Subsidiary company in Malaysia.

Expanding into Malaysia presents a significant opportunity for both foreign and local companies, and establishing a subsidiary is one of the most effective ways to do so. A subsidiary is a separate legal entity controlled by a parent company, allowing businesses to manage operations locally while limiting liability and maintaining strategic oversight.

This guide provides an overview of setting up a subsidiary in Malaysia, covering legal frameworks, incorporation steps, regulatory requirements and key post-registration obligations.

What is a subsidiary?

A subsidiary is a separate legal entity that is controlled by another company, known as the parent company or holding company. The parent company typically owns more than 50% of the subsidiary’s voting stock, giving it the power to influence the subsidiary’s operations and decision-making processes.

In Malaysia, subsidiaries are governed by the Companies Act 2016, which provides the legal framework for their establishment and operation. Under this act, a subsidiary can be either a private limited company (Sdn Bhd) or a public limited company (Bhd).

Importantly, a subsidiary has a separate legal entity from its parent company. Therefore, the subsidiary is liable for its own debts and liabilities. This structure is suitable for both foreign and local companies who want to expand their business in Malaysia. The company name does not need to be the same as the foreign parent company, and it can conduct all business activities.

Legal framework for subsidiary companies in Malaysia

Companies Act 2016

The Companies Act 2016 is the primary legislation governing corporate entities in Malaysia, including subsidiaries. This act replaced the previous Companies Act 1965, bringing about significant changes to simplify the process of incorporating and managing companies in the country.

Key provisions of the act relevant to subsidiary companies include:

• Incorporation requirements
• Corporate governance structures
• Financial reporting and auditing obligations
• Directors’ duties and responsibilities
• Shareholders’ rights and protections

Other relevant regulations

In addition to the Companies Act 2016, subsidiaries in Malaysia must comply with various other regulations depending on their industry and activities.

These may include:

• Income Tax Act 1967
• Employment Act 1955
• Industrial Relations Act 1967
• Competition Act 2010
• Personal Data Protection Act 2010

Foreign investors should also be aware of the Guidelines on Foreign Participation in Distributive Trade Services, which may affect certain sectors and business activities.

Requirements for setting up a subsidiary

Shareholders

Subsidiaries require a minimum of one corporate shareholder, who can be either a local or foreigner. Full foreign ownership is allowed.

Directors

One resident director is required. The resident director does not have to be a Malaysian citizen but must have a principal residential address in Malaysia.

Company secretary

All companies in Malaysia must appoint a qualified company secretary within 30 days of incorporation. The company secretary must be registered with the SSM and have a practising certificate issued by the SSM. The company secretary plays a crucial role in ensuring compliance with statutory requirements and maintaining corporate records.

Incorporation process

The process of incorporating a subsidiary in Malaysia requires several steps:

Name reservation and approval

Approval for the proposed company name must be obtained from the SSM.

There are two methods available:

• Direct incorporation: Complete the required information for both the company name and incorporation online, with a fee of RM 1,000. After the name is approved, the application for incorporation will be processed.
• Name reservation: Submit an online application for the company name with a fee of RM 50 per name. The approved name will be reserved for 30 days, after which the incorporation can proceed with a fee of RM 1,000.

Preparation of incorporation documents

This step involves drafting the complete details of directors and shareholders, along with other required forms. The required documents and information include:

• Identification card or passport of all shareholders and directors
• Residential address of all directors and shareholders
• Declaration from all directors and promoters
• Company particulars from the company’s Registrar for the corporate shareholder
• The proposed type of business
• Board resolution from the corporate shareholder approving the registration
• Certified true copies of:
  • Certificate of incorporation of the corporate shareholder
  • Memorandum and articles of association or equivalent documents of the corporate shareholder
  • Memorandum of appointment or power of attorney authorising a person in Malaysia to accept notices on behalf of the foreign company

Submission of documents

The incorporation documents known as Section 14 or the Company Superform must be filed with the SSM together with a fee of RM 1,000.

Issuance of Notice of Registration

Upon approval, the SSM will issue the Notice of Registration. A certificate of incorporation will only be issued by SSM upon request together with the prescribed fee.

Opening a bank account

After completing company registration in Malaysia, a corporate bank account can be opened. It is advisable to conduct thorough research to identify banks that align with the company’s needs, as different institutions offer various benefits and fee structures.

Popular local and international banks in Malaysia include:

• Maybank
• CIMB Bank
• Public Bank Berhad
• RHB Bank
• Hong Leong Bank Berhad
• UOB Bank
• HSBC Bank

To open a corporate bank account, the following documents are generally required:

• Completed application forms from the bank
• Letter of introduction and recommendation from an existing customer of the bank (required by some banks)
• Photocopy of directors’ and authorised signatories’ identification cards
• Certified true copies by the company secretary of:
  • The company’s constitution
  • Section 78 – Return of allotment of shares
  • Section 58 – List of directors
  • Section 46 – Registered office address
  • Section 14 – Superform
  • Section 17 – Certification of incorporation
  • A resolution from the board of directors authorising the opening of the account and designating the list of authorised signatories

Financial reporting and audit requirements

Subsidiaries are required to:

• Maintain proper accounting records
• Prepare financial statements in accordance with Malaysian Financial Reporting Standards (MFRS)
• Have their financial statements audited annually by an approved auditor if the companies are not qualified for audit exemption
• File annual returns and audited financial statements with the SSM

Conclusion

Establishing a subsidiary company in Malaysia offers significant opportunities for foreign investors looking to expand their presence in Southeast Asia. The country’s strategic location, robust infrastructure and business-friendly policies provide a solid foundation for business growth. However, success requires careful navigation of the legal and regulatory landscape, cultural nuances and market dynamics.

By understanding the benefits, challenges and strategic considerations outlined in this article, parent companies can make informed decisions about establishing and operating subsidiaries in Malaysia.

How Acclime can help establish a subsidiary in Malaysia

Acclime offers complete support in company incorporation and corporate compliance. From subsidiary registration to post-incorporation services, our team of experts can assist with everything from preparing incorporation documents to setting up statutory records and ongoing compliance filings. By partnering with us, foreign and local businesses can confidently navigate Malaysia’s legal requirements and establish a compliant and operational subsidiary. Contact us to learn more about how we can support your company incorporation and long-term governance needs.