The Practical Guide to Starting a Business in Malaysia
Malaysia, as one of the most open economies in the world, emerges to be an ideal location for setting up a business. Strategically located in Asia, Malaysia has lower start-up costs compared to other Asia-Pacific countries, thus attracting increasingly more entrepreneurs to form their companies there. This article will outline some procedures for setting up a company in Malaysia and a few points to note for good corporate governance.
Company incorporation in Malaysia
There are various types of business entities in Malaysia. Amongst them, sole proprietorship and partnership are the simplest and most economical forms since annual filings are not compulsory. Owners are only required to pay an annual fee for business renewal.
On the other hand, the most common form of business entity in Malaysia is private limited company (Sendirian Berhad, in short Sdn. Bhd.). Since a private limited company has a separate legal entity, owners’ personal assets are protected. It is important to note that foreigners can only set up a private limited company in Malaysia but not the other forms of business.
Limited liability partnership (“LLP”) is a combination of a private limited company and partnership. LLP is a separate legal entity from its partners but has fewer compliance requirements relative to limited companies, making it an affordable type of business ownership.
For large businesses, the form of a public limited company is likely beneficial since it offers the option to raise capital by selling shares to the public. A public limited company is governed and listed by the Securities Commission of Malaysia.
If you already have a company incorporated outside Malaysia, you can establish your company in Malaysia by incorporating it as a private limited company with foreign shareholder ownership, or registering it with the Companies Commission of Malaysia as a foreign branch. A foreign branch would not be considered as a separate legal entity under the Malaysian Companies Act 2016 since it is only seen as an extension of the parent company instead of a new entity.
Procedures and requirements for setting up a private limited company in Malaysia
To form a private limited company in Malaysia, you need at least one shareholder, one director and a company secretary. The company secretary and at least one director should have their principal or only place of residence within Malaysia, and directors of the company must be 18 years old or above, and not be bankrupt or convicted of any offence. There is no minimum paid-up capital for the company.
- Identification documents of the director and company secretary and a proposed registered address for the company are required. Once these documents are ready, you can proceed to apply for incorporation of the company. The name of the company should include the term “Sdn Bhd”.
- The incorporation form and the proposed company constitution along with the supporting documents should be submitted to the Companies Commission of Malaysia.
- After that, you can apply for a certificate of incorporation and prepare the minutes book and the company kit. According to the Companies Act, there is no requirement for issuance of a share certificate, but the shareholder of the company could send a formal letter to the company secretary to request one if necessary.
- When the company is incorporated, you can then open a bank account in Malaysia.
The whole process of registering a private limited company takes around 8 to 11 days.
Corporate governance in Malaysia
This article will end with some points to note for good corporate governance in Malaysia. To achieve long-term success, the board should be responsible for setting good corporate governance practices and ensuring that the company has met its objectives and goals. The board should also be supported by a competent company secretary to provide governance advice and ensure compliance of rules and procedures.
Furthermore, it is important for directors to observe their responsibilities for good corporate governance. They may be personally liable for breaching their general duties or failing to comply with specific duties. In addition, directors who contravene the Companies Act commit an offence and are liable to imprisonment and/or fine
Accordingly, a director should exercise his rights for a proper purpose, in good faith and in the best interests of the company. Generally, directors have the right to allot shares to members in proportion to their shareholding and authorise the payment of dividends, subject to any limitation contained in the Companies Act and/or the company’s constitution.
This summary is for information purposes only. Its contents do not constitute legal advice and should not be regarded as a substitute for detailed advice in individual cases. Transmission of this information is not intended to create, and receipt does not constitute, a lawyer-client relationship between JC Legal and the user or browser. JC Legal is not responsible for any third-party content which can be accessed through the hyperlink provided in this summary.