Introduction to Malaysia Private Company Limited by Shares
Malaysia is now seen by many as a perfect gateway to ASEAN and beyond because it is strategically located at the centre of South-East Asia and surrounded by many ASEAN countries - offering market access of over 650 million people with a combined GDP of US$3.2 trillion. The average combined GDP of the ASEAN countries is expected to grow by 5.2% in 2022 and 5.3% in 2023.
Foreign investors are welcomed to do business in Malaysia. Unlike certain countries, foreign equity ownership restrictions in Malaysia have been lifted in most instances. Foreign investors who are keen to register a company in Malaysia may set up several types of legal entities including private limited company, branch office and representative office which are the three most common options of business entities adopted by foreigners in Malaysia. Foreign investors are not allowed to set up sole proprietorship or partnership in Malaysia unless they are a permanent resident in Malaysia.
Malaysia Government have introduced a Special Tax Incentive under the Economy Recovery Plan (PENJANA) whereby new companies which are small to medium enterprises incorporated within July 2020 to December 2022 are eligible for a tax rebate of up to RM 20,000 per year for the first 3 years.
Unless otherwise indicated, the Malaysia company stated in this article refers to a private company limited by share(s) (identified through the words ‘Sendirian Berhad?or ‘Sdn. Bhd.? formed and incorporated in Malaysia in accordance with the Malaysia Companies Act 2016.
- Advantages of Incorporating a Private Limited Company
The name of a private limited company ends with “Sendirian Berhad?or its abbreviation “Sdn. Bhd.? A private limited company offers maximum advantages to businesses that allow them to grow and flourish, amongst others, the following:
(1)
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Separate legal entity
The company can acquire assets, sue or be sued and enter into contracts.
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(2)
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Limited liability
Safeguard the shareholder's personal wealth as the liabilities of the owner is limited to the amount unpaid on shares.
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(3)
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Perpetual succession
Its existence will not affect by the happenings to the director, founder and shareholder unless the company is liquidated.
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(4)
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Ease in transfer of ownership
Subject to the provisions of the company’s constitution (if any), by executing a share transfer form and pay stamp duty.
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(5)
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Greater access to funding
It is relatively easier to raise capital funding via issuing bonds or shares. It is also able to borrow money from financial institutions at lower rates.
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(6)
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Tax advantage
Malaysia only imposes Sales and Service Tax on certain industries or specific goods. A company is taxed only on profit before tax with the first RM600,000 at 17% and a further of 24% on subsequent balance.
Presently, there is no capital gains tax, except for the RPGT (Real Property Gains Tax), which is a tax charged on gains arising from the disposal or sale of real property or shares in a real property company. With effect from 1 January 2019, RPGT rates for disposal of chargeable asset is ranging from 10% to 30% depending on the holding period of chargeable asset.
Malaysia Government have introduced a Special Tax Incentive under the Economy Recovery Plan (PENJANA) whereby new companies which are small to medium enterprises incorporated within July 2020 to December 2022 are eligible for a tax rebate of up to RM 20,000 per year for the first 3 years.
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- Structure of a Private Limited Company
The applicant has to gather the following information to form a company:
(1)
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Proposed Name
The name of a private limited company ends with “Sendirian Berhad?or its abbreviation “Sdn. Bhd.? Generally, the proposed name of the company will be available if the name is:
(a) not undesirable or unacceptable;
(b) not identical to an existing business entity’s name;
(c) not identical to a reserved name;
(d) not a name of a kind that the Minister has directed the Registrar not to accept for registration.
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(2)
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Registered Office and Business Address
A company must have a registered office in Malaysia to which all communications and notices may be addressed. The registered office shall be open and accessible to the public during ordinary business hours. Kaizen will provide a Malaysia local address to be used as the registered office of your Malaysian company.
Business address is an address of a company’s principal place of business. It can be your office, shop, factory etc. Business address is not mandatory at the time of incorporation but the company is required to notify CCM on its business address within 14 days from the date when the company has an actual place of business.
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(3)
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Share Capital
There is no minimum share capital requirements for incorporate a private limited company in Malaysia. A company can be registered with an initial share capital of RM1.00. However, it might require to increase its share capital if it intends to apply for certain licenses or employment pass. The company secretary should be provided with proof of capital contribution from the shareholders before he/she proceed to notify CCM on the increase of share capital.
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(4)
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Company Secretary
Every company is required to have at least 1 company secretary who shall be a natural person of 18 years of age, a citizen or permanent residence of Malaysia and ordinarily reside in Malaysia by having a place of residence in Malaysia. A company secretary shall be a member of any one of the following professional bodies as set out in the Fourth Schedule of the Companies Act 2016 and licensed by CCM:
(a) Malaysian Institute of Chartered Secretaries and Administrators
(b) Malaysian Institute of Accountants
(c) Malaysian Bar
(d) Malaysian Association of Company Secretaries
(e) Malaysian Institute of Certified Public Accountants
(f) Sabah Law Association
(g) Advocates Association of Sarawak
Although it is not mandatory to have a company secretary at the time of incorporation, the board of directors of a company shall appoint a company secretary within 30 days from the date of incorporation of a company. Kaizen can provide a qualified named Company Secretary for your Malaysia Company to comply with the requirements.
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(5)
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Shareholder(s)
There must be at least 1 shareholder, either individual or body corporate and up to a maximum of 50 shareholders. The director and shareholder can be the same person.
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(6)
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Director(s)
A minimum of 1 director who shall be a natural person of at least 18 years of age and shall ordinarily reside in Malaysia by having a principal place of residence in Malaysia. In addition, a person shall not hold office as a director if that person is an undischarged bankrupt and has been convicted of a serious office and imprisoned for the past 5 years, within or outside Malaysia. The director and shareholder can be the same person.
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(7)
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Business Nature and Description
A short description of the nature of business and up to 3 Malaysia Standard Industrial Classification (MSIC) code that classifies the business activities of the company are required. A company have unlimited capacity to undertake any lawful business activity.
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- Procedure of Incorporation
Firstly, a name search must be conducted to ensure that the desired name is available. There are 2 ways to apply for a name of a company, i.e. name reservation and direct incorporation. If the name is approved by the Companies Commission of Malaysia (CCM), it will be reserved for 30 days (or up to a maximum of 180 days upon application).
Secondly, submit incorporation application to the CCM by paying prescribed fee. If the Registrar is satisfied that all information provided is complete and complied with the Companies Act 2016, a notice of registration which is conclusive evidence of the incorporation will be issued via email.
Thirdly, if a company secretary is not appointed at the time of incorporation, the company shall submit the relevant information pertaining to the appointment of company secretary to CCM within 30 days from the date of incorporation of the company.
Lastly, to open bank account for the use of daily transactions and deposit of share capital.
The company is advised to obtain the necessary license/permit/approval from the relevant authorities before commencing business.
Kaizen Group, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.
See also：
Malaysia Company Incorporation Package
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