The Malaysian Companies Act 1965 regulates the incorporation of companies under Malaysian law. The law identifies three types of companies: companies limited by shares, companies limited by guarantee and companies with unlimited liability. The most widely used form of company in Malaysia is the limited liability company with shares (Sdn. Bhd.).
There are two types of limited liability companies.
1. Companies not listed on the stock exchange (Sdn. Bhd).
These are called private companies (sendirian Berhad in Malay). Their corporate name is distinguished by the suffix Sdn. Bhd. These companies are characterized by five elements:
o A share capital of at least RM2 and that the latter be released by at least two separate shareholders,
o A memorandum and articles of association
o A maximum of 50 partners,
o A minimum of two directors.
The rule for the adoption of an ordinary resolution by the shareholders is that of a simple majority, i.e. 51% of the members present and voting at the meeting. Three-quarters, i.e. 75% majority is required to pass a special resolution.
2. Listed companies (Bhd.)
Listed companies are called public companies (Berhad) under the abbreviation Bhd. which is attached to their company name. This type of company can call on public savings and its shares are freely transferable.
3. The other entities: Limited Liability Partnership or LLP and the Unlimited Liability Business.
The Limited Liability Partnership is a new form of company that combines the advantages of a limited liability company and a general partnership. The creation of this form of company is particularly important for SMEs and professional practices by offering them flexibility and freedom to choose the business model that best suits their needs.
A Limited Liability Partnership or LLP must be formed by at least two people (natural or legal). Partners have limited liability. The LLP is a separate legal entity, the permanent legal existence of which is independent of its members. Besides, it is not subject to corporation tax, but to income generated and which is treated as part of the personal income of each partner.
A Limited Liability Partnership or LLP can be registered by a request made to the SSM indicating the name of the LLP project, the nature of the activity proposed, the address of the head office, the partners and the LLP compliance officer. The registration fee for a Limited Liability Partnership or LLP is RM500.
The branch and subsidiary in Malaysia
A foreign company wishing to carry out commercial operations and transactions directly in Malaysia can do so by registering a branch or a subsidiary.
a) The Branch
The establishment of a branch does not constitute a separate entity from the parent company. It is a form of commercial activity generally temporary and often followed by the establishment of a subsidiary.
However, a foreign company is not allowed to register a subsidiary for wholesale or retail activities.
b) The Subsidiary
A foreign company may establish a Sendirian Berhad (private limited company) in Malaysia.
The latter has the advantage of being able to be wholly owned by the parent company.
Generally, to obtain working visas, the subsidiary must have a minimum capital of at least MYR 500,000. Certain sensitive sectors such as education, petroleum, banking and finance, tourism, agriculture, and certain distribution businesses require a certain percentage of local participation (Bumiputra). However, several sub-sectors linked to these fields of activity have been liberalized since 2009.
Besides, the registration of a subsidiary is carried out in two stages, with the Companies Commission of Malaysia, also known as the abbreviation SSM. The first step is to check the availability of the company name; the second (within 3 months of the approval of the name) is the filing of documents for the registration of the company. This procedure usually lasts 2 weeks between the reservation of the name and the issuance of the Certificate of Incorporation. Its cost depends on the amount of the share capital of the parent company (between 1000 and 70,000 MYR).
Check out this article to know how to register your company with SSM: 2020 Updated: How To Register A Company in Malaysia With SSM
Setting up a branch is easy if the foreign company appoints a local manager and does not employ expatriate staff.
For the constitution, the company must have at least two (2) directors, two (2) shareholders, who may be natural or legal persons. One of the directors must be a Malaysian or a foreigner residing in Malaysia.
A company with a share capital of less than RM 2.5 million will be taxed on its income at the following rates:
· 20% on the first RM500,000
· 25% on the following income.