RAISING CAPITAL FOR BUSINESS VIA INTEREST SCHEMES ACT 2016 FOR SMEs

RAISING CAPITAL FOR BUSINESS VIA INTEREST SCHEMES ACT 2016 FOR SMEs IN MALAYSIA – REGULATED BY SURUHANJAYA SYARIKAT MALAYSIA

Section 43(1) of Malaysia’s Companies Act 2016 (CA 2016) prohibits private companies, e.g. Sdn. Bhd., from offering shares or debentures to the public, allotting shares with the intention to offer to the public, or inviting the public to deposit money with the company. This prohibition ensures that private companies remain distinct from public entities, e.g. Berhad, and reinforces their characteristic of having a limited number of shareholders, typically 50 or fewer.

An Interest Scheme is a method for companies, particularly SMEs, to raise funds in Malaysia by pooling capitals from the public in exchange for a stake or interest in a specific scheme where in normal circumstances may not be possible. These schemes are regulated by the Suruhanjaya Syarikat Malaysia (SSM) under the Interest Schemes Act 2016, which provides a framework for different types of investment, recreational, and time-sharing schemes and offers protections for investors.

Purpose and Benefits

  • For Companies:

Provides an alternative source of funding for business expansion beyond traditional methods, typically raised via bank borrowings.  Capital intensive businesses such as plantation, technology, medical, logistics, recreational and other similar businesses are encouraged.

  • For Investors:

Offers a diverse investment option to generate passive income at a transparent price, alongside safeguarding risks.

Types of Schemes

The “Interest Schemes Act 2016” allows for several types of schemes:

  • Investment Schemes:

It allows funding of all types of businesses and schemes.

  • Recreational Membership Schemes:

For clubs and resorts offering facilities like golf courses or vacation clubs.

  • Time-Sharing Schemes:

Allowing for the right to use a property or facility for a specific period.

  • Hybrid Schemes:

A combination of any of the above schemes.

Regulation by SSM

  • The SSM is the registrar that oversees these schemes, providing investor protection and strong regulatory controls.
  • Companies seeking to offer an interest scheme must apply for registration under the Interest Schemes Act 2016.

How to Find More Information

We, Megat Faizal Musa & Co, a Firm of Chartered Accountants, licensed by Malaysian Institute of Accountants and Companies Commission of Malaysia, provides extensive services in accounting/finance, tax submission, secretarial and corporate advisory services.

We are a multilingual firm, proficient in English, Malay, and Chinese languages.