How to start business in Malaysia

05.07.17
5 minute read

Malaysia’s economy has been struggling as of recent. Despite a few recent growth reports, the Southeast Asian country is hoping to gain some traction through the private sector; as evidenced by participation in prominent business development and trade programs like China’s Belt and Road initiative.

While the economic climate has made Malaysia friendlier for small businesses as a whole, there are still some challenges facing foreigners that want to set up shop. Though it’s not always a simple process, it is possible. This guide will walk you through some of the key steps in opening a Malaysian business as a foreigner.

What types of foreign businesses are allowed in Malaysia

Some common business types can’t be established by a Foreigner in Malaysia, including sole proprietor, enterprise, or LLP companies. However, there are still ways to register that allow for foreign ownership, including the following:

Sdn Bhd company (or Private Limited company)

While Sdn Bhd (Sendirian Berhad) is a viable registration option for most businesses, some industries will require businesses looking to file as Sdn Bhds to have 50% Malaysian ownership. Those industries include education, oil & gas, banking, tourism, and agriculture.

If your business falls outside of that list, you’ll be eligible to be a 100% foreign owned Sdn Bhd. If that’s the case, you’ll still need to meet some financial requirements. For advisory and consultancy businesses, that means having a minimum paid-up capital of RM500000. For import, export, restaurant, or trading businesses, it’s having a paid-up capital of RM1000000. The business must also show promise of benefiting the Malaysian economy, including creating employment opportunities for Malaysians.

As with all business types, incorporating as a Sdn Bhd comes with advantages and disadvantages. Some of the plus sides are that shareholders aren’t liable for company debts beyond their share capital, shares are easily transferable, and there are no restrictions on the increase of share capital. On the downside, the company is required to have a minimum of two directors and two shareholders, and it can be difficult to get approval without any local Malaysian participants.

Labuan International Company (LIC)

The simplest filing option, any type of business registering as a Labuan International Company (LIC) can be 100% foreign owned. This registration type is common among import, export, trading, and consultant businesses, but isn’t limited to those industries. Set-up as an LIC is also easy, with businesses only requiring one director and one shareholder, positions that can both be filled by one person.

Filing as an LIC comes with a multitude of benefits, including:

  • The ability to be 100% foreign owned, without requiring a Malaysian Partner
  • A low Paid-Up Capital requirement
  • Simple business structure
  • Quick turnaround for registration, as little as two weeks
  • Registration can be completed without being present in Malaysia
  • No trade licenses are required
  • Ease of setting up Visas for your family, including parents

Key differences between Sdn Bhds and LICs

Factor LIC Sdn Bhd
Paid-Up Capital for 100% Foreign Ownership $1 USD Minimum RM500,000
Number of Shareholders 50 Maximum 50 Maximum
Trade License for Import, Export, Trading, Online, and Consultancy Businesses Not Required Required
Net Profit Tax for Trading Activities International 3%, Local 24% International and Local Sales 24%
Expat Income Tax 0% 0-26%
DTA Tax Treaty Yes Yes

What’s the process for registering?

The process for incorporating is actually fairly simple, assuming your business qualifies as one of the two entity types listed above. The steps for registration are as follows:

1. Application of name search

A trademark search must be undertaken in order to ensure your company’s proposed name is available for registration in Malaysia. You must first complete and submit Form 13A of the CA (Request for Availability of Name) to the Surumanjaya Syarikat Malaysia (Companies Commission of Malaysia otherwise known as SSM), then pay a RM30 fee per name submitted. If your name is approved by the SSM, it will be reserved for three months following the date of its approval.

2. Lodgement and registration documents

Registration documents must then be submitted to the SSM within the three month period following naming approval. If the documents aren’t sent within the allotted time, a new Application of Name Search must be submitted. Registration documents include:

  1. Memorandum and Article of Association
    • An original of the Memorandum and Article of association must be notarized. The first directors and secretaries must be named in the memorandum, and all shareholders are required to sign the document in front of a witness.
    • If filing as a private company (Sdn Bhd), the articles of association should also contain:
      a. Restrictions on rights to transfer shares
      b. Limitations on the number of members (not to exceed 50)
      c. Prohibition of any member of the public to acquire shares
      d. Prohibition of any member of the public to deposit money with the company
  2. Form 48A, Statuary Declaration By A Director Or Promoter Before Appointment
    • The director must declare under oath that they are not bankrupt, and have not been convicted and imprisoned for any offences.
  3. Form 6, Declaration of Compliance
    • A declaration that states all of the CA requirements have been met. It must be signed by the company secretary, as named in the Memorandum and Articles of Association
  4. Original copy of Form 13A
  5. A copy of the letter from SSM approving the company name
  6. A copy of the ID of each director and secretary

Beyond documentation, businesses looking to incorporate must also pay registration fees, as dictated by their authorised share capital. In compliance with the foreign business minimum of RM500000 for Sdn Bhds, the fee is RM5000, and increases as share capital goes up.

When all requirements have been met and the application is approved, your company will be issued a Certificate of Incorporation by SSM. While these steps most closely mirror the application process for a Sdn Bhd, the process for an unlimited company isn’t much different. The only change for Labuan companies is that the liability of each of its members must be listed as “unlimited” in the Memorandum of Association.

What if I need more help?

The best resource for those looking to register a business in Malaysia is the SSM (the Companies Commission of Malaysia). They’ve been around since 2002 and in addition to the added advantage of a website written also in English, they have written out specific guidelines for registering a foreign company in Malaysia.

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