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Foreigners who want to start a company in Malaysia should know which types of business entities permit foreign-ownership as not all business entities in Malaysia can be (up to 100%) foreign-owned.
In this guide, we will look at the available company registration options for foreign investors and companies in Malaysia and briefly talk about the process and requirements.
Foreign vs. local company company in Malaysia
Defined by the Companies Act 2016, a foreign company means:
- A company, corporation, society, association or other body incorporated outside Malaysia
- An unincorporated society, association or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose and which does not have its head office or principal office of business in Malaysia.
A foreign parent company may set up entities in Malaysia if they want to explore a new market and carry on their business activities in Malaysia.
In contrast, a local company is a company registered under the Malaysian law and can benefit from the tax exemptions available under the free trade agreements signed by the country with the ASEAN countries. Depending on your intended business activity, 100% ownership restrictions may apply.
Foreign company registration options in Malaysia
Foreign investors can obtain ownership of a company by setting up one of the following foreign company registration options in Malaysia:
- Branch office
- Representative office
- Private limited company
- Sole proprietorship
- Limited liability partnership
1. Branch office
A branch office is not a separate legal entity and is an extension of the foreign parent company. The foreign parent company is liable and responsible for all the debts of the branch in Malaysia. The activities of a branch office must be the same as the foreign parent company, and a branch is suitable for foreign companies that want to expand their business to Malaysia for a short-term basis. There must be at least one Malaysian resident agent to set up the branch in Malaysia.
2. Representative office
Foreign companies that want to increase their market and understanding of the Malaysian business environment can set up a representative office. A representative office does not have an independent legal standing in Malaysia. Therefore, the parent company is responsible for the debts and liabilities.
The representative office cannot engage in any activities that will generate profit, cannot sign or enter any contracts, sign deals or undertake any trading activities; it is restricted to promotion and liaison activities, conducting market research and coordinating activities for the parent company.
3. Private limited company
The private limited company is the most common type of entity for foreign investors. Foreigners are permitted to own 100% of the company. However, for some industries, they will need 50% Malaysian ownership. These industries include agriculture, banking, education, oil and gas.
A private limited company is a separate legal entity from its owners, meaning that it can buy or sell property, enter legal contracts and sue or get sued in courts. The owners are liable only to the amount they have contributed to the company, and their personal assets or wealth will be left untouched if something happens to the company.
To establish a private limited company, you would need a minimum of one shareholder and a maximum of 50 shareholders.
4. Sole proprietorship
A sole proprietorship is one of the simplest types of Malaysian business entities to set up. A foreigner can only register this entity if they have a permanent resident status in Malaysia.
The sole proprietorship requires only one owner, and his/her liability is unlimited. Personal income or assets of the owner will not be protected if the company is declared bankrupt or in debt.
You will have to pay an annual fee to the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia (SSM)) to keep the company renewed. This type of entity does not need to submit audits or carry out annual filing.
A partnership has two or more and a maximum of 20 owners, and only foreigners with a permanent resident status are allowed to register partnerships.
These partners combine their resources to carry out business with the goal of generating profit. Partnerships are suitable for professional firms such as auditors and lawyers.
The partnership agreement outlines the responsibilities and liabilities of each partner. The business partners share the profits and liabilities of the company. The partnership is not required to pay any tax, but the partners will be taxed as individuals and have to report their profits and losses.
6. Limited liability partnership
A limited liability partnership combines the characteristics of a partnership and a company. It is a body corporate and is a separate legal entity from its partners.
Foreign investors can set up a foreign limited liability partnership. The partners of the foreign limited liability partnership do not need to be a resident in Malaysia. However, the compliance officer needs to be a citizen, permanent resident or ordinarily resides in Malaysia.
A limited liability partnership provides asset protection to its partners if the company goes bankrupt or in debt. It also has less compliance requirements compared to other entities and is more affordable.
Requirements for foreign company registration
To register a foreign company in Malaysia, you must prepare the following documents:
- Certified true copy of:
- The certificate of incorporation
- The company’s memorandum and articles of association
- A list of all foreign and local directors and list of their powers
- A memorandum of appointment or power of attorney under the seal of the foreign company wanting to incorporate in Malaysia
- A copy of the application and reservation of the company names
- A copy of the email for approval of the reservation of the company name
- A statutory declaration made by the agent of a company
- Registration fees
Registration process for foreign companies
Company name search and approval
- The company name should be submitted through the Companies Commission of Malaysia online system with a fee of RM 50. Once the name is approved, it will be reserved for 30 days from the date of approval.
- If you want to extend the period of name reservation, you will have to pay a fee of RM 50 for every 30 days.
The foreign name should be the same as the foreign parent company, except the subsidiary company whose name does not need to be the same.
Registering a foreign company in Malaysia
- Within 30 days after the name is approved, you must submit the following information to the Companies Commission of Malaysia:
- Name, identification, nationality and the place of residence of every shareholder in Malaysia. For body corporates, the corporate name, place of incorporation, registration number and registered office
- Name, identification, nationality, place of residence of every director of the foreign company in Malaysia
- List of the shareholders or members
- Foreign company with share capital – details of class and number of shares
- Foreign company limited without share capital – the amount up to which the member undertakes to contribute to the assets of the foreign company
- Name and address of the person who is a Malaysian resident who is appointed as the company’s agent
- Any other information the registrar may request
- The application for registration of foreign company under section 562 together with a statement from the agent of the foreign company verifying his/her consent for the appointment.
- If the documents are not in Bahasa Malaysia or English, a certified translation of the documents is required.
Foreign company registration fees
|Not more than RM 1 million||RM 5,000|
|Exceeds RM 1 million but not exceeding RM 10 million||RM 20,000|
|Exceeds RM 10 million but not exceeding RM 50 million||RM 40,000|
|Exceeds RM 50 million but not exceeding RM 100 million||RM 60,000|
|Exceeds RM 100 million||RM 70,000|
Once the registration is complete, the notice of registration will be issued within one working day by the Companies Commission of Malaysia.
The steps and documents may vary based on the foreign company options in Malaysia, but most of the time, it is similar.
We recommend engaging with Acclime’s professional corporate services to help you go through the process of registering a company in Malaysia and comply with the regulations that are required by the Malaysian Companies Act.
Acclime is Asia’s premier tech-enabled professional services firm. We provide formation, accounting, tax, HR and advisory services, focusing on delivering high-quality outsourcing and consulting services to our local and international clients in Malaysia and beyond.