A foreigner can register a corporation in Malaysia with 100% foreign ownership. This is called a Sdn Bhd. In order to have complete foreign ownership, the company must be in specific industries as dictated by the government.
The following are a few of the industries in which the Malaysian government is trying to encourage foreign investment.
- Petroleum, Oil and Gas
- Banking and Finance
- Tourism Outbound and Ticketing
The list will change according to the economic needs of Malaysia.
Malaysian Foreign Owned Company Process
There are many challenges for a foreigner establishing a corporation in Malaysia, so do not expect the process to be easy. Here are some of the steps involved.
- A conversation about the type of business you plan to conduct.
- Identity of the corporate shareholders and directors.
- Three possible names that you would like to call your company. Names will be checked for availability.
- Preparation of documentation with company name, shareholders and directors.
- Articles of incorporation submitted to the government in Malaysia.
- Issuance of a Registration Certificate
In order to form a Sdn Bhd (Private Limited Company) Malaysia, according to the Company Act 1965 you will need the following:
- At least 2 directors
- At least 2 shareholders
- Decision as to ownership. Do you want to restrict the type of business you can do by owning 100% of the company? Or do you want more flexibility in the products and services it sells by having part of the company owned by a Malaysian?
The following section is on Malaysian Incorporation, in general, regardless of foreign or local ownership.
Malaysia Corporation Introduction
Malaysia offers incorporation to people worldwide since 1965 when their Companies Act was enacted. Malaysian corporations enjoy the same rights and privileges which other international corporations enjoy around the globe.
Benefits of a Malaysia Corporation
Whether formed as a full corporation or a limited corporation, the owners of a Malaysia corporation share the same benefits which include:
- Strategically located in Asia.
- Low start-up costs compared to Singapore and other Asian countries.
- Lower Rental Rates than Singapore (and other Asian countries) as Malaysia’s average monthly office rental per m2 is $17 USD.
- Lower Wages as the average wages are $2.31 USD per hour which are far less than Singapore’s ($3.24 USD).
- No Double Taxation as Malaysia has 68 double taxation treaties with other countries. This means that Malaysia corporations benefit from doing business in 68 other countries without being taxed by both countries.
- No Withholding Taxes on dividends paid outside of Malaysia.
- No restrictions on Malaysian corporations upon repatriation of capital, profits, dividends, and royalties.
- Malaysia has given strong incentives to encourage business formation and capital investment.
Incorporation Process in Malaysia
Malaysia enacted its Companies Act in 1965. This Act requires all corporations to file annually with the Malaysian government agency known as the SSM.
The filing includes the company’s annual return, which must be updated during the company’s Annual General Meeting. After updating, the corporation must file its annual return as well as a certificate listing the corporation’s shareholders, signed by a director or by the manager or secretary of the corporation. These documents must be filed together with the Audited Financial Statements within one month of the completion of the AGM.
Malaysian Corporate Name
Prior to forming a corporation, the owners must submit a unique corporate name that does not resemble any existing registered corporate names. Once this step is completed, the corporation must register the name with the government’s registration system to gain approval from the Company Formation in Malaysia.
It is mandatory to conduct a company name search and name reservation online for incorporation in Malaysia.
The corporation’s secretary must prepare the incorporation documents following the approval of the name reservation application by the agency in Malaysia that files the companies.
Malaysian Office Address and Local Agent
Every corporation must have a local office address and local registered agent. The registered office in Malaysia is where all formal communications and notices must be addressed. It is normal practice in Malaysia to have the secretarial office as its registered office.
Corporations can have a different office address located anywhere in the world.
At least one shareholder is required for all Malaysia corporations.
Directors and Officers
Malaysia corporations must have at least one director who is at least eighteen years old and residing in Malaysia. This director cannot have been declared bankrupt, nor convicted of a crime punishable by at least five years. The director can be a permanent resident, or a foreigner with a Resident Talent Pass (RPT), permanent resident (PR), or MM2H holder. A nominee resident director can also be appointed for privacy purposes.
Corporations are required to have a secretary. The secretary must be a member of at least one of the government’s prescribed professions or licensed by the SSM.
Authorized Capital for Malaysian Corporation
The authorized capital for a corporation can vary. The fees depending upon the authorized capital are listed in the chart below:
|AUTHORIZED SHARE CAPITAL (RM)||FEES (RM)|
|Up to 400,000||1,000|
|400,001 – 500,000||3,000|
|500,001 – 1 million||5,000|
|1,000,001 – 5 million||8,000|
|5,000,001 – 10 million||10,000|
|10,000,001 – 25 million||20,000|
|25,000,001 – 50 million||40,000|
|50,000,001 – 100 million||50,000|
|100,000,001 and above||70,000|
Corporations must register for the Goods and Services Tax (GST) if they meet certain requirements. Corporations do not need to register for the GST if their annual business exceeds RM500,000.
Corporations must pay an annual fee of RM1,000 payable to SSM for its registration
Confidentiality can be obtained for corporations by appointing the nominee directors and shareholders.
Accounting and Audit Requirements
Corporations must select a fiscal year. The initial fiscal year can begin anytime within eighteen months of incorporation. Corporations are required to keep track of their income and expenses, and to do general bookkeeping that is both maintained and up-to-date.
Every corporation must maintain annual account reports. The annual reports must be audited by authorized auditors in Malaysia appointed by the corporation. In addition, the audited reports need to be prepared for the Annual General Meeting so that the shareholders can approve the report. Once this procedure is completed, the audited report must be filed with the SSM, alongside the corporation’s annual returns.
Annual General Meeting
A yearly meeting is required in order to nominate directors (if there are vacancies), and for tax and accounting purposes.
The Annual General Meeting (AGM) must take place within six months from the end of the fiscal year. For new corporations, the meeting must occur within 18 months from the date of incorporation. During the meeting, the company’s shareholders must approve the audited report.
Estimated Time for Incorporation
Most corporations find that the entire process, from the signing of documents to their submission for registration, takes about five to ten days to complete.
However, completion timeline of incorporation can vary depending on how accurate and complete the registered incorporation documents are. In addition, delays may occur due to the availability of the online system business system in Malaysia.
Shelf corporations are available in Malaysia for faster availability to conduct business.
Malaysia Corporation Conclusion
Forming Malaysia corporations are similar to most countries. The registration fees along with office rental costs, local wages, and other start-up costs are much lower than Singapore and other Asian countries. Malaysia allows only one shareholder, one director, and one secretary. Anonymous ownership can be achieved by using nominee directors and shareholders. Shelf corporations are available to purchase for immediate incorporation. Malaysia uses an online corporation registration system.