The venture capital (“VC”) and private equity (“PE”) industry occupies a pivotal role in Malaysia’s capital markets ecosystem, channelling long-term investment into high-growth enterprises and early-stage innovators. Any person carrying on a business in any regulated activity as defined under the Capital Markets and Services Act 2007 in Malaysia must be licensed or registered with the Securities Commission Malaysia. To ensure market integrity and investor protection, the SC has established a robust regulatory framework under the Guidelines on the Registration of VC and PE Corporations and Management Corporations (the “Guidelines”) to allow a registration regime instead of a licensing regime for VC and PE firms in Malaysia.
Generally, a VC or PE fund in Malaysia may be structured as:
- a private company limited by shares, under the Companies Act 2016 of Malaysia;
- a limited liability partnership under the Limited Liability Partnership Act 2012 of Malaysia; or
- a Labuan limited partnership or a Labuan limited liability partnership under the Labuan Limited Partnerships and Limited Liability Partnerships Act 2010.
Who Must Register?
Any VC corporation, PE corporation, VC management corporation or PE management corporation must register with the SC if it is acting or offering to act as an investment manager or co-investment manager of a VC or PE fund.
Incidental activities are also permitted within this framework. A registered corporation may carry out activities incidental to its fund management activity, including dealing in securities in relation to arrangements of and investments of funds managed by the registered corporation, as well as the provision of investment advice on VC and PE to its clients or related entities.
Financial and Governance Requirements
A registered corporation must maintain at all times minimum net assets of RM100,000.
In addition, each registered corporation must have at least one responsible person whose appointment is subject to the prior approval of the SC. The responsible person must have a minimum of five years of relevant industry experience at least at a managerial level and must be a fit and proper person. In determining fitness and propriety, regard shall be had to the individual’s probity, competence, soundness of judgement, diligence, and whether the interests of customers are likely to be threatened by their holding of that position.
Investor Access and Investment Parameters
A registered corporation may only provide fund management services in respect of a VC or PE fund to sophisticated investors. From an investment perspective, such corporation may invest no more than 20% of the VC or PE fund’s committed capital in listed securities. This restriction does not apply where the investment was made prior to the listing of the venture corporation, arises from a corporate action, is undertaken for the purpose of taking the venture corporation private, or constitutes a private investment in public equity, provided in each case that the investment is not effected for trading purposes and is consistent with the fund’s investment strategy.
Ongoing Obligations
Registered corporations are subject to substantial ongoing compliance obligations. In particular, they must implement and maintain appropriate systems, procedures and controls, including policies on anti-corruption and whistleblowing, commensurate with the size of the fund under management and its risk profile. All material agreements, including the Management Agreement, Subscription Agreement and Shareholders’ Agreement, must be properly maintained and documented.
In relation to valuation, a registered corporation is required to establish and maintain a robust valuation framework for assessing investments in venture corporations. Adequate disclosures must also be made to ensure that investors have a clear and informed understanding of the methodology by which the portfolio is valued and priced.
Conclusion
The Guidelines represent a comprehensive and evolving regulatory architecture for Malaysia’s VC and PE landscape. Fund managers must remain alert to registration requirements, investment limits and ongoing governance obligations, as non-compliance carries regulatory and reputational risks. As the market matures, strong compliance will be integral to credible and sustainable fund management.
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