Foreign individuals and companies wishing to establish a business in Malaysia should be aware of the types of legal structures that allow for foreign ownership. Not all types of Malaysian companies may be wholly owned by foreign entities.
This article will discuss the registration options and types available to foreign investors in Malaysia, as well as the process and necessary requirements.
This article will discuss the registration options and types available to foreign investors in Malaysia, as well as the process and necessary requirements.
The distinction between a foreign and local company in the Malaysia
According to the Malaysian Companies Act of 2016, a "foreign company" is defined as a company, corporation, partnership, or other legal entity registered outside of Malaysia.
A foreign parent company may establish a subsidiary in Malaysia in order to explore the local market and continue operations in the country.
In contrast, a local company is one that is registered under Malaysian law and is able to enjoy tax benefits offered by free trade agreements between the country and ASEAN countries. Depending on the intended business activities, there may be restrictions on owning 100% of the company.
A foreign parent company may establish a subsidiary in Malaysia in order to explore the local market and continue operations in the country.
In contrast, a local company is one that is registered under Malaysian law and is able to enjoy tax benefits offered by free trade agreements between the country and ASEAN countries. Depending on the intended business activities, there may be restrictions on owning 100% of the company.
Types of Legal Entities in Malaysia
Foreign investors are able to acquire ownership of a company through one of the following methods for registering a foreign company in Malaysia:
- Branch Office
- Representative Office
- Private Limited Liability Company
- Sole Proprietorship
- Partnership
- Limited Liability Partnership
Branch Office
Branch office a subsidiary of the foreign company and is not a legally separate entity. The parent company in the foreign jurisdiction is responsible for any debt incurred by the branch in Malaysia. The activities of the branch are aligned with those of the parent company, making it suitable for foreign businesses seeking to expand in Malaysia on a temporary basis. To establish a branch in Malaysia, at least one local agent must be a resident of the country.
Representative office
Representative offices, on the other hand, are not legally independent from the parent company and do not enjoy the same level of protection. As a result, the parent organization remains liable for any debts incurred by the representative office in Malaysia.The representative office is not permitted to engage in any activity that generates revenue, nor can it sign or enter into any contracts or carry out trading activities. It is limited to activities such as marketing and public relations, conducting market research, and coordinating with the parent company.
Private limited company
A private limited company is a legal entity that exists separately from its shareholders, meaning that it can own and operate real estate, enter into contracts, and take legal action in courts. The company is responsible for its actions, but the shareholders are only liable to the extent that they invested in the company. Their personal assets and wealth will be unaffected if the company experiences financial difficulties. To establish a private limited company in Malaysia, at least one and no more than 50 individuals can act as shareholders.
Sole proprietorship
A sole proprietorship is one of the simplest types of legal entities that can be formed in Malaysia. Foreigners can establish this type of legal entity if they hold a permanent residency status in Malaysia. For a sole proprietor, only one individual is required as a shareholder, and they are personally liable for any debts or losses incurred by the company. If the company becomes insolvent or is overextended, the owner's income and assets will not be covered.You will need to pay an annual fee to the Malaysian Companies Commission (SSM) in order to extend the activities of your company. Legal entities of this type are not required to undergo an audit or carry out annual registration.
Partnership
A partnership may have two or more partners but no more than twenty, and only foreign individuals with permanent residency are allowed to establish partnerships. Partners pool their resources in order to operate a business with the aim of making a profit. Partnerships are well-suited for professional firms, such as auditing and legal services.
Business partners are jointly liable for the company's debts and obligations. The partnership does not need to pay any taxes, however, the partners will be subject to personal income taxation and are required to report their profits and losses.
Business partners are jointly liable for the company's debts and obligations. The partnership does not need to pay any taxes, however, the partners will be subject to personal income taxation and are required to report their profits and losses.
Limited liability partnership
A Limited Liability Partnership (LLP) combines the features of a partnership and a corporation. It is an independent legal entity that is separate from its members.Foreign investors can establish a foreign limited partnership. The participants in a foreign limited partnership do not need to be residents of Malaysia, but the company secretary must be a Malaysian citizen or resident of Malaysia.
A limited partnership provides protection for the assets of its participants in the event of the bankruptcy of the partnership or the incurrence of debts. In addition, it has fewer requirements than other legal entities and is more cost-effective.
A limited partnership provides protection for the assets of its participants in the event of the bankruptcy of the partnership or the incurrence of debts. In addition, it has fewer requirements than other legal entities and is more cost-effective.
Requirements for Registration of a Foreign Company
To register a foreign company in Malaysia, applicants must provide the following documents:
- The founding agreement and Articles of Association of the company;
- Certified copies of:
- The founding agreement and Articles of Association of the company;
- List of all foreign and domestic directors and the powers they hold,
- Letter of appointment or power of attorney from a foreign company desiring to register in Malaysia;
- Copy of the application for reservation of company names.
- Copy of the email confirming the reservation of a company name.
- Official statement issued by the company's representative.
The process of registration for foreign companies
Search and selection of a suitable company name
Foreign names must comply with the name of the parent company, excluding subsidiaries or private limited companies, whose names do not need to match exactly.
Registration of foreign companies in Malaysia
Within 30 days of the approval of a company's name, all relevant information must be provided to the Malaysian Companies Commission.
The following information is required for the registration of a company in Malaysia:
The following information is required for the registration of a company in Malaysia:
1. The name and identification data of each shareholder of the company.
2. The citizenship and place of residence of each shareholder.
3. The company name, the place of registration, the registration number, and the legal address for legal entities.
4. The identification data and nationality of each director of a foreign company registered in Malaysia.
5. A list of all shareholders or participants in the company, including details such as the name, address, and citizenship of each individual.
6. Detailed information about the share capital of the foreign company, including the class and number of shares.
7. The amount within which each participant agrees to contribute to the company's assets, if the foreign company is a limited liability company with no authorized capital.
8. The name and address of a person who is resident in Malaysia and has been appointed as the company's agent.
2. The citizenship and place of residence of each shareholder.
3. The company name, the place of registration, the registration number, and the legal address for legal entities.
4. The identification data and nationality of each director of a foreign company registered in Malaysia.
5. A list of all shareholders or participants in the company, including details such as the name, address, and citizenship of each individual.
6. Detailed information about the share capital of the foreign company, including the class and number of shares.
7. The amount within which each participant agrees to contribute to the company's assets, if the foreign company is a limited liability company with no authorized capital.
8. The name and address of a person who is resident in Malaysia and has been appointed as the company's agent.
After the registration process is complete, the Malaysian Companies Commission will issue a registration notice within one working day.
The specific requirements and documentation may vary depending on the industry sector of the foreign company operating in Malaysia, however, in most cases, these requirements will be similar.
We recommend contacting the Shile Consulting corporate team, who can assist you with the company registration process in Malaysia and help you comply with all relevant local legal requirements.
We recommend contacting the Shile Consulting corporate team, who can assist you with the company registration process in Malaysia and help you comply with all relevant local legal requirements.