Updated: Dec 5, 2020
Guidelines for the Incorporation of Local Companies l Registration of a Business l Starting Company l Starting Up Business l Registering Business Entities In Malaysia
What is incorporation of a company? Can a foreigner incorporate a company in Malaysia? How much does it cost to set up a company in Malaysia? What is foreign company in Malaysia?
Methods of Conducting Business in Malaysia
In Malaysia, a business may be conducted:
i. By an individual operating as a sole proprietor, or
ii. By two or more (but not more than 20) persons in partnership, or
iii. By a limited liability partnership (LLP), or
iv. By a locally incorporated company or by a foreign company registered under the provisions of the Companies Act (CA) 2016.
Types of Businesses
1. Sole Proprietorship/Enterprise
A sole proprietorship or enterprise is a business that owned by a single individual owner. The name of the company and its business is also registered under a private name or the name of the business owner himself/herself. This business is registered at the Suruhanjaya Syarikat Malaysia (SSM)
It only takes 1 hour to register this type of business. Usually, the capital used for this business is small, and can be raised by the owner’s assets, or borrowed from friends, family, and banks that offer microfinance. For example grocery store, shoe shop and so on
A partnership business is similar to a sole proprietorship, except it has more than one (1) owners but no more than 20 owners. Usually, the capital used for this business is small, and can be raised by the owner’s assets, or borrowed from friends, family, and bank loans. The profit of the company can be distributed according to the amount of capital, labour and under agreement from the members of the partnership. Losses are also shared equally. An example of a partnership business is accounting firms, law firms and so on.
In the case of partnerships, partners are both jointly and severally liable for the debts and obligations of the partnership should its assets be insufficient. Formal partnership deeds may be drawn up governing the rights and obligations of each partner but this is not obligatory.
3. Limited Liability Company (Sdn Bhd )
A limited liability company (Sendirian Berhad or Sdn Bhd) is a business that registered under the Company Act 2016. A limited liability company has Sdn Bhd at the end of its name, for example Syahlam Sdn Bhd and Terus Maju Sdn Bhd. The ownership of a limited liability company is between 2-50 people.
A limited liability company does not involve personal assets, where its liabilities are limited. If there are any losses to the company or it becomes bankrupt, the losses do not involve the owner’s assets, but the company’s assets. This is one of the advantage of a Sdn Bhd.
4. Public Limited Company (Berhad)
A public limited company is easily defined as companies which are listed in Bursa Malaysia. The shares of the company listed in Bursa Malaysia can be bought or sold by the public. For examples TM, Padini, Aeon, Petron, Nestle and many more. A public limited company can be owned by a minimum of two owners, up to an unlimited number of owners. The liabilities and debts are limited, which does not involve personal assets. Its capital can be gained from the sales of shares to the public, and the minimum amount is 100 units and its price depends on the price of the units on that particular time.
A cooperation is formed to increase the income of its members. Each cooperation must have at least 50 active members, and if either one of the 50 active members become inactive, the cooperation cannot run. A cooperation is established according to Cooperation Act 1993 where members can profit through dividends if the cooperation profits. They can also vote for a Board Member in an Annual Grand Meeting. A cooperation must register under Suruhanjaya Koperasi Malaysia (KPM).
There are three (3) types of companies that can be incorporated:
i. A company limited by shares is a company formed on the principle that the members' liability is limited to the amount, if any, unpaid on the shares taken up by them.
ii. A company limited by guarantee where the liability of the members is limited to the amount which the members have undertaken to contribute to the assets of the company in the event the company is wound up.
iii. An unlimited company is a company formed on the principle of having no limit placed on the liability of its members.
Company Limited by Shares
The most common company structure in Malaysia is a company limited by shares. Such limited companies may be incorporated either as a private company (identified through the words "Sendirian Berhad" or "Sdn. Bhd." as part of the company's name) or a public company (identified through the words "Berhad" or "Bhd." as part of the company's name).
Company shall have name;
One or more members;
In the case of a limited company with shares, one or more shares; and
One or more directors
The limits of the number of members of a private company is 50.
A company having a share capital may be incorporated, changes its status into or remains as a private company if it:
i. Restricts the right to transfer its shares
ii. Limits the number of its members to 50, excluding employees in the employment of the company or its subsidiary and some former employees of the company or its subsidiary
iii. Prohibits any invitation to the public to subscribe for its shares and debentures
iv. Prohibits any invitation to the public to deposit money with the company for fixed periods of payable at call, whether interest-bearing or interest-free.
A public company can be formed or, alternatively, a private company can be converted into a public company. Such a company can offer shares to the public provided:
i. It has registered a prospectus with the Securities Commission; or
ii. It has lodged a copy of the prospectus with the SSM on or before the date of its issue.
A public company can apply to have its shares quoted on the Bursa Malaysia subject to compliance with the requirements laid down by the exchange. Any subsequent issue of securities (e.g. issue by way of rights or bonus, or issue arising from an acquisition, etc.) requires the approval of the Securities Commission.
Requirements for Company Incorporation
The basic requirements to incorporate a company are:
(a) Private company (Sdn. Bhd.)
- at least one (1) director who ordinarily resides in Malaysia by having a principal place of residence in Malaysia and minimum of one (1) promoter; or
(b) Public company (Bhd.)
- at least two (2) directors who ordinarily reside in Malaysia by having a principal place of residence in Malaysia and minimum of one (1) promoter.
Incorporation Information Needed
To incorporate a company, an application must be made to the SSM by providing the following information:
- the name of the proposed company;
The name of the company shall appear in legible Romanized letters, together with the company number, on its seal, official documents, publications and website, if any.
- the status whether the company is private or public;
- the nature of business of the proposed company;
- the proposed address of registered office;
A company must maintain a registered office in Malaysia where all books and documents required under the provisions of the Act are kept.
- the name, identification, nationality and ordinary place of residence of the member of the company;
- the name, identification, nationality and ordinary place of residence of every person who is to be the director;
In addition, a private company is required to have at least one director whereas a public company must have at least 2 directors. Each of the minimum director(s) must have his principal or only place of residence within Malaysia. The minimum age of a director is 18 years and there is no specified maximum age. A director of the company need not necessarily be a shareholder of the company.
- in the case of company limited by shares, the details of class and number of shares to be taken by a member;
- in the case of company limited by guarantee, the amount up to which the member undertakes to contribute to the assets of the company in the event of its being wound up.
PROCEDURES FOR COMPANY INCORPORATION
1. Name Search and Application of Name
Requirement for approval of company name from SSM.
A name search must be made to ensure that the proposed name is available. There are two ways to apply for a name of a company:
(i) application for the name and incorporation of a company (Direct Incorporation); or
(ii) name reservation.
Direct incorporation (a combination of name reservation and incorporation process)
1. The applicant must complete the information during the application for the name and incorporation of a company via online and the application must be accompanied with incorporation fee of RM1,000 in the case of company limited by shares; or RM3,000 in the case of a company limited by guarantee; and
2. If the proposed name is approved by SSM, the application to incorporate the company would be directly sent to the officer to be processed.
1. The applicant must complete the information for the name of the company online and the fee is RM50.00 for each name applied. Incorporation of company is a separate process; and
2. If the name is approved by SSM, the name is reserved for 30 days or any longer date as allowed by the Registrar (maximum 180 days) from the date of approval. The applicant can then submit the incorporation application with a fee of RM1,000 in the case of company limited by shares; or RM3,000 in the case of a company limited by guarantee.
2. Lodgement of application to incorporate the company
Incorporation information required to incorporate a company is as follows
(a) The applicant must complete the information required as follows:
• The proposed name of the company
• The status of a private or public company
• The proposed type of business
• The address of registered office
• The business address
• Complete details of director(s) and promoter(s)
• Declaration from the director(s) or promoter(s) that he/she:
➢ is not an undischarged bankrupt either in or outside Malaysia; and
➢ has not been convicted of any offence whether in or outside Malaysia
(b) Declaration of Compliance from individuals responsible for incorporation
This declaration states that the applicant has complied with all requirements of the Companies Act 2016. The declaration should be made by the individual who is responsible for the incorporation.
(c) Additional Document(s)
(i) a copy of consent letter from the corporate body named as the member of the company.
(ii) a copy of certificate of director’s qualification, if required.
(iii) a consent letter from relevant agency, if any.
3. Incorporation Fee
Each application to incorporate the company should be lodged together with a fee as follows:
(a) Company limited by shares - RM1,000
(b) Company limited by guarantee - RM3,000
4. Verification of Incorporation
Once the Registrar is satisfied that all information provided is complete and complied with the required procedures—
(a) a notice of approval and registration will be emailed to the applicant; and
(b) a certificate of incorporation will only be issued by SSM upon request together with the prescribed fee.
The notice serves as conclusive evidence that the requirements in respect of registration and matters precedent and incidental to the registration have been complied with.
Incorporation of a company may be approved within 1 day. SSM processes, approves and registers a complete application in a speedy and efficient manner within the time period stated as follows:
Incorporation of a company 1 day
Conversion of status 1 day
Change of company name 1 day
Commencement of business for public companies 1 day
Registration of charge 2 days
Approval of a trust deed 5 days
Registration of prospectus 3 days
Uncertified copy of company documents 30 minutes
Certified copy of company documents 1 hour
Requirements of a Locally Incorporated Company
A company secretary must be appointed within 30 days after the incorporation of the company. The secretary shall be licensed by the Registrar of Companies and possess a valid practising certificate issued by SSM. The secretary of a company must be a natural person of full age who has his principal or only place of residence in Malaysia.
The company must also appoint an approved company auditor to be the company auditor in Malaysia.
Company's constitution is a non-mandatory option for company limited by share. If required by the company, it may file the constitution of the company after the incorporation of the company.
A company cannot deal with its own shares or hold shares in its holding company. A holder of a share has the right to vote on a show of hands on any resolution of a company at a general meeting. In a case of a poll, each equity share of a company carries the right to one vote.
Once incorporated, the company is advised to obtain the necessary license/permit/approval from the relevant authorities before commencing business.
If you would like to know more, please contact Bestar.