Incorporating a local company (normally “Sdn Bhd”)

Setting up a local company, is the most common way of starting the business in Malaysia. There are currently more than 850,000 companies incorporated. These local companies are mostly limited liabilities by way of shares issued.

The characteristic of private limited liability companies –
- To be incorporated under Malaysian Companies Act, 1965
- Limits the number of its members/shareholders to fifty (the minimum being two);
- Prohibits any invitation to the public to subscribe for shares
- Minimum Authorised Capital of RM100,000 and Paid-Up Capital of RM2.00

The qualification to be a director –
- Natural person and above 18 years old
- Must not be a undercharged bankrupt
- Must not have been convicted of an offence within a period of 5 years preceding to his appointment
- Minimum two directors who have their principal or only place of residence in Malaysia

The directors are the primary persons entrusted with the power and authority to make decision for the running and management of the company. They are responsible for the financial management and preparation of financial accounts of the company.

The incorporation process starts with the name search conducted with CCM, and once the name approved, it will be reserved for 3 months pending the submission of incorporation documents, such as Memorandum and Articles of Association, declaration forms, etc.

On the maintenance angle, generally, a local company is required to –
- Convene AGM annually;
- Lodge annual return and audited accounts annually; and
- Lodge statutory documents where there is a change in director, secretary, registered office, share capital, etc using the prescribed forms.

Registering a foreign company

For a company incorporated outside Malaysia (a foreign company), who desiring to establish a place of business or to carry business in Malaysia, can register with CCM, using its own name, as a “branch office” in accordance with the Malaysian Companies Act, 1965.

Normally, the setting up of a branch office will be considered a more appropriate form of business operations for a foreign company if they intend to only operating on a short term basis compared to incorporation of a local company.

A name search must be conducted to determine whether the proposed name is available for registration. Similarly, the approved name will be reserved for 3 months pending the submission of relevant documentation for registration.

A register office in Malaysia is required to have all communications and notices to address to. Also, a foreign company is required to appoint at least one person resident in Malaysia to be its authorized agent in Malaysia to accept on its behalf service of process and any documents required to be served on the company. The agent can be a natural person (a Malaysian or foreigner) or a corporate body.

Among the documents required for the registration –
- A certified copy of certificate of incorporation or registration of the foreign company
- A certified copy of the foreign company’s charter, statute or Memorandum and Articles of Association, or similar documents
- A list of directors, etc

Generally, a foreign company is required to –
- Lodge annual return yearly;
- Lodge its balance sheets yearly;
- Lodge the audited accounts for its operations in Malaysia; and
- Lodge returns where registration documents, etc are changed or altered.

Registering a sole proprietorship or partnership

A sole proprietorship is a business wholly owned by a single individual using his/her personal name or trade / business name.

A partnership is a business owned by at least 2, but not exceeding 20, business partners using the trade name.

A sole proprietorship and partnership are more simpler set up as compared to a company incorporated, like a Sdn Bhd, since the former do not required their financial accounts to be audited, and the requirement to appoint an auditor and company secretary.

The business owner or the partners for the sole proprietorship and partnership must be a Malaysian citizen or permanent resident and aged 18 years and above.

The registration of business for sole proprietorship and partnership can be done via internet using e-Lodgement services as provided by CCM.