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Public Limited Companies in Malaysia

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Public Limited Companies in Malaysia

2021-02-02T16:37:28+08:00February 20, 2020|0 Comments

Most of Malaysia’s largest companies are public limited companies, also known as Bhd or Berhad companies. Public limited companies in Malaysia are to have at least two directors who are citizens of Malaysia, a company secretary who is a citizen of Malaysia, and at least two shareholders. A private limited company may, at the owner’s decision, become a public limited company.

Malaysia Public Limited Companies

 

A public limited company is defined as a company which offers its shares to the public. A Berhad company or Bhd company is a name given to a Malaysian public limited company. They are the largest companies in Malaysia as the public owns the shareholding rights of these companies. They also have strict financial standards as they have to disclose their reports to the public. These companies can choose to either be listed or remain unlisted on the stock exchange of the country.

All public limited companies in Malaysia must have at least two shareholders. There is no limit to the number of shareholders to be possessed by such a company. Malaysian public limited companies must be located in Malaysia and the directors (at least two in total) and company secretary (one person) must be citizens of Malaysia. They must be at least 18 years old or older to hold such positions in a public limited company.

Reasons for Private Companies to Become Public in Malaysia

A private limited company in Malaysia enjoys many rights and privileges. However, in some instances, its owner may choose to make it a public limited company due to any of several reasons. The primary reason often relates to the offered shares of the company. These shares are provided to limited shareholders in a private company. However, in a public company, there is no limit with regard to this matter. Many private limited companies become public limited companies in order to source funds from the public and invest in their projects. Furthermore, the annual returns of a private limited company are relatively low when compared to those of a public limited company. Many people therefore prefer to own a public limited company for the higher level of annual returns.

Furthermore, in private limited companies, the shares are only available to new shareholders upon the agreement of the existing shareholders and the directors of the company. If in any case the two parties do not agree, the distribution of shares will be limited. However, this is not the case in public limited companies because one can transfer shares to new shareholders or investors.

These are just some of the reasons that compel owners of private limited companies in Malaysia to turn their companies into public limited companies. As there are fewer regulations and greater levels of profitability, many private companies opt to become public.

In any case, regardless of the type of company which you are interested in establishing, we at Paul Hype Page & Co will be able to serve any of your needs at any time. Our incorporation team understands a great deal about company incorporation in Malaysia. Therefore, by working with us, you can be certain that your company will be suitably established according to the business laws of Malaysia.

Thinking of incorporating in Malaysia? Let’s get started.

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Advantages Possessed by Public Limited Companies in Malaysia

A public limited company in Malaysia, as is the case with any other company, is governed by Malaysia’s Companies Act. There are also several advantages possessed by public limited companies in the country. For example, through an initial public offering, the company may raise capital for its projects. Another important advantage of public limited companies lies in the fact that the shareholders have limited liability towards only their contributed share capital. They are not entitled to pay any amount of money beyond that. Furthermore, the financial statements are made public and the company’s financial position accounts are to be displayed to both the shareholders of the company and the general public, so there will not be any malpractice or fraud involved. It is also relatively simple to transfer shares to new shareholders because with the permission of the director, the existing shareholders can transfer their shares to the new investors either partially or completely.

Another advantage of public limited companies lies in the fact that they never need to be wound up. In a sole proprietorship or partnership, in the event of the death of the directors or shareholders, the company must be wound up. However, a public limited company in Malaysia can have new shareholders or directors elected in annual general meetings of the company. The share capital of a public limited company can be raised from the public because there is no limit to the maximum number of shareholders. This allows the company to receive more funds and more significant investments. Public limited companies are also among the most stable companies in Malaysia. Thus, many investors choose to invest in public limited companies. For this reason, public limited companies have a greater degree of credibility than do most other companies in Malaysia.

Disadvantages Possessed by Public Limited Companies in Malaysia

Although there are many advantages possessed by public limited companies in Malaysia, they also have certain disadvantages which may sometimes take a toll on either the company’s confidential matters or public affairs. One key disadvantage of public limited companies in Malaysia lies in the fact that they must go to far greater lengths than must other companies in order to remain compliant with the Companies Act. Compliance with the Companies Act involves much effort which a public limited company must put forth for the regulation of the proceedings of the company. Such is not the case with any other business entity in Malaysia such as a partnership or sole proprietorship. Another disadvantage is that the general public has much access to the information of a public limited company. In any public limited company, there is nothing which is truly hidden from the public. Any member of the public has the right to understand the company’s profit and losses in detail. The full access to financial affairs may sometimes lead to the loss of several shareholders because upon learning about the true state of the company’s financial well-being, some of these shareholders may deem the company’s financial position to be excessively unfavorable and therefore leave the company.

In public limited companies in Malaysia, the directors alone are not permitted to make any decision regarding the business because there is a requirement for the shareholders to be involved. Should there be significant disagreement among the shareholders of the company, the business progress of the company could possibly be adversely affected. Public limited companies based in Malaysia are also to adhere to a higher level of financial reporting standards than other companies based in the country. All reports are to include concise details of every financial transaction conducted by the company. There will also be a requirement to pay fees to any accounting firms which have either been auditing or preparing the financial reports.

Conclusion

A public limited company in Malaysia enjoys certain rights and privileges which are not available to other business entities based in the country. However, those who intend to own a public limited company in Malaysia should also be aware of the specific disadvantages which may be incurred if they are not careful about how they run the company. However, those who own and operate a Malaysian public limited company in an intelligent and well-planned manner will soon find that the company will receive much profit and corporate success.

Public Limited Companies in Malaysia FAQs

How does one become the shareholder of a Public Limited Company in Malaysia?2020-04-29T11:58:07+08:00

A public limited company or Berhad company is to possesses a minimum of two shareholders. In order for one to become the shareholder of such a company, the first step is to engage in the trading of stocks on Bursa Malaysia. This can be done only through investing in the stock market for the carrying out of research. One may also choose to engage a broker to do the same. Shareholders also need to open a CDS account to start trading and must also check share prices before placing their orders to share the market of listed public limited companies. After acquiring the shares of the Berhad company, one can engage in the buying and selling of the shares during the company’s trading hours.

Can a Foreigner own a Public Limited Company in Malaysia?2020-04-29T11:57:26+08:00

Foreigners are not permitted to own a public limited company in Malaysia. They are also not allowed to start either a limited liability partnership or a sole proprietorship. Only Malaysian citizens may own any of the preceding types of companies. Foreigners are only allowed to incorporate a Sdn Bhd or a private limited company in the country according to the regulations imposed by the Companies Commission of Malaysia (SSM). The reason for this rule is that private limited companies provide foreign business owners with complete foreign ownership. They are only to open companies in specific sectors which are the following: petroleum, oil, and natural gas; education; outbound tourism and ticketing agencies; banking and finance companies; and agriculture. However, the list is subject to change depending on the type of foreign investment which the government of Malaysia intends to attract. Foreigners are encouraged to open unique businesses which are rare in Malaysia. However, before doing so, foreigners have to obtain the necessary licenses and trade permits to open such a company in Malaysia.

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