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Joint Publication By:

Nurul Hanani Ahmad (Associate)

Morgan Phrasaddha Naidu Puspakaran (Pupil)

Nazatul Akmal Azma (Pupil)

Global Banking Division, EzriLaw Firm


As compared to conventional forms of capital raising, equity crowdfunding (“ECF”) is an alternative form of fundraising that allows businesses to raise capital from the general public using online platforms regulated by the Securities Commission (“SC”). We will dwell on the concept of ECF and the rules that apply to ECF operators in Malaysia.

ECF is an online fundraising platform for start-ups or micro, small and medium enterprises (“MSME”) to raise early-stage financing from a group of investors. Investors who provide financing to the start-up or MSME via ECF will receive equity or shares from the company and will become one of the shareholders of the company. Over time, if the company’s business does well, the investor who is currently a shareholder will benefit from either the potential dividend paid out by the company; sale of the shares to new investors or if the company becomes eligible to list on the stock exchange.

The SC regulates ECF activities in Malaysia by registering the ECF platform operators as Recognized Market Operators (“RMO”) pursuant to the Guidelines of Recognized Markets (“RMO Guidelines”). The RMO Guidelines were issued pursuant to Section 377 of the Capital Markets and Services Act 2007 which sets out the registration requirements and obligations imposed on the RMO.

The SC may register a person as an RMO if that the person satisfies the criteria under Chapter 3 of the RMO Guidelines. To be eligible to be registered as an ECF operator, the applicant must be a body corporate incorporated under the Companies Act 2016. The prospective applicant must be also able to demonstrate to the SC that it meets all RMO Guidelines' requirements, which include but not limited to the following:

  • The applicant will be able to operate an orderly, fair and transparent market in relation to the securities or derivatives that are offered or traded on or through its platform;

  • The applicant will be able to carry out its obligations as set out under the RMO Guidelines;

  • The information or document that is furnished by the applicant to the SC is not false or misleading nor does it contain any material omission; and

  • The applicant is not in the course of being wound up or otherwise dissolved.

The RMO shall have the obligations set out in Chapter 6 of the RMO Guidelines and in addition to its obligations in Chapter 6, the RMO must, among others:

  • Undertake a due diligence exercise on prospective issuers planning to use its platform;

  • Ensure that the issuer’s disclosure document lodged with the ECF operator is verified for accuracy and made accessible to investors through the ECF platform;

  • Inform investors of any material adverse change in the issuer’s proposal;

  • Ensure that the fundraising limits imposed on the issuer are not breached; and

  • Ensure that the investment limits imposed on the investor are not breached.

The detailed requirements and obligations of RMO can be further found in the RMO Guidelines by accessing this link:

A start-up or MSME who raises financing on an ECF platform is referred to as an issuer. When an issuer applies for funding, the ECF operator will evaluate and assess the issuer's eligibility by, among others, assessing its business proposal, conducting background checks on the issuer, assessing the fit and properness of its shareholders/promoters and ensuring all relevant disclosure documents lodged by the issuer are true and accurate.

Only locally incorporated private companies (excluding exempt private companies) and limited-liability partnerships can raise funds from the ECF platform. The following are the list of entities that are not permitted to raise fund through the ECF platform:

  • Commercially or financially complex structures (i.e. investment fund companies or financial institutions).

  • Public listed companies and their subsidiaries.

  • Companies with no specific business plan or their business plan is to merge or acquire an unidentified entity (i.e. blind pool).

  • Companies, other than a microfund, which propose to use the funds raised to extend loans or invest in other entities.

  • Companies, other than a microfund, with a paid-up share capital exceeding RM10 million.

  • Any other type of entity that is specified by the SC.

An issuer may only raise collectively, a maximum amount of RM10 million through ECF platforms in its lifetime. This excludes the issuer’s own capital contribution, or any funding obtained through a private placement exercise.

A person may invest in any issuer hosted on the ECF platform, subject to the following limit on the investment amount:

For this type of crowdfunding, angel investor refers to an individual:

  • who is a tax resident in Malaysia; and

  • whose total net personal assets exceed RM3 million or its equivalent in foreign currencies; or

  • whose gross total annual income is not less than RM180,000 or its equivalent in foreign currencies in the preceding twelve months; or

  • who, jointly with his or her spouse, has a gross total annual income exceeding RM250,000 or its equivalent.

Investors are allowed a cooling off period of six business days, during which they can withdraw their entire investment amount. In any case, investors are advised to evaluate and understand investment risks before making any investment decisions. Investing in start-ups and early-stage businesses involves high risks, including loss of investment, illiquidity, lack of dividends and dilution, and it should be done only as part of a diversified portfolio.

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