Company Registration in Malaysia- An Overview
In the last few years, Malaysian economy has seen upward trend. As a result, the number of investors investing in Malaysia has also gone up. With a liberalised market it has so much to offer especially for foreign investors.
Registering a foreign company in Malaysia is quite seamless and straightforward. The companies which are registered as public limited companies have the suffix in the name Berhad (BHD). If a company is registered as a private limited company in Malaysia then the company would have a suffix in the company’s name as Sendirian Berhad (SDN BHD). Hence if the applicant wants to go for the process of company registration in Malaysia then the documents along with the prescribed procedure has to be considered.
The government of Malaysia has promoted foreign investment in the country. Hence the government allows majority of foreign ownership for such industries. Encouraging this will increase the amount of foreign investment in the country.
Before going for the process of company registration in Malaysia the applicant has to consider all the requirements to be in compliance of Malaysian local law. The main law that regulates company registration in Malaysia is the Companies Act, 2016.
Regulatory Authority/ Body for Company Registration in Malaysia
The primary regulatory authority for company registration in Malaysia is the Suruhanjaya Syarikat Malaysia (SSM). This authority is the nodal agency known as the Companies Commission of Malaysia. Apart from this, the law which regulates companies in Malaysia is the Companies Act, 2016.
What are the preferred Industries to Start Business in Malaysia?
For company registration in Malaysia, the following sectors are thriving. Hence there will be lot of local government support for the above areas to flourish.
The following are the preferred industries and sectors to start a business:
- Banking and Finance;
- Oil, Petroleum and Natural Gas;
- Tourism Outbound and ticketing.
Benefits of Company Registration in Malaysia
The following benefits are present for the applicant by incorporating the company in Malaysia:
- Start-up costs are very low compared to Singapore and other Asian countries.
- Rental Rates are also lower than Singapore (and other Asian countries)
- Lower Wages as the average wages are $2.31 USD per hour which is far less when compared with other countries.
- Malaysia has 68 double taxation treaties with other countries; hence there is no Double Taxation on income generated in Malaysia.
- There are no Withholding Taxes on dividends paid outside of Malaysia.
- There are no restrictions on Malaysian corporations upon repatriation of capital, profits, dividends, and royalties.
- The government of Malaysia has given strong incentives and subsidies to encourage business formation and capital investment.
- Foreign investors prefer Malaysia particularly due to the level of investor protection, guaranteed by the local legislation.
Types of Business Structure in Malaysia
The following are the companies incorporated in Malaysia:
- Sole Proprietorship-
This form of entity can be easily set up in Malaysia. The sole proprietorship business structure requires only one owner, and his/her liability is unlimited. Personal income or assets of the owner won’t protected in case the company is declared bankrupt or in debt.
- Private Limited Company
A private limited company is a separate legal entity from its owners, which means that it can buy/sell property, enter into legal contracts and sue or get sued in courts. The owners shall be liable only to the amount they have contributed to the company, their personal assets will be left untouched if something happens to the company.
- Public Limited Company
A public limited company means a company whose shares can be offered to the public. Public limited companies are listed on the stock exchange and is governed by the Securities Commission of Malaysia.
- Unlimited Company
An unlimited company provides unlimited liability to the members and shareholders meaning if there is a loss or the company falls under debt, the members and shareholders shall be personally responsible.
- Foreign Company (Branch office and Representative Office)
Foreign companies desiring to have an understanding of the Malaysian business environment can set up a representative office. A representative office does not have any independent legal stature in Malaysia. Therefore, the parent company shall be responsible for the debts and liabilities.
A branch office is an extension of the foreign parent company. Here also the foreign parent company shall be liable and responsible for all the debts of the branch in Malaysia.
- Limited Liability Partnership
An LLP has the characteristics of a partnership and a company. It is a body corporate and is a separate legal entity from its partners. An LLP can be set up under the Limited Liability Partnership Act 2012.
Minimum Requirement for company registration in Malaysia
The following requirements have to be satisfied by the applicant for company registration in Malaysia:
A minimum of two subscribers or members is required for company registration in Malaysia.
Apart from this, there must be minimum of two directors. At least one director must be a natural person. The directors must be resident of Malaysia. There must be no form of proceedings against the directors. This will include any form of insolvency or bankruptcy proceedings. All the duties of the directors have to be carried out in accordance to the requirements under the Companies Act, 2016.
The Company must also have a qualified company secretary as per the provisions of the Companies Act, 2016. The governing provisions with respect to the company having a company secretary are section 238(1) and section 238(2). An individual would not be competent to carry out the duties of a company secretary if the individual is insolvent or incompetent to carry out responsibilities. The company secretary must have residence in Malaysia. The company secretary will either be:
- An individual who is a member of a professional body prescribed by the Minister of Domestic Trade Cooperative and Consumerism; or
- An individual who has been given license by the Companies Commission of Malaysia (SSM)
- The proposed director and company secretary in a Malaysian company shall have their principal or only place or residence within Malaysia.
As per the requirements of the Companies Act, 2016 the company must be established with proper objects. Such objects have to be present in the Memorandum of Association of the company. The company is allowed to carry out activities which are lawful. No company can be registered to carry out unlawful activities.
Documents Required for Company Registration in Malaysia
- Original copy of name application Form 13A.
- A copy of the letter from SSM approving the name of the company.
- A copy of the identity proof of each proposed director and company secretary.
- Declaration of Compliance which has to be signed by the company secretary of the registered company. The name of the company secretary would be present in the memorandum of association and articles of association.
- Memorandum of Association signed and stamped by the SSM.
- The information on the directors of the company.
- Information on the subscribers of the company.
- Table A of the Fourth Schedule of the CA can be adopted as the Article of Association of the company.
- The articles of association of a private company shall contain the following stipulations:
- Restriction on the right to transfer the company’s shares;
- Limitation on the number of members to not exceed the prescribed limit;
- Prohibition to any invitation to the public to subscribe the shares/debentures of the company; and
- Prohibition on the public invitation to deposit money with the company.
- The director or promoter shall give a declaration under oath, in the prescribed form, that:
- He/She is not a bankrupt; and
- He/She has not been convicted and imprisoned for any prescribed offenses.
What is Procedure for Company registration in Malaysia?
Incorporation process of a Malaysian Company is very much similar to that of Indian Company incorporation. The following step by step procedure has to be carried out for company incorporation in Malaysia:
- Name Search
- Reserving the Name
- Notice of Registration
- Certificate of Incorporation
Name Search and Name Reservation-
A name search is conducted to check the availability of the proposed name. The proposed name of the company should be unique and should not be similar to any name that is already in use. The name has to comply with the requirements related to the companies’ act of Malaysia. No offensive terms must be utilised. Apart from this the name of the company must be not breaching any forms of intellectual property rights. The name has to be reserved.
In the application for company registration the company incorporation details must be provided. The details related to the directors must be provided by the applicant and the details of the shareholders or members must be provided by the applicant.
The applicant must also provide a declaration for company registration in Malaysia. Such declaration would state that all the information provided in the application is correct to the knowledge of the applicant.
Notice of Registration-
After these steps have been completed, the SSM will review and check the application for any form of inconsistencies with the application. If there are no problems related to the application, then a notice of registration would be provided.
The company Incorporation Documents needs to be submitted to SSM within 3 months from the date of approval of the company’s name, failure of which a fresh application for a name search will be required to be submitted to SSM.
Certificate of Incorporation-
Upon compliance with the incorporation procedures and submission of the duly completed Incorporation Documents with prescribed fee, a Certificate of Incorporation is issued by SSM. After the incorporation, the company shall obtain the required license/permit/approval from the relevant authorities before starting to carry on any business outlined in the Memorandum of Association.