By Iva Karen
KUALA LUMPUR, June 19: Companies looking to invest overseas are often faced with a recurring challenge — the unavailability or incompleteness of beneficial ownership information in foreign company registries, said a legal expert.
Lawyer Guok Ngek Seong said, investing companies have two primary courses of action, whereby investment decisions are put on hold until the required ownership information becomes available, either through public registries or verified by the relevant authorities in the host country.
Guok who has nearly 25 years of experience in both criminal and civil litigation, said the
second option, which is more proactive, is for investing companies to impose disclosure requirements on the target or investee companies.
“These would compel individuals with control over the company to declare the true beneficial ownership details. However, the second approach carries significant risks.
“The individuals disclosing the information may misrepresent facts or may themselves be acting as proxies for other undisclosed beneficial owners, potentially masking the true identity of controlling parties,” he said.
The lawyer who is currently sitting as an independent director of a company listed on Bursa Malaysia Bhd, explained that, such misrepresentation not only increases legal and reputational risks but also complicates the ability of the investing company to conduct a thorough and reliable due diligence process, especially in jurisdictions with opaque corporate governance structures.
He further said that the cross-border investment transactions typically begin with a non-disclosure agreement (NDA), a standard legal instrument that restricts the dissemination of sensitive information.
He said, this includes financial statements, contractual obligations, and legal documents crucial for decision-making.
“The purpose of the NDA is to ensure that information shared remains confined to authorised individuals — such as company directors, senior management, and due diligence professionals — thereby reducing the risk of breaching data privacy and protection laws in both jurisdictions,” he said.
Guok said that, in many cases, target companies may be involved in government or private projects subject to confidentiality clauses.
He said such contractual obligations may require the target company to seek prior written consent from its counterparties before disclosing any sensitive project-related information to a potential investor.
“Further complicating matters, certain licences issued to local companies by the host country’s regulatory authorities may include restrictive clauses. These clauses may prohibit the transfer of ownership, shares, or directorships to foreign entities without prior approval.
“If an investor remains interested despite such restrictions, they may choose to proceed on the basis that the licence conditions will be amended or varied by the appropriate authorities, typically as a condition precedent in the investment agreement.
“Alternatively, some companies opt to enter into trust agreements with existing shareholders or controllers of the target company,” he said.
Guok said, this allows indirect control or participation, but such arrangements may be challenged in courts, especially if deemed contrary to the public policy or laws of the host country.
“Given these complexities, companies are advised to conduct robust legal and regulatory assessments prior to proceeding with cross-border investments, particularly in jurisdictions where beneficial ownership transparency remains an issue,” he said.
–WE