Malaysia 1MDB
The 1MDB scandal casts a towering shadow over Najib Razak's tenure as prime ministerManan Vatsyayana/Getty Images

Malaysia's state fund 1Malaysia Development Berhad is set for a roller coaster ride as its sole shareholder, the Ministry of Finance steps in to undertake a major reshuffle of its assets and management. One of the first steps the MoF announced was the dissolution of the fund's advisory board, chaired by Prime Minister Najib Razak.

It was Najib's chairmanship of the fund's advisory board that came under severe scrutiny amid allegations that funds from 1MDB had been diverted into his personal accounts via a web of complex bank transfers. The fund is now under investigation in several international jurisdictions over allegations of money-laundering and bribery although none of them involve the prime minister.

The MoF has also accepted the collective resignation of the fund's board of directors. They submitted their resignations following the publication of the Public Accounts Committee's report into the fund last month. The all-party parliamentary committee had criticised the board over alleged mismanagement and had recommended that an investigation be initiated into its former chief executive. It also cleared Najib of any wrong doings pertaining to 1MDB.

The new board of directors will be appointed "to reflect the limited business profile of 1MDB," the MoF said in a statement. 1MDB President Arul Kanda however will remain in his role until further notice, it added.

"[Arul] will continue to focus on his specific mandate to implement the rationalisation plan, which will include resolution of the recent contractual dispute with IPIC [International Petroleum Investment Co]," the Ministry said.

That is not all, the Ministry of Finance is also taking over ownership of 1MDB's subsidiaries and land assets in Bandar Malaysia Sdn Bhd, TRX City Sdn Bhd, Air Itam and Pulau Indah. Ownership will be transferred to the Ministry of Finance Incorporated or MoF Inc, the statement added.

It is not immediately clear what assets will remain with 1MDB. At publication time, 1MDB has yet to issue a statement.

The Ministry however was silent on the status of the debts linked to these assets. In January, the fund's debt stood at RM50bn ($12.5bn). Last month, the fund defaulted on a $50.3m interest payment on a $1.75bn bond which triggered cross defaults on some of its other bonds. The default, 1MDB maintained was limited to its very public spat with Abu Dhabi sovereign fund IPIC.

The other changes proposed by the MoF include amending all references of Prime Minister in the fund's company articles to Minister of Finance. It also has agreed to the recommendation by PAC to remove Article 117 which requires the prime minister's written approval for all of 1MDB's financial commitments, including investments, and matters such as the appointment to the board of directors.