Easy Guide: Setup Company in Malaysia for Foreigners

Are you a foreign entrepreneur looking to setup a company in Malaysia but feeling overwhelmed by the process? Look no further! Navigating through the legalities of setting up a business in a foreign land can be daunting.

But hey, that’s where our guide to Malaysia company registration comes in handy. We’re here to walk you through every step of launching your business registration and the nature of business in Malaysia. You’ll get the lowdown on the types of business entities that permit foreign ownership, how businesses work here and what the requirements are. Malaysia’s a great place with lots of opportunities, and we want to make sure you’re all set to make the most of it.

Let’s dive in and get your business up and running!

Understanding the Difference: Foreign vs. Local Company in Malaysia

Before delving into setting up a company in Malaysia, it is essential to understand the distinction between a foreign company and a local company. According to the Companies Act 2016, a foreign company refers to:

• A company, corporation, society, association, or other body incorporated outside Malaysia.
• An unincorporated society, association, or other body that can sue or be sued, or hold property in the name of its appointed officer and does not have its head office or principal office of business in Malaysia.

On the other hand, a local company, registered under Malaysian law, can benefit from tax exemptions offered through free trade agreements with ASEAN countries.

However, depending on the intended business activity, there may be restrictions on foreign ownership, with some industries requiring a certain percentage of Malaysian ownership.

Types of Business Structures Available for Foreign Companies To Setup Company in Malaysia

Before you begin the process of setting up a company in Malaysia, it’s important to understand the different types of business entities that permit foreign ownership. Here are some options to consider:

1. Branch Office

A branch office acts as an extension of the foreign parent company and does not constitute a separate legal entity. The foreign parent company is fully liable and responsible for all the debts incurred by the branch in Malaysia. A branch office is suitable for foreign companies looking to expand their business to Malaysia on a short-term basis.

To setup a company in Malaysia as a branch office, there must be at least one Malaysian resident agent responsible for its establishment. The activities of the branch office should align with those of the foreign parent company.

2. Representative Office

A representative office allows foreign companies to increase their market presence and gain a better understanding of the Malaysian business environment. However, it does not have independent legal standing in Malaysia, and the parent company assumes full responsibility for its debts and liabilities.

A representative office must not engage in profit-generating activities, sign contracts, or undertake trading activities. Its primary functions include promotion and liaison activities, market research, and coordination of activities for the parent company.

3. Private Limited Company (Sdn. Bhd.)

The private limited company, also known as a Sendirian Berhad (Sdn Bhd) company, is the most common type of entity for foreign investors in Malaysia. To determine the best structure for your specific business needs, foreigners can own 100% of the company, except in certain industries such as agriculture, banking, education, and oil and gas, which require a minimum of 50% Malaysian government ownership.

A private limited company is a separate legal entity from its owners, enabling it to buy or sell property, enter into contracts, and pursue legal actions. The owners’ liability is limited to their contributions to the company, safeguarding their personal assets in case of financial issues.

To set up a private limited company in Malaysia, you need a minimum of one shareholder and a maximum of 50 shareholders.

4. Sole Proprietorship

A sole proprietorship is a simple business entity for a local entrepreneur to set up in Malaysia, but it is only available to foreigners with permanent resident status in the country. This type of entity, especially for those who are foreign owners, may require the appointment of a nominee director to manage certain legal obligations, including maintaining shareholder details. It requires only one owner and a registered address, but their liability is unlimited. In the event of bankruptcy or debt, the owner’s personal income and assets are not protected.

Sole proprietorships must pay an annual fee to the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia) for renewal. Unlike other entities, sole proprietorships do not need to submit audits or carry out annual filings.

5. Partnerships

Partnerships are suitable for businesses with two or more owners, with a maximum limit of 20 partners. Furthermore, only foreigners with permanent resident status are allowed to register partnerships in Malaysia.

Partnerships allow partners to combine their resources and expertise to generate profit. Professional firms such as auditors and lawyers commonly choose this entity type. The partnership agreement outlines each partner’s responsibilities and liabilities, and the partners share profits and losses. While the partnership itself is not subject to taxation, individual partners must report their profits and losses for tax purposes.

6. Limited Liability Partnership

A limited liability partnership (LLP) combines elements of both partnerships and companies. It is a separate legal entity from its partners and provides asset protection in case of bankruptcy or debt. LLPs have fewer compliance requirements compared to other entities and are more cost-effective.

Foreign investors can set up a foreign LLP in Malaysia, with partners not necessarily required to be residents of the country. However, the compliance officer must be a citizen, permanent resident, or ordinarily reside in Malaysia.

Documents Required to Setup a Company in Malaysia

To set up a foreign company in Malaysia, the following documents are typically required:

• A certified true copy of the certificate of incorporation.
• Certified true copy of the company’s memorandum and articles of association.
• List of all foreign and local directors, along with their powers.
• Memorandum of appointment or power of attorney from the foreign company.
• Copy of the application and reservation of the company name.
• Copy of the email confirming the approval of the company name reservation.
• Statutory declaration made by the agent of the company.
• Registration fees.

The registration process also involves a company name search and approval, where the proposed name is submitted to the Companies Commission of Malaysia. Once approved, the name is reserved for 30 days, with the option to extend for an additional fee.

Within 30 days of name approval, the required information must be submitted to the Companies Commission of Malaysia, including details of shareholders, directors, and the appointed Malaysian agent, among others.

Registration fees for foreign companies vary based on the share capital of the company.

A Step-by-Step Foreign Company Registration Process

Now that you’ve got a handle on the document requirements, what’s next? Let’s walk through the steps you need to take to set up a company in Malaysia:

a. Name Reservation

The first step is to choose a unique name for your company and submit it for approval to the Companies Commission of Malaysia (SSM). Once approved, the name will be reserved for 30 days.

b. Prepare Documents

Prepare the necessary documents for company registration, including:

• Certificate of incorporation
• Articles of association and memorandum
• Identity documents of directors and shareholders
• Information on company directors and shareholders
• The company’s registered office address
• Statutory declaration of the company’s agent
• Registration fees

c. Submit Application

Submit the completed application and required documents to the Companies Commission of Malaysia (SSM) within the 30-day reservation period.

d. Obtain Certificate of Incorporation

Once your application is approved, you will receive a Certificate of Incorporation, indicating your company’s registration number.

Advantages of Setting up a Foreign Company in Malaysia

There are several benefits to setting up a company in Malaysia, including:

• Strategic location in Southeast Asia
• Low initial costs compared to other countries
• Competitive rental rates
• Favourable tax policies, including double taxation treaties with other nations
• No restrictions on repatriation of profits, capital, royalties, or dividends

Are There Any Restrictions on Foreign Ownership When Establishing a Company in Malaysia?

Yes, there are restrictions on foreign ownership in Malaysia. Certain industries have specific guidelines on the percentage of local ownership required in a company. For example, sectors like healthcare and telecommunications may have stringent regulations in place to protect local businesses and industries.

Streamlining the Company Registration Process with Incorporation Specialists

For foreign investors unfamiliar with the Malaysian business landscape, navigating the company registration process can be a daunting task. However, by partnering with experienced incorporation specialists, the process can be streamlined and made significantly more efficient.

Incorporation specialists at Grof MY offer a comprehensive suite of services to guide foreign entrepreneurs through the entire company registration journey. These services typically include:

Name Reservation and Approval

Incorporation specialists can handle the name reservation process on behalf of the client, ensuring the proposed company name is unique and compliant with local regulations.

Incorporation and Registration

Experts can manage the entire incorporation and registration process, including the submission of necessary documents and coordination with the SSM.

Obtaining Licenses and Permits

Incorporation specialists can assist in identifying the required licenses and permits for the specific business activities, and then facilitate the application and approval process.

Ongoing Compliance Support

Incorporation specialists can provide ongoing support for the company, ensuring compliance with the Companies Act 2016 and other relevant regulations, such as annual reporting and tax filings.

By partnering with an experienced incorporation specialist, foreign investors can navigate the company registration process in Malaysia with confidence, focusing on the strategic aspects of their business while the administrative and compliance-related tasks are handled efficiently.

Conclusion

Setting up a company in Malaysia as a foreigner involves understanding the various registration options available and complying with the legal requirements. Whether you choose a branch office, representative office, private limited company, sole proprietorship, partnership, or limited liability partnership, each entity type has its own advantages and restrictions.

Should the complexities of company incorporation feel daunting, engaging a corporate services provider is a practical solution. This is where we step in. We can help you set up a company in Malaysia, anywhere, anytime, making sure everything’s in line with the Malaysian Companies Act.

With the guidance and support available with Grof, you can confidently navigate the complexities of setting up a company in Malaysia and position yourself for long-term success in this dynamic and thriving market.