Malaysia

A. BUSINESS MODELS:-

Given below are the different types of business structures that can be set up in Malaysia. It is pertinent to mention here that regardless of the business that a person is running and depending on the business entity, registration of the business with the Companies Commission of Malaysia is required under the Registration of Businesses Act, 1956 (in case of Sole proprietorship and partnership); the Companies Act, 1965 (in case of a Company) or the Limited Liability Partnership Act, 2012 (in case of a Limited Liability Partnership):-

  1. Sole Proprietor (or Sole Trader)- Malaysiais owned solely by one individual, as his/her liability is unlimited.
  2. Partnerships– is a joint-entity holder with two or more persons to carry out a legal business in Malaysia. The Companies Commission of Malaysia requires that partnership entities must comprise of at least two (2) members and a maximum twenty (20) members. Partners in a partnership business entity are also bounded by unlimited liability.

As aforementioned, registration of the Sole Proprietorship and Partnership is governed by the Registration of Business Act, 1956. Business is defined under Section 2 of the Registration of Business Act, 1956 as, “business” includes every form of trade, commerce, craftsmanship, calling, profession., or other activity carried on for the purposes of gain, but does not include any office or employment or any charitable undertaking or any occupation specified in the Schedule;”. As per Section 5 of the said Act, registration of a new business to be done within 30 days from the date of commencement of the business. An application under subsection (1) shall be made in the prescribed form and shall state-

  • The name of the business;
  • The nature of the business;
  • The date of the commencement of the business;
  • The address of the place of business, and in the case of a business having more than one place of business, the addresses of the branches;
  • In the case of a partnership, the particulars of the partnership agreement, if any;
  • In respect of the associates of the business, their full names, positions held, and dates of entry into the business; and
  • Such other information as the Registrar may require.
  1. Limited Liability Partnership (LLP)– is a hybrid between a private limited company and partnership. It is similar to conventional partnership but with the advantages of a private limited company. The salient features of LLP are:-
  • It is body corporate and is a separate legal entity from its partners;
  • LLP has perpetual succession;
  • It is capable of suing and being sued, acquiring, owning, holding and developing or disposing of property; and
  • LLP has lesser compliance requirements and is therefore a more affordable business vehicle. For example, LLP is not required to audit its accounts annually.

An LLP may be registered by an application made to the Registrar by furnishing the following information:-

  • Name of the proposed LLP;
  • General nature of the proposed business of the LLP;
  • Proposed registered office of the LLP;
  • Name and details of every person who is to be a partner of the LLP;
  • Name and details of compliance officer(s) of the LLP;
  • If the LLP is formed for the purposes of carrying on any professional practice, the application shall be accompanied by an approval letter from the governing body as specified in the third column of the First Schedule of the LLP Act 2012; and
  • Such other relevant information as may be specified by the Registrar.

A registration of LLP is required to be done by the Compliance Officer appointed by the LLP.

  1. Sendirian Berhad (SDN BHD)– is a Private Limited Company, which prohibits any invitation to the public to subscribe to any of its shares, deposit money with the company for investment or subscription. Minimum members in a private limited company is two (2) and maximum is fifty (50).
  2. Berhad (BHD)– is a Public Limited Companywhere the shares (of the company) can be offered to the public for fixed periods and any other forms of subscription. The minimum amount of members’ (shareholders) are two (2) and maximum of unlimited amount of members.

Incorporation process of a Company in Malaysia involves the following steps-

  • Application of Name Search– A name search must be conducted to determine whether the proposed name of the company is available. The steps involved are: (i) Completion and submission of Form 13A CA (Request for Availability of Name) to SSM; and (ii) Payment of a RM30.00 fee for each name applied.
  • Lodging of incorporation document with the Suruhanjaya Syarikat Malaysia (SSM)– including the Articles of Association/Memorandum of Association; Form 48A (declaration by Director)-that he is not a bankrupt and has not been convicted and imprisoned for any prescribed offences; Form 6 (Declaration of Compliance)- This declaration states that all the requirements of the Companies Act have been complied with; and Additional Documents, if any.
  • Registration Fees- Each application for the incorporation of a company shall be accompanied with payment as per the schedule provided.

A Certificate of Incorporation will be issued by SSM upon compliance with the incorporation procedures and submission of the duly completed Incorporation Documents.

  1. Foreign Company- A foreign company/ foreigner intending to start business in Malaysia usually do so in one of the following ways:-
  • Branch Office- suitable for business entities that wish to expand their operations in Malaysia for short term basis. The ownership is exclusively that of the parent Company, however, there must be at least one Malaysia Resident Agent to set up the Branch. The liability extends to the parent Company.
  • Representative office- suitable for foreign Companies that wish to set up temporary vehicle in Malaysia to conduct research and act as liaison office and other activities which will not result directly in actual commercial transactions.
  • Subsidiary Company- Private Limited Company (identified through the words ‘Sendirian Berhad’) is the most common business vehicle in Malaysia. The basic requirements to set-up a Locally Incorporated Company under Companies Act, 1965 (“CA”) are the same for both Malaysian and Foreigner setup:-
  1. A minimum of two subscribers to the shares of the company (Section 14 CA);
  2. A minimum of two resident directors (Section 122);
  3. A company secretary who can be either be an individual who is a member of a professional body prescribes by the Minister  of Domestic Trade Cooperative and Consumerism; or an individual licensed by the Companies Commission of Malaysia (SSM); and
  4. A minimum authorized capital of RM 400,000 and paid up capital of RM2.

Both the director and company secretary shall have their principal or only place or residence within Malaysia.

B. ENTREPRENEURSHIP IN MALAYSIA–

Due in large part to the proactive steps the government has taken to build a positive infrastructure for the Malaysian entrepreneurship scene has even come to grow foreign startups that find Malaysia an easier place to grow their business than back home. In the recent years, the government has adopted a policy of allowing greater flexibility on foreign equity participation in local companies. Most foreign investors incorporate one or more companies in Malaysia through which all operations in Malaysia are carried out. Such companies may even establish Joint Ventures with local companies to enter into Malaysian corporate market.