The Law amending the Law on Trade Companies, published in the Official Gazette no. 120/18 on 29.06.2018, entered into force on 07.07.2018. Namely, this law excludes the provisions on silent partnership from the Law on Trade Companies (Official Gazette of RM no. 28/04, 84/05, 25/07, 87/08, 42/10, 48/10, 24/11, 166/12, 70/13, 119/13, 120/13, 187/13, 38/14, 41/14,138/14, 88/15, 192/2015, 6/2016, 30/2016, 61/16, 64/18) under the rationale that the exclusion of these provisions would increase transparency and reduce tax evasion through the availability of information on the legal and real owner of the legal entities, and would improve the access to such information for the tax administration, so that the tax administration can use such information for their purposes and exchange them with other tax administrations.

Just to be clear, a silent partnership does not have the status of legal entity and is not recorded in the trade register, and furthermore, third parties do not know the identity of the silent partner.

Namely, the Law amending the Law on Trade Companies, makes amendments in Article 500 paragraph 7 by indicating that the annual report on the operations of the company that acquired 10% of the shares in another company and did not inform that company on the acquisition, shall include the identity of all natural and legal persons that participate in the equity. The report shall include the changes that occured throughout a year long period. Furthermore, this law erases the titles before the articles and the articles 567, 568, 569, 570, 571, 572, 573, 574, 575, 576, 577 and 578 which refer to silent partnership, and Article 5 from the Law amending the Law on Trade Companies defines that when the law enters into force, the legal possibility to create silent partnership shall cease, in other words the silent partnerships made before this law entered into force, shall be no longer valid.

On the other hand, the Law amending the Law on Trade Companies allows for the contracts made with silent partner, or silent partnership, to continue to be applied in accordance with the Law on Obligations, which practically means that this Law instructs entities to regulate such relations through the provisions that refer to contracts on partnership, where two or more persons, partners, shall mutually bound themselves to join their property and labour or part of their property and labour, for the purpose of obtaining mutual benefits and distribution of such benefits (as a profit).

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