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Equity Crowdfunding (ECF) in Malaysia

Equity Crowdfunding (ECF) in Malaysia | Bestar
Equity Crowdfunding (ECF) in Malaysia | Bestar

How ECF Works

Equity crowdfunding (ECF) is an innovative form of alternative fundraising that allows start-ups or micro, small and medium enterprises (MSMEs) to raise capital from a group of investors, using online platforms registered with the Securities Commission Malaysia (SC). ECF allows small businesses to offer equity in their companies to investors, who in turn invest in the concept which they see potential in.

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 now 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. Through ECF, investors can diversify their investments beyond traditional asset classes.

Ten ECF platforms have been registered to date.

How Issuer Raises Funds through ECF Platform

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.

These factors allow the ECF operator to assess and determine whether the issuer’s business proposition meets the eligibility criteria to be hosted on its platform. The issuer’s campaign will be hosted on the ECF platform where investors will then select and invest accordingly.

How SC Regulates ECF Activities in Malaysia

The SC regulates ECF activities in Malaysia by registering the ECF operators (ECF operators) as recognised market operators pursuant to the Guidelines of Recognized Markets (RMO Guidelines). The RMO Guidelines, among others, sets out registration requirements and imposes a set of obligations applicable to an ECF operator. Ongoing obligations imposed on an ECF operator include ensuring compliance with disclosure requirements and governance arrangements, carrying out due diligence exercise on prospective issuers planning to use its platform and ensuring investors’ monies are properly safeguarded.

To learn more about the SC's regulatory framework for ECF, please refer to the RMO Guidelines. These Guidelines set out the registration requirements and obligations for the ECF operators.

Eligibility Criteria for ECF Platform Provider

An applicant that wishes to be registered as an ECF operator must be a body corporate locally incorporated under the Companies Act 1965. The prospective applicant must be able to demonstrate to the SC that it is able to satisfy the relevant criteria mentioned in the Recognised Market Operator (RMO) Guidelines. An ECF operator must also comply with the following requirements:

  • 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.

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

Obligations and Key Regulatory Requirements for ECF Operator

In addition to the general obligations as set out in the RMO guidelines, key obligations of an ECF operators are found in Chapters 6 and 13 of the RMO Guidelines. As the ECF operator plays a critical role in ensuring confidence in the ECF platform, the RMO Guidelines require the ECF operator, among others, to:

  • Ensure users’ (including both the investors and issuers) compliance with the platform rules.

  • Carry out due diligence on the potential MSMEs / issuers wanting to fund raise on its platform and may deny an issuer access to its platform if it is of the view that the issuer or the proposed offering is not suitable to be hosted on the platform.

  • Ensure that funds obtained from investors are safeguarded in a trust account maintained by an independent trustee to remit / handle monies until the funding goal is met and appropriate disbursements are made.

  • Establish systems and controls for maintaining accurate and up-to-date records of investors' monies held to safeguard from conversion or inappropriate use by its officers.

Notwithstanding the above and other requirements stated in the RMO Guidelines, an ECF operator is also required to comply with other relevant SC guidelines and regulations, including but not limited to:

• Guidelines on Prevention of Money Laundering and Terrorism Financing for Reporting Institutions in the Capital Market;

• Guidelines on Management of Cyber Risk; and

• Guidelines on Advertising for Capital Market Products and Related Services.

ECF operators must have in place processes for complaints handling or dispute resolution. Such information must also be made accessible to all investors.

Additional Obligation Imposed for the Offering of Shariah-Compliant Equity on ECF platform

An ECF operator must also comply with Chapters 12 of the RMO Guidelines for the offering of Shariah compliant equity on its platform.

Who can Raise Funds through ECF

Only locally incorporated private companies (excluding exempt private companies) and limited-liability partnerships can raise funds from the ECF platform. The following entities are prohibited from raising funds through an 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 can only raise funds on one ECF platform at any one time. An issuer may be permitted to be hosted on an ECF platform and peer-to-peer (P2P) platform at the same time, subject to disclosure requirements as may be specified by the platform operators.

An issuer can only raise up to RM3 million within a 12-month period, through several campaigns. In total, an issuer may only raise a maximum amount of RM20 million through ECF platforms in its lifetime. This amount excludes the issuer’s own capital contribution, or any funding obtained through a private placement exercise.

The concept of ‘all or nothing’ is applied to the ECF fundraising exercise. In this regard, an issuer must raise the targeted amount from investors, or the campaign is considered unsuccessful.

The issuer is only allowed to keep the funds raised on an ECF platform within the targeted range of fundraising amount (minimum and maximum amount). A campaign is considered successful once the targeted amount sought to be raised has been met.

When the ECF campaign is unsuccessful (if the funds raised on an ECF platform is less than the target amount), all monies collected are returned to the investors. A targeted range of fundraising amount (minimum and maximum amount) must be set for each ECF campaign.

Who can Invest in an ECF Platform

There are three types of investor categories:

​Investor Type

​ Criteria

Retail Investor

​Refers to an individual who is not an angel investor or a sophisticated investor.

​Angel Investor

​Refers to an individual— (a) who is a tax resident in Malaysia; and 2 (b) whose total net personal assets exceed RM3 million or its equivalent in foreign currencies; or (c) whose gross total annual income is not less than RM180,000 or its equivalent in foreign currencies in the preceding 12 months; or (d) who, jointly with his or her spouse, has a gross total annual income exceeding RM250,000 or its equivalent in foreign currencies in the preceding 12 months.

​Sophisticated Investor

​Refers to any person who— (a) falls within any of the categories of investors set out in Part 1, Schedule 6 and 7 of the CMSA; or (b) acquires any of the capital market product or Islamic capital market product offered or traded on a recognized market where the consideration is not less than RM250,000 or its equivalent in foreign currencies for each transaction whether such amount is paid for in cash or otherwise.

Investment in any issuer is open to all ECF investors, subject to the following limits:

​Investor Type

​Investment Limit

​Retail investor

A maximum of RM5,000 per company and, with a total amount of not more than RM50,000 within a 12-month period

​Angel investor

A maximum of RM500,000 in total within a 12-month period

​Sophisticated investor

​No investment limit

ECF represents an additional investment asset class where investors can have the option to diversify their investments beyond the traditional asset classes to suit their goals and risk profile. Remember to ask questions, read all information given carefully, and seek independent financial advice before committing yourself to any investment.

ECF investors are given a six business days cooling-off period for investments made on an ECF platform, during which they may withdraw the full amount of their investment. In addition, if there is any material adverse change relating to an issuer, the investors must be notified of such change.

How Investor Invests through ECF

The process for investing through an ECF platform may differ from operator to operator depending on the rules set by the ECF operators. In general, upon understanding and analysing the information disclosed by issuers concerning its business, financing purpose, financial information and risk information published on the ECF platform, an investor will then make an informed investment decision on the issuer, including the amount they wish to invest in.

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.

An ECF operator must make available relevant information on the issuers hosted on its platform. This includes the issuers' key characteristics, business plan, and purpose of fundraising and financial information.

Additionally, the ECF operator is required to disclose information on general risk warnings, appropriate risk disclosure of issuers and display prominently on how its platform facilitates the investor's investment including providing communication channels to permit discussions about issuers hosted on its platform.

Further, all fees, charges and other expenses relating to the investment must be disclosed by the ECF operator.

Secondary Market to Sell Equity

An ECF operator can offer a secondary market for the trading of the equities / shares raised on its platform, subject to the approval of the SC. ECF operators can set up a secondary market that will allow ECF investors to sell their equity to interested buyers. The provisions and obligations on secondary market can be found in paragraphs 13.33 to 13.43 of the RMO Guidelines.

Apply to be Registered as ECF Operator

Interested applicants should submit their application to the SC. However, do note that applications are currently opened only for an operator who wishes to operate a shariah compliant ECF platform as announced on 31 Oct 2022. The SC will make the relevant announcement for the opening of application of other types of ECF platform.

Certified true copies of the following documents required


  • Certificate of incorporation/ registration

  • Memorandum or articles of association, partnership agreement or any constituent document

  • Most recent annual audited financial statements/ Balance sheet and profit and loss account

  • Annual return / annual declaration

  • Return of allotment of shares form (Section 78)

  • Return giving particulars in Register of Directors, Managers and Secretaries, and Changes of Particulars (Section 58)


  • For Individuals: Certified true copy of the National registration identity card (NRIC) for Malaysian citizen or passport details (for non-Malaysian citizen)

  • CVs, qualifications and experience of the individual Controller(s). Controller is as defined in Guidelines

  • For Corporation: Certified true copy of the certificate of incorporation/ registration

  • Please provide an organisation chart showing the Applicant and its relationship with its shareholder/ partner and up to its ultimate shareholder(s)/partner(s)


  • For Individuals: Certified true copy of the National registration identity card (NRIC) for Malaysian citizen or passport details (for non-Malaysian citizen)

  • CVs, qualifications and experience of the individual


  • Certified true copy of the National registration identity card (NRIC) for Malaysian citizen or passport details (for non-Malaysian citizen)

  • CVs, qualifications and experience of the individual

For more information on the ECF operator application process, please refer to the RMO Guidelines.

Application Fee

The application fee is RM5,000 as prescribed under Capital Markets and Services Regulation 2012 upon submission to the SC.

How Bestar can Help

Bestar can help ECF in a number of ways, including:

  • Providing guidance on the regulatory requirements: Bestar is familiar with the regulatory requirements for ECF in Malaysia. We can help body corporates ensure that they are compliant with all applicable laws and regulations.

  • Providing assistance with the incorporation process: Bestar can help body corporates with the incorporation process, including drafting the Memorandum and Articles of Association and obtaining the necessary approvals from the relevant authorities.

  • Providing administrative support: Bestar can provide administrative support to body corporates, such as managing the share register, issuing share certificates, and maintaining the company's records.

  • Providing advice: Bestar can provide advice to body corporates on a range of matters, such as contract drafting, shareholder disputes, and compliance with the Companies Act 2016.

Overall, Bestar can help ECF to achieve their goals of raising capital for businesses and providing investors with access to new investment opportunities.

Here are some specific examples of how Bestar has helped ECF:

  • We helped FundedByMe, a ECF platform that operates in Singapore and other countries, to manage their share register and issue share certificates.

We are confident that we can help ECF to achieve their goals. If you are interested in learning more about how Bestar can help you, please contact us.


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