction of amendments to the Companies Act2016 (“CA 2016”) on beneficial owners (i.e its definition, duty to disclose, annual return requirements, etc.). Subsequently, in a bid to improve transparency and accountability within limited liability partnerships (“LLP”), the Limited Liability Partnership (Amendment) Act 2024 (“LLPAA 2024”) was gazetted on 17 October 2024, though it has yet to come into force.

The LLPAA 2024 introduces several amendments to the Limited Liability Partnership Act 2012 (“LLPA 2012”) including time for compliance with the requirements under the LLPA 2012 (new section 70A), substitution of section 76 of the LLPA 2012 to include electronic means as way of service of documents, and a new section 76A on publication or advertisement on the website of the Companies Commission of Malaysia (“CCM”).

This article will be focusing on two pertinent amendments to the LLPA 2012 — ­­­­­the introduction to the beneficial ownership reporting and disclosure framework (introduced as a new Part IIIA) and the concept of corporate voluntary arrangement and judicial management of LLPs (new sections 49A and 49B).

Introduction to Beneficial Ownership Reporting and Disclosure

The LLPAA 2024 has introduced a new Part IIIA to govern beneficial ownership reporting and disclosure framework of LLPs.

It sets out the definition of beneficial owner and grants the registrar of the CCM (“Registrar”) the power to issue guidelines on identifying beneficial owner of LLPs. In line with this, CCM has issued a consultation on the proposed guideline for the reporting framework for beneficial ownership of LLPs. This consultation, together with case studies and illustrations, relatively similar to the approach taken for the beneficial ownership reporting under the CA 2016, contains step by step approach for the application of the new Part IIIA. It covers proposed scopes of reporting, entry points of the beneficial ownership information and criteria to determine beneficial owners. However, do note that this is still a consultation document and has yet to be enforced or finalised by CCM.

Further, Part IIIA provides a list of details that must be included in the register of beneficial owners. These can be found in section 20B(1) which states:

LLPs are obligated to require any partners to disclose if they are the beneficial owner. If they are not, then to indicate persons (whether by name or other particulars to make identification easy) who are beneficial owners. LLP has 14 days from the date the information is received to record the information in the register of beneficial owners (section 20C(4) of the LLPA 2012).

Additionally, a beneficial owner is to notify the LLP if there are any changes to their particulars, including when they cease to be a beneficial owner. The date and particulars of the cessation must be notified as soon as practicable (section 20D(3) of the LLPA 2012).

LLPs that are already subjected to similar reporting obligations may be exempted from their obligations under Part IIIA by the domestic trade minister. The exemption maybe subjected to such terms imposed by the Minister. Failure to abide by the requirements in Part IIA, LLPs and every partner and compliance officer can be liable for the following:

• Section 20B: Fine not exceeding RM 20,000. If the offence continues, a further fine not exceeding RM 500 for each day.
• Section 20C (1)-(6): Commits an offence.
• Section 20D: Any person who contravenes this section commits an offence.

Corporate voluntary arrangement and judicial management

In addition to the introduction of the beneficial ownership framework, the LLPAA 2024 introduces the concept of corporate voluntary arrangement and judicial management. Section 49A of the LLPA 2012 provides that Division 8 of Part III (in so far as they relate to a company limited by shares and except for sections 395 and 403 and paragraph 1 of the Eight Schedule) of the CA 2016 and the Companies (Corporate Rescue Mechanism) Rules 2018 shall apply to the voluntary arrangement and judicial management of an LLP. Nonetheless, this is subject to such modifications and adaptations as may be necessary.

Moreover, Section 49B imposes that an insolvency related clause in any contract for the supply of essential goods and services shall not be exercised against LLPs. However, it is pertinent to note that section 49B(2) provides an avenue to a supplier who wishes to exercise his rights pursuant to an insolvency related clause in a contract. They must inform the LLP of their intention in writing at least 30days before exercising their rights and taking any action.  

Section 49B shall not prevent a supplier from exercising his other rights, including right to payment for essential goods and services provided to an LLP, under a contract for supply of essential goods and services. The newly inserted Fourth Schedule provides a list of the essential goods and services that is covered.

In conclusion, the recent amendments introduced in the LLPAA 2024 marks a promising shift towards improved governance and accountability in LLPs. With these new frameworks and future guidelines, stakeholders have the opportunity to enhance cooperate governance and embed greater transparency in their reporting practices.

If you have any questions or require any additional information, please contact Chan Xian Ai, or the Zaid Ibrahim & Co (in association with KPMG Law) partner you usually deal with. This article was prepared with the assistance of Ellesya Myra Faredz, Associate at Zaid Ibrahim & Co (in association with KPMG Law).