Guide to Registration of Branch Office in Malaysia
Unless otherwise indicated, the branch office stated in this article refers to the foreign company registered in Malaysia in accordance with the Malaysia Companies Act 2016 (CA 2016).
A foreign company may carry on business in Malaysia by either incorporating as a local company or registering the foreign company with the Companies Commission of Malaysia (CCM). A foreign company is defined under the CA 2016 as:
- A company, corporation, society, association or other body incorporated outside Malaysia; or
- An unincorporated society, association, or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose and which does not have its head office or principal place of business in Malaysia.
As a branch office is an extension of its parent company and it will not be viewed as a separate legal entity from the foreign company it represents, therefore its name must be identical to the foreign parent company and the business activities that it can conduct is limited to that of its parent company. Further, all contracts that it enters, as well as the legal obligations, debts and liabilities arising therefrom, shall be binding and enforceable against the foreign parent company.
Although a branch office can engage in legitimate commercial activities as its parent company, it is not allowed to undertake prohibited and restricted business activities, i.e. wholesale and retail trade business. According to a guideline issued by the Ministry of Domestic Trade and Cost of Living, all wholesale and retail trade businesses with foreign interests must operate through a locally incorporated company.
There must be at least one (1) resident agent in Malaysia appointed for the branch office who is answerable for all such acts, matters and things that are required to be done by the branch office under CA 2016. The agent will be personally liable to all penalties imposed on the branch office for any contravention of the CA 2016 unless the agent satisfies the court hearing the matter that the agent should not be liable.
In addition, a branch office is required to have a physical address or place of business within Malaysia. There is no employment restriction for branch office. It can hire both local and foreign workforce (with work permit). As branch office do not have issued capital in Malaysia, it is not subject to any equity condition.
- Advantages of Registering a Branch Office
The benefits of setting up a branch office in Malaysia are as follows:
(1)
|
Allow foreign companies to have access to a new market in different countries for business expansion;
|
(2)
|
As a branch office tends to be dependent on foreign parent company, the foreign parent company will have full control over the activities and management decision making of the branch office in Malaysia; and
|
(3)
|
There are fewer registration requirements as a branch office is not a separate legal business with its own articles of association or constitution, hence simplifying the registration process.
|
- Basic Structure of a Malaysia Branch Office
The minimum requirements of a Malaysia Branch Office are as follows:
(1)
|
One resident agent in Malaysia who shall be answerable for all acts, matters and things that are required to be done by the foreign company under CA 2016.
|
(2)
|
One registered office in Malaysia to which all communications and notices may be addressed.
|
- Registration of Branch Office
To register as a branch office in Malaysia, the foreign company is required to register its name with CCM together with a prescribed fee. Within 30 days after the approval of name, the following documents/information are required to be submitted to CCM to complete the registration:
(1)
|
Name, identification, nationality, and ordinary place of residence of every shareholders and directors;
|
(2)
|
List of shareholders or members at its place of origin;
|
(3)
|
The details of share capital at its place of origin or the amount up to which the members undertake to contribute to the assets of the foreign company at its place of origin in the event of it being wound up, which applicable;
|
(4)
|
Certified copy of the certificate of incorporation/registration and memorandum and articles of association or constitution of foreign company; and
|
(5)
|
Other information as CCM may require.
|
In determining the fee payable to CCM for branch office registration, the share capital of the foreign company should first be converted to the Malaysian currency at the prevailing exchange rate. The registration fee is depending on the share capital of the foreign company, ranging from RM5,000 to RM70,000. In the event of foreign company does not prescribe any share capital, a flat rate of RM70,000 shall be paid to CCM.
A branch office is required to file its annual returns, annual tax return and submit audited accounts with the relevant authorities. Any changes related to the parent entity, namely its name, constitution, directors, registered office, share capital and its audited accounts must also be filed with CCM.
From the tax perspective, a branch office is usually considered as a non-resident company for tax purposes. Hence, it is not eligible for tax incentives that a subsidiary company enjoys. Besides, withholding tax will apply for profits repatriated in the form of interests, royalties or management fee payments.
Once registered with CCM, a branch office is suggested to open a bank account for the use of daily transactions. To choose the right bank, the company may need to consider factors such as bank reputation, account opening requirements, branches and convenience of banking etc. The process of opening a bank account in Malaysia is relatively straightforward once the branch office has all the documents that the bank required. Many banks have been practicing e-KYC with their clients to accelerate and streamline the process.
- Continuous Obligation of Malaysia Branch Office
Upon registration, every branch office must comply with the requirements under the CA 2016 as set out below:
(1)
|
Exhibition or Statement of Company’s Name and Registration Number
A foreign company shall conspicuously exhibit its name and the place where it is formed or incorporated in romanised letters outside its registered office and every place of business established by it in Malaysia.
The name, registration number and the place where the foreign company is formed or incorporated shall appear in legible romanised characters on it business letters, notices and other official publications (including electronic medium), websites, bills of exchange, promissory notes, indorsements, order forms, cheques, order, invoices, other demands for payments, receipts, letters of credit and all other forms of its business correspondence and documentation.
|
(2)
|
Notification of Changes in Particulars
The foreign company shall lodge a notification to the Registrar for the following changes of the foreign company and branch office within 14 days from the date of such changes:
(a) Charter, statutes, constitution, memorandum or articles of the foreign company;
(b) Directors of the foreign company or the name or address of any director;
(c) Agent of the foreign company or the name and or address of any agent;
(d) Registered office of the branch office or the days or hours during which the registered office of the branch office is open and accessible to the public;
(e) Registered office of the foreign company;
(f) Name of foreign company; and
(g) The power of any directors resident in Malaysia who are members of the local board of directors of the foreign company.
When there are changes in matters relating to share capital or registered members (for foreign company without share capital) of the foreign company, the foreign company is required to notify CCM within 30 days of change.
|
(3)
|
Keeping of Accounting Records
The foreign company shall ensure that accounting records which are kept in Malaysia sufficiently explain the transactions and financial position of the foreign company, arising out of its operations in Malaysia. It shall also cause appropriate entries to be made in the accounting and other records within 60 days of the completion of the transactions to which the entries relate.
|
(4)
|
Financial Statements
The foreign company shall, within 2 months of its annual general meeting, lodge with the CCM a copy of its audited financial statements together with a statutory declaration in the prescribed form verifying that the copies are true copies of the documents so required. In addition, the foreign company must also file the audited financial statements of its branch office showing its assets used in and liabilities arising out of its operations in Malaysia.
Where a foreign company is not required by the law of its place of origin to hold an annual general meeting and prepare audited accounts, the foreign company shall prepare and lodge with CCM within such period an audited accounts as if the foreign company were a public company incorporated under CA 2016.
|
(5)
|
Annual Return
A foreign company shall lodge its annual return with the Registrar not later than 30 days from the anniversary of its registration date. The annual return shall contain the particulars of directors, shareholders, officers, auditors and agents in Malaysia, registered office, business address, share capital, amount of indebtedness etc.
|
See Also:
Procedure and Fee for Registration of Limited Liability Partnership in Malaysia
Malaysia Company Incorporation Basic Package
Malaysia Company Incorporation (and Nominee Director) Package
Malaysia Company Incorporation Complete Package
Malaysia Trademark Registration Costs and Procedures
|
