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How to open a company in Malaysia

Our team of specialists in company registration in Malaysia provides a wide category of company formation services to local and foreign investors who want to enter a business activity here. Our representatives can offer assistance for the incorporation of any of the company types prescribed by the Malaysian legislation. With an extensive experience on the incorporation process requirements, our specialists in company formation in Malaysia can facilitate the registration of a business, respecting the rules and regulations of the local legislation.

 

What are the basic steps for opening a company in Malaysia? 


The incorporation process for company formation in Malaysia consists in drafting the company’s articles of association, alongside with the registration of compulsory documents; the company will be registered either as a company limited by shares or as an unlimited company. Our company incorporation specialists can offer you details related to the requirements that have to be fulfilled in order to open a company in Malaysia, such as the required number of partners associated in the business, directors or company secretary and other aspects. 

When opening a company in Malaysia, our company incorporation specialists can file for a proposed business name by completing a form and paying a fee of RM 30 for the proposed name (investors can provide maximum three options). The approval will be received from Companies Commission of Malaysia, to which the incorporation documents must be submitted no later than three months after receiving the approval for the trade name. Once these documents are approved by the local institutions, the company will receive a Registration Certificate


Why Open a Company in Malaysia


What are the main types of companies in Malaysia?  


Foreign investors interested in company formation in Malaysia may set up several types of legal entities, which can be chosen in accordance with the capital that will be invested in the business, as well as the investors’ plans on the local market.

The simplest way to open a company in Malaysia is by registering a sole trader, which represents a company type designed for natural persons. One should know that this business form does not require the completion of any audit formalities, nor does its founder have to submit annual filing, but the disadvantage is that the investor is fully responsible for the company’s debts.

Another common way for company formation in Malaysia is by registering a private limited company, a corporate entity that is selected for registration in the case of those setting up a small or medium-sized company. This company type is very popular for registration in Malaysia as the investors have a liability for the company’s debts that is limited to their capital investment. 

This type of company is seen as a separate legal entity than its founders, having a legal personality. A similar business form available here is the public limited company, which generally has the same structure as in the case of the private limited company, with the difference that this entity can offer its shares to the public.  

A public limited company is designed by for large businesses, which can be listed on the stock exchange, This company type can have larger costs for its company incorporation in Malaysia and its registration can take longer than other company types, due to its complexity and the approvals it needs. 

Compared to the private limited company, which can have a maximum of 50 investors, the public limited company does not have a limit with regards to the number of shareholders. The manner in which this company type can raise funds can also be more advantageous and you can address to our specialists in company formation in Malaysia for additional information on this legal entity. You can also rely on our consultants on the process of registering this company type. 

 

What other company types are available for foreign investors in Malaysia?  ​ 


Although foreign investors can set up their business operations in Malaysia by registering one of the above mentioned business forms, they also have the possibility of starting a business through a branch office or a subsidiary. The branch office represents a type of entity that is dependent to its parent company; when selecting the branch office for a business activity in Malaysia, investors must be aware that they may enter only the business activities carried out by the parent company. 

Investors should take into consideration that certain operations can’t be conducted through a branch office. Our team of consultants in company formation in Malaysia can advise on how to register a local branch and can explain the tax system applicable to those wishing to incorporate it. Other characteristics are mentioned in the list below:  
 

  • the branch office in Malaysia must have the same trading name as the one of the parent company;
  • it is usually selected for incorporation by businesses that want to expand on a given market for a short-term basis;
  • for its registration, it is necessary to appoint a representative agent, who must have his or her residency in this country;
  • the company’s financial documents must be audited and the company also has the obligation to file annual financial reports;
  • from a tax point of view, the branch is taxed as a non-resident company. 


Those who want to benefit from more legal rights and management independence can operate through a subsidiary, which represents a separate legal entity than its parent company. The subsidiary can be owned 100% by foreign investors, but there are certain limitations regarding specific business activities (education, banking, tourism, agriculture). When registering a Malaysian subsidiary, the registration process will follow the standard incorporation procedure available for local business and different steps may appear based on the chosen legal entity. 

Another legal option for opening a company in Malaysia as a foreign entity is by registering a representative office. However, this type of office does not represent a vehicle through which one can develop commercial activities. It may only be employed for carrying market research activities or for coordinating various operations of the parent company (such as maintaining a close relation with the partners the company has in Malaysia). 

Since it does not carry any commercial activities, the representative office does not have to follow the same accounting and reporting requirements applicable to other local entities. The representative office will only hire employees which are already employed by the foreign company or by a local subsidiary of the parent company. If you are interested in opening a company in USA or any other country, we can put you in touch with our local partners.
 

What is the procedure for opening a subsidiary in Malaysia? 


As presented above, the subsidiary is considered, from a legal point of view, a separate legal entity that must be incorporated following the process of company formation in Malaysia. Here, the investors who want to register a subsidiary will need to select a legal entity, but in most of the cases, the private limited company is the starting point for the registration of the Malaysian subsidiary.

The private limited company in Malaysia allows foreign investors to own 100% of the company’s shares, but, as mentioned above, the possibility of owning 100% of the company’s shares is limited to specific economic sectors; in the business fields regulated by the local government, foreign businessmen are allowed to invest, but they must associate with a local businessman. As a general rule, a foreign company which registers this business form is required to deposit a minimum share capital of RM 500,000 (or $115,000). 

The registration procedure begins at the Companies Commission of Malaysia, where the investors will be proposing a suitable trading name. Please mind that the institution charges fees for the registration process, which vary based on the company’s share capital (as mentioned above, as a foreign company, it is necessary to deposit at least RM 500,000, but investors can increase the capital).  

When referring to the structure of the company, it is necessary to know that it can have a maximum number of 50 members and it can be formed by a single shareholder (natural person or corporate body). The company must be represented by a director, who may be a Malaysian citizen or a foreigner. If the appointed director is represented by a foreigner, then he or she must have a residential address in Malaysia or must have a valid work permit issued by the local authorities. 
 

Why register a private limited company in Malaysia? 


Company formation in Malaysia under a private limited company is a common practice here, as this company type represents the most advantageous way to enter the business sector for those who want to register a small and medium-sized companies (SMEs). This company type is actually created to fit the needs of investors who want to begin their business operations under a SME and its characteristics are designed especially for this purpose. 

One of the main advantage is that it represents a separate legal entity, meaning that it can own properties in its own name, enter contracts and be sued or sue other entities. This means that the investors will not be personally held accountable for these aspects. Those who want to set up a company in Malaysia under this company type must know that there aren’t many restrictions for the its registration. 

This company type provides numerous advantages, one being the separation of the company’s liabilities from the ones of the investors. As a general rule, the private limited company is seen as an entity with simple compliance procedures and the costs associated with its registration are considered rather cheap (compared to other company types). 

As mentioned above, the company can be 100% foreign owned, this being an important advantage for foreign businessmen wishing to expand on this market. It also provides the possibility of increasing the capital by issuing more shares to its founders, but it must be noted that the shares can’t be sold on public markets.  
 

What is a limited liability partnership in Malaysia? 


The legislation on company formation in Malaysia prescribes additional options for local and foreign investors, when we refer to the legal entities that are available for registration. The Malaysian law offers the possibility of registering a hybrid entity, containing the characteristics of a private company and the ones of a partnership. 

Here, investors can set up a company in Malaysia as a limited liability partnership, which is regulated under the Limited Liability Partnership Act 2012. This company type was created for the purpose of promoting the development of the business market and it is designed for those who want to operate a SME. 

Overall, the limited liability partnership (LLP) is designed to act as a private company, in which the partners are not personally liable for the debts of the company, but which has fewer compliance requirements and an audit exemption as well. The LLP needs for its incorporation at least two partners, who can be natural persons or corporate bodies. 

The compulsory requirements for company formation in Malaysia in this case stipulate that the LLP must have at least one compliance officer who is a Malaysian citizen and who currently resides in this country (and who is at least 18 years old). Just like in the case of other company types, the LLP must have an official registered address, which can be a residential or commercial address.

Investors have to be aware that the LLP is taxed as a company and that this entity is founded based on a partnership agreement. Non-resident investors are also allowed to start an LLP in Malaysia. Also, although the LLP benefits from simpler compliance requirements, from an accounting point of view, the company must prepare specific accounting documents and maintain them throughout the financial year. More importantly, the LLP is obliged to maintain the accounting records for a period of seven years. 

 

What types of services are available for foreigners interested in company formation in Malaysia?

 

Our company formation specialists in Malaysia can further assist foreign investors by providing other types of services related to the registration of a business in this country. Foreign investors starting a business in Malaysia can also request legal assistance from our specialists for the following types of services: 
 

  • virtual office – a way through which a business can obtain an official business address in Malaysia, a legal requirement that must be met by all company types; 
  • accounting – our specialists can offer bookkeeping and payroll services, as well as compulsory submissions for goods and services tax;
  • opening a corporate bank account – this procedure can be completed at any commercial bank in Malaysia;
  • tax compliance services – available for all companies that need to register for taxes, including for value added tax;
  • consultation on the tax minimization methods or exemptions your company may be entitled to (if the company set up in Malaysia is a beneficiary of a double taxation agreement signed by the  Malaysian authorities with another partner jurisdiction, the legal entity is entitled to certain tax deductions which will be granted in accordance with the provisions of the respective agreement). 


Companies Commission of Malaysia


The Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia) was established in 2002 as the main body supervising the registration of new companies. The SSM represents an institution from which other investors can gather relevant information on other companies operating in Malaysia, which are required to provide to the general public various details about their business activities. 


Services provided by the Malaysia Company Register


The SSM is the institution where all the aspects of a company life, from its incorporation to its dissolution, are registered in real time, as the founders of a business will always have to provide up-to-date information on their company. 

The trading name, which has to be proposed by the shareholders of the new company, is registered at the SSM by following several rules; for example, it is recommended that the trading name should be formed from a maximum of 50 characters, and that includes the spaces between words. It is important to know that several business names are not accepted, as prescribed by the local legislation; our team of agents specialized in company formation in Malaysia can offer more information on these trading names. 

When starting a business in Malaysia, the investor should submit the Business Registration Form, containing information on the following: the business name, the place of business, the address of the branch (if applicable), information about the shareholders/partners and the business activity and the field in which the company will carry out its operations. The document must be signed by all partners and filed on the online platform of the institution. 


The Malaysian Companies Act 


The Malaysian Companies Act was enforced by the local authorities in 1965; since then, the Act has been amended several times, in order to comply with new local measures taken by the Malaysian institutions. In the Part I of the Act, one can observe the legal understanding of the subsidiary, as prescribed by the Malaysian law, as well as on the holding companies that can be set up here, but also the manner in which an investor can own company shares.  

Part II refers to the administration of the Act, which prescribes the legal rights of the institutions which regulate the activity of businesses in Malaysia. Section 7A stipulates that the governmental bodies, represented by ministries, have the legal rights to exempt legal entities, such as statutory bodies or government agencies, from paying various fees prescribed in the Act; our team of consultants in company formation in Malaysia can offer more information on this law. 
 

Why change the company type? 


The company type of a business carried out in Malaysia can be changed as an effect of several situations. For example, the respective entity does not represent the best interest of the company, even though for a period of time it was the most suitable option. 

For example, businessmen operating as sole traders in Malaysia may want to re-register the company under another legal entity that can provide a better legal ground in terms of protecting the company’s assets. In case of a sole trader, the investor is personally liable for the company’s debts, as there is no legal distinction between the businessman and the company. However, this regulation no longer applies in the case of a limited liability company.


What are the main reasons for investing in Malaysia? 


Investors can a numerous reasons for investing in Malaysia. For instance, the country has a very competitive labor market and it benefits from a strategic geographical location, providing access to other important markets in Asia. Malaysia is one of the most attractive destinations for starting a company as the registration procedure is very fast (approximately one week) and it is comprised of only three registration steps. 

Malaysia has a high level of productivity when referring to its workforce, ranking as the 3rd country at a global level on this matter. The Malaysian workforce has a high degree of knowledge and skills and this can be an attractive advantage for those seeking to expand on the Asian market, given the fact that the company’s employees represent one of the most important assets of a business. 

More importantly, foreign investors can find in Malaysia a suitable market due to the level of investor protection, guaranteed by the local legislation (the country ranks as the 4th global economy on this matter). In this sense, Malaysia has attracted so far more than 5,000 foreign companies from more than 40 countries and many of these companies have diversified their operations on the local market. With regards to the level of foreign investments in Malaysia, we mention the following:
 
  • the FDI stock in Malaysia increased from 2017 to 2018, from $146,602 million to $152,510 million respectively;
  • the number of greenfield investments developed by foreign companies in Malaysia also increased, from 151 in 2017 to 189 in 2018;
  • one of the leading investment sectors that is of interest for foreign investors is the real estate sector, which accounted for 23.7% of all the foreign investments in 2018, while other important investment sectors were the petroleum products industry (16.3%), basic metal industry (6.5%), electrical and electronic products (5.6%) and the mining sector (5.1%);
  • in 2018, the country’s main investor was China, accounting for 22.5% of all the foreign investments, while the next most important trading partners were Indonesia (10.3%), the Netherlands (9.5%), Japan (4.7%) and the United States of America (3.6%); 
  • Malaysia ranks as the 10th economy on the foreign direct investment confidence index, showing that the country provides suitable measures that can increase the number of foreign investors on the local market.
One of the most important aspects that help in the decision making process for opening a company in Malaysia or elsewhere refers to the taxation system applicable to a new legal entity incorporated on the respective territory. In terms of taxation, Malaysia offers the following benefits: 
 
  • Malaysian companies are not imposed with a withholding tax on the transfer of dividends to foreign entities;
  • there are no restrictions concerning the repatriation of company’s assets – such as capital, profits, royalties and dividends;
  • a local company can benefit from the tax exemptions available under the free trade agreements signed by the country with the ASEAN countries; 
  • at the same time, foreign companies can benefit from the provisions of the double taxation treaties signed by the country, which has concluded more than 60 agreements. 

Investors should also be aware that Malaysia is currently considered an expanding center for startup companies, currently being the third country in its region for this activity. A large number of startup companies registered in this country have expanded their operations in other countries in the region and our team of consultants in company incorporation in Malaysia can assist investors with advice on how to invest in other jurisdictions. 

Regarding the activity of startup companies operating in this country, Kuala Lumpur is set out to be the top destination for digital market sector, which is rapidly expanding in this city. Due to the fact that 75.9% of the Malaysian population uses smartphones (at the level of 2017), local businesses are trying to explore the economic opportunities that could derive from this increasing trend of using digital devices by creating new products and services. 

Foreign businessmen can obtain different types of visas when investing in this country. This is also applicable for a foreign director of a Malaysian business, who can obtain a visa sponsored by the company, provided that the company’s capital is above RM 500,000. 
 
Businessmen can also invest on the local stock market and the most popular investment vehicles are represented by exchange traded funds; relevant investments can also be concluded in the real estate sector. If you need further information on the company registration services offered here, please contact our Malaysian company incorporation specialists.

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