New qualifying criteria for audit exemption for private companies in Malaysia commencing on 1 January 2025

On 16 December 2024, the Registrar of the Companies Commission Malaysia (CCM) released Practice Directive No. 10/2024 (P.D. 10/2024), outlining the new qualifying criteria for audit exemption for certain private companies.

Qualifying criteria for audit exemption

Under the P.D. 10/2024, a private company qualifies for audit exemption if it meets at least two (2) of the following criteria:

The annual revenue of the company during the current financial year and in the two (2) immediately preceding financial years do not exceed RM3,000,000;
The total assets of the company in the current statement of financial position and in the two (2) immediately preceding financial years do not exceed RM3,000,000; or
The number of employees at the end of the current financial year and in the immediately preceding two (2) financial years do not exceed thirty (30).

The threshold criteria for exemption from the audit requirement will be implemented in a three-year phased plan starting in 2025, with the thresholds for turnover, assets and number of employees being gradually increased in each phase and the new exemption criteria mentioned above being fully implemented for the financial period beginning on or after 1 January 2027.

Submission of unaudited financial reports

P.D.10/2024 also specifies the requirement for unaudited financial reports and the list of documents to be submitted to the registrar, together with the unaudited financial reports, by a company that has opted for an exemption from the audit.

Application

P.D. 10/2024 shall apply to financial statements for financial years beginning on or after 1 January 2025. It should be noted that P.D. 10/2024 does not apply to the following companies:

an exempt private company that has chosen to file a certificate of its exempt private company status with the Registrar of Companies in accordance with section 260 of the Companies Act 2016;
a public company, including a listed company;
a private company that is a subsidiary of a public company; and
a foreign company.

A company that no longer meets the requirements for an exemption from the audit requirement is no longer exempt, but remains exempt with respect to the accounts for the financial years in which it met the requirements for an exemption from the audit requirement.

P.D. 10/2024 establishes comprehensive criteria and procedural requirements for private companies seeking exemption from the audit requirement, and these new criteria will certainly increase the number of companies eligible for an audit exemption. It is imperative that companies keep up to date with and comply with these new regulations in order to maintain their exemption status and avoid potential issues associated with non-compliance.