With its robust economy and strategic location in Southeast Asia, Malaysia has become an increasingly attractive destination for foreign investors seeking to establish businesses. However, the company registration process in Malaysia involves navigating various legal, administrative, and regulatory requirements, which can be complex for foreigners. Malaysia's economy is diverse and driven by the manufacturing, services, and tourism sectors.
With a stable political climate, well-developed infrastructure, and a skilled workforce, Malaysia offers a conducive environment for business growth and investment. The Malaysian government has also implemented pro-business policies and initiatives to attract foreign investment, making it an appealing destination for entrepreneurs worldwide. In this article, we'll delve into the intricacies of registering a company in Malaysia as a foreigner, providing detailed insights and practical advice at every step.
Can a Foreigner Register a Company in Malaysia?
Yes, a foreigner can register a company in Malaysia. Foreign investors, including non-residents, have several options for setting up a business, each with distinct features as below:
a. Private Limited Company (Sdn Bhd)
A private limited company (Sdn Bhd), is the most popular choice among foreign investors.
- Ownership: Foreigners can generally own 100% of an Sdn Bhd. However, specific agriculture, banking, education, and oil and gas industries may require 50% Malaysian ownership.
- Structure: Requires at least one shareholder and one local director, with a maximum of 50 shareholders.
- Liability: Shareholders have limited liability, meaning their assets are protected, and they are only liable for the amount they have invested in the company.
- Legal Compliance: Must appoint a certified company secretary who advises on statutory compliance. The company must also maintain proper accounting records, file annual returns, and submit audited financial statements to the Suruhanjaya Syarikat Malaysia (SSM).
b. Limited Liability Partnership (LLP)
An LLP offers a simpler alternative to an Sdn Bhd, providing flexibility and limited liability protection.
- Ownership: It can be 100% foreign-owned.
- Structure: Requires at least two partners, with no upper limit on the number of partners.
- Liability: Partners enjoy limited liability protection, safeguarding their assets.
- Legal Compliance: A resident compliance officer must be appointed to advise on statutory compliance. LLPs benefit from more relaxed compliance requirements compared to Sdn Bhds, which include no mandatory requirement for annual audits.
c. Representative Office
Foreign companies typically establish a representative office to explore investment opportunities and conduct research in Malaysia.
- Purpose: Used for market research, promoting trade relations, and gathering information on potential investments.
- Restrictions: You cannot engage in revenue-generating activities such as trading, signing contracts, or leasing property. It is strictly for non-commercial operations.
- Legal Compliance: Regulated by the Malaysian Investment Development Authority (MIDA). Approval from MIDA is required, and the office must adhere to guidelines and reporting requirements.
d. Branch Office
A Branch Office acts as an extension of foreign companies in Malaysia that conduct similar business activities from HQ.
- Ownership: The branch is wholly owned by the parent company.
- Liability: The parent company is fully liable for any debts and obligations incurred by the branch office.
- Purpose: Conduct business activities similar to those of the parent company, providing products or services to Malaysian consumers.
- Legal Compliance: Requires registration with the Suruhanjaya Syarikat Malaysia (SSM). The branch office must file annual returns and audited financial statements. It operates under the same tax regime as local companies, and any profits are subject to Malaysian corporate tax.
Are There Any Prohibited Industries for Foreigners to Be Involved In?
No, there are no industries in Malaysia that are completely prohibited for foreigners. However, certain industries impose restrictions, requiring at least 50% local ownership. These industries include professional services, repair and maintenance, transportation, creative services, rental services, non-profit organisations, and manufacturing and packaging. While foreign participation is allowed in these sectors, local ownership is mandated to safeguard Malaysian interests and promote domestic economic growth.
4 Steps to Register a Company in Malaysia for Foreigners
The process for a foreign company to open a company in Malaysia involves several key steps.
For more information, you may refer to SSM guidelines for foreign companies
Here's a simplified version of the 4 steps guide below.
Step 1: Name Search and Application of Name
1. Propose a Company Name: Submit the proposed company name through the SSM online system, MyCoID.
2. Pay the Fee: A fee of RM50 is required for the name search.
3. Reservation Period: If the name is approved, it will be reserved for 30 days from the approval date.
4. Extension: The duration of the reserved name can be prolonged by paying a prescribed fee of RM50.00 for each thirty-day period or part thereof, with a maximum extension of up to 180 days.
5 Consistency Requirement: The name of the foreign company in Malaysia must match the name registered in its country of origin.
For more information, you may refer to Guidelines on Company Names by SSM.
Step 2: Submit The Application to Register a Foreign Company
Here is the SSM-application for registration of foreign company particulars. You may submit it together if the registrar requests it.
1. Submission Timeline: Submit the required information to SSM within 30 days of name approval.
2. Required Information:
- Details of shareholders.
- Details of directors.
- List of shareholders/ members in the country of origin.
- Share capital details.
- Details of the appointed Malaysian agent.
- Any additional information as required by the registrar.
3. Agent’s Consent: Include a statement confirming the agent’s consent to act on behalf of the company.
4. Additional Documents:
- A certified copy of the certificate of incorporation or registration from the country of origin is required.
- A certified copy of the Memorandum and Articles of Association or a similar document is required.
- Copy of the name reservation application.
- A copy of the email notification is needed for name reservation approval.
- If documents are not in Bahasa Malaysia or English, certified translations must be provided.
Step 3: Pay Registration Fees
1. Determine Fees: Calculate the registration fees based on the foreign company’s share capital converted to Malaysian Ringgit at the prevailing exchange rate. The fee structure is as follows:
Step 4: Receive Verification of Company Incorporation
1. Notice of Registration: Upon compliance with and submission of all completed documents, SSM issues a notice of registration for the foreign company within one working day.
2. Certificate of Registration: SSM issues the certificate of registration of the foreign company upon request and payment of the prescribed fee by SSM.
Legal Compliance and Ongoing Obligations
Once a company is registered in Malaysia, it must comply with various ongoing obligations to maintain its legal status and conduct business lawfully:
1. Annual Filing Requirements
Companies must file annual filings within specific deadlines to Lembaga Hasil Dalam Negeri Malaysia (LHDN). Failure to comply with these requirements may result in penalties, fines, or company deregistration.
2. Tax Obligations
Companies are subject to taxation on their income generated in Malaysia, including corporate income tax, sales tax and service tax (SST), and other indirect taxes. Foreign-owned companies must register for taxation purposes with the Lembaga Hasil Dalam Negeri Malaysia (LHDN) and fulfil their tax obligations following Malaysian tax laws and regulations.
- For Lembaga Hasil Dalam Negeri Malaysia (LHDN) registration information for a foreign company, refer here.
- For sales tax and service tax (SST) registration information, refer here.
- For Kumpulan Wang Simpanan Pekerja (KWSP) registration as an employer, refer here.
3. Corporate Governance and Reporting Standards
Companies registered in Malaysia must adhere to corporate governance standards and reporting requirements set forth by regulatory authorities such as the SSM and the Securities Commission of Malaysia (SCM). This includes maintaining proper accounting records, holding annual general meetings, and disclosing information to shareholders and regulatory authorities as required by law.
Conclusion
Before starting a business in Malaysia for foreigners, it is important to understand the legal and regulatory requirements outlined by Malaysia's local authorities and seek professional assistance. Foreign investors are encouraged to consult with legal advisors, corporate service providers, and government agencies such as the Malaysia Investment Development Authority (MIDA) and the Suruhanjaya Syarikat Malaysia (SSM) to understand how to start a company in Malaysia. With the right guidance and resources, registering a company in Malaysia can be a strategic and profitable investment opportunity for foreign entrepreneurs and investors alike.
