A guide to conducting business in Malaysia

Malaysia's dynamic business environment and rise in technologically innovative firms in recent years makes it an attractive investment destination. As with any prospective venture, an in-depth understanding of the investment environment is key, especially for foreign firms looking to establish a presence in the country. And, the best way to be on ground is by incorporating a local private limited company (known as Sendirian Berhad or Sdn Bhd).

Here is a quick guide on how to get started.

As in Singapore, all private limited companies in Malaysia are mandated to appoint a company secretary. Their role is to ensure that the organisation is compliant with the relevant laws by maintaining statutory registers and submitting statutory filings.

What do I need to know before incorporating a company in Malaysia?

If you are not yet aware, all businesses and companies in Malaysia are governed by the Companies Commission of Malaysia or Suruhanjaya Syarikat Malaysia (SSM). There are several types of business entities that one can incorporate in Malaysia:

• Enterprise (Sole proprietorship or Partnership)
• Limited Liability Partnership (LLP)
• Sdn Bhd
• Public listed company (Berhad or Bhd),
• Companies Limited by Guarantee (CLBG) such as foundations and organisations.

For the most part, non-Malaysians may only incorporate a Sdn Bhd. However, certain industries such as education, oil and gas, banking, tourism, and agriculture will require a 50 per cent Malaysian ownership.

Companies in industries aside from the above may qualify as 100 per cent foreign-owned Sdn Bhd, but there may be specific financial requirements, such as a minimum paid-up share capital, depending on industry.

For example, RM500,000 (approximately S$161,400) will be required for advisory and consulting businesses and RM1,000,000 (approximately S$322,800) will be required for some trading businesses. You may refer to Malaysian Investment Development Authority (MIDA) for the specific requirements.

Non-Malaysians may also establish an offshore company in Labuan, located in East Malaysia.

How can I set up a company in Malaysia?

Setting up a Sdn Bhd only requires a minimum of one director and shareholder, and a maximum of 50 shareholders. At least one of the directors needs to be residing in Malaysia and may be required to provide proof of residency. All directors should be over 18 years of age and have not been convicted of a crime or declared bankrupt within the last five years.

You should also consider the company name you want, as certain words are not permitted, such as offensive and gazetted words, as well as some controlled terms including 'royal', 'national' and 'banks'. The trade name of the business does not need to be the same as the registered company name.

Basic personal information of directors and shareholders will be required during the submission of the incorporation application. Amongst the shareholders, an agreement that details the shareholding structure, roles, responsibilities and proposed director fees should also be drawn up, although is not required for submission.

You may incorporate your company on your own, via SSM's portal MyCoID, or utilise the services of a service provider, which usually would be a company secretary firm or a law firm. The first method requires an in-person visit to the SSM office, whereas using a service provider offers greater convenience and can be done remotely without even stepping foot in Malaysia. You may also clarify any enquiries you may have with your service provider before proceeding with the incorporation.

What do I need to do post-incorporation?

Once your company in Malaysia is incorporated, you are almost ready to kick off your business. First however, there are a few additional items you need to take care of:

• Appoint a company secretary: Within 30 days from the date of incorporation
• Appoint an auditor: At least 30 days before the end of the period for the submission of the first financial statements. Private limited companies have up to 18 months to submit the first financial statements.
• Application to relevant business licences: Before commencement of the business
• Submission of financial statements: Before the financial year end
• Registration with relevant authorities for employment: Before employment of any employees

The recent Covid-19 pandemic and movement control order in Malaysia have posed enormous challenges to many companies and businesses in Malaysia. That said, many have quickly adapted to the new business environment by embracing digitisation wherever possible.

Many have taken a cold, hard look at their business processes in order to build a stronger level of resilience and, in some cases, pivot their business entirely. In spite of the challenges, many companies in Malaysia are weathering the storm and, with the right mindset and systems in place and mindset, will emerge stronger and sleeker than ever.

This guide was contributed by the Quadrant Biz Solutions team. Based in Kuala Lumpur, Quadrant Biz Solutions has team of qualified and professional Chartered Secretaries, headed by Agnes Lim, an Associate of the Malaysian Association of the Institute of Chartered Secretaries & Administrators (MAISCA) since 1995.