Public Limited Companies in Malaysia

7 min read|Last Updated: November 30, 2022|

A Public Limited Company, also known as “Berhad”, is one of the two types of Companies limited by shares available in Malaysia. Establishment, conduct, and closure of these Companies are regulated by Company Act 2016.

Large scale businesses in Malaysia usually adopt a Public Limited Company entity. The key characteristics of a public Company are:

  • A minimum of two (2) natural persons who are at least eighteen (18) years of age and shall ordinarily reside in Malaysia by having a principal place of residence in Malaysia
  • A minimum of one (1) shareholder either an individual or corporate (local or foreign is acceptable)
  • Maintain a registered office in Malaysia to which all communications and notices may be addressed and shall be open and accessible to the public during ordinary business hours
  • Appointment of a Company Secretary who is certified and qualified as per enacted in the Company Act 2016

Reasons for Private Limited Company (Sdn. Bhd.) venture into Public Limited Company (Berhad) in Malaysia

Most of the regulations in private limited Company (Sdn. Bhd.) applies to a public limited Company (Berhad) except:

  • The Company shares can be sold to the public as an alternative to raise funds
  • Strict compliance such as holding annual general meetings and filing audited reports are compulsory

  • A more complex administration that can also lead to a slow decision-making process

However, despite the differences, there are advantages for a private limited Company (Sdn. Bhd.) who wishes to expand their business and convert to public limited Company (Berhad):

  • Institutional investment – It is easier for public listed companies to attract institutional investment without having to go through hassle negotiations

  • Enhanced corporate profile and improved valuation – Listed companies can greatly elevate the Company’s profile which automatically enhances and increases business opportunities due to trust and credibility
  • Employees’ shareholding scheme – This scheme is able to boost the employee’s morale, retain long-serving and loyal employees as well as attract best-in-class employees
  • Profitable exit strategy – Making the Company public will provide a mechanism for owners to nurture and expand the business, working towards improving the entity’s share price performance and selling it prior to an exit, as it offers potential high pay-out

As a starting point, entrepreneurs may venture into a Private Limited Company (Sdn. Bhd.) for them to explore and sustain the business within the market. However, once the business is deemed sustainable and wishes to expand, converting a private limited Company (Sdn. Bhd.) to a Public Limited Company (Berhad) is definitely seen as the long-term solution to being profitable.

Advantages of Public Limited Companies in Malaysia

When venturing into a Public Limited Company (Berhad), there are plenty of advantages for large-scale business which includes:

  • Opportunity for higher share capital

    Raising share capital is the main advantage of Public Limited Companies, especially from the public stock exchange. With the Company shares are opened to anyone, they can invest their money into the Company, resulting in higher capital compared to a Private Limited Company (Sdn. Bhd.).

  • Increased number of shareholders

    As the Company has shares available to the public, there will be a diverse and large number of stakeholders who invest into the Company. This provides the opportunity for the Company to spread the risk of Company ownership. Also, early investors can make a profit by selling off their shares while maintaining a substantial stake in the Company.

  • Other finance opportunities

    Another key advantage is the improvement of the Company’s creditworthiness when issuing corporate debt because of its demand and being on the stock exchange listing, reducing the return the Company needs to offer its investors. This puts Public Limited Companies (Berhad) in a favourable position when it comes to exploring other sources of finances.

    When needing finance assistance, bankers are more likely to offer help due to the fact that such entities are usually in a better position to negotiate good interest rates and repayment terms on loans.

  • Growth and expansion opportunities

    With more finances secured, the Public Limited Company (Berhad) can:

    • Venture into a new market, develop new products or kickstart new projects
    • Make capital expenditure to support and enhance the business in the long run
    • Execute research and development (R&D) plans and strategies
  • Esteemed brand image & enhanced public confidence

    As a Public Limited Company (Berhad), the perception from investors is that the company is established and reputable, improving the brand image when compared to Private Limited Companies (Sdn. Bhd.).

Disadvantages of Public Limited Companies (Berhad) in Malaysia

Although there are many advantages when starting a Public Limited Company (Berhad), there are also certain disadvantages which may sometimes affect the company’s confidentiality or public affairs.

  • More regulatory requirements

    As a Public Limited Company (Berhad) is open to the public, the compliance requirements are stricter compared to other business entities in Malaysia. This is to ensure the stakeholders interest are well protected.

    • Annual return must be filed with the Registrar each calendar year not later than thirty (30) days from anniversary of incorporation date. Example: The Company was incorporated on 01.07.2019, the annual return must be filed between 01.07.2020 to 30.07.2020. Any later is subject to penalty.
    • Financial statements and reports must be audited by an appointed external auditor. Normally, the financial statement will be prepared accordance to Malaysia Financial Reporting Standard (MFRS) or International Financial Reporting Standard (IFRS). This is to ensure the reporting standard is aligned with international accepted reporting standard for investment purposes.
    • The audited financial statements must be circulated to the Members (Shareholders) of the Company within six (6) months of the financial year end date. Once signed and approved by the Board of Directors and Members, it must be lodged with the Registrar within thirty (30) days from circulation to its members. Example: Financial year end is on 31.12.2019. Date of signed financial statement is on 31.05.2020. The audited report must be lodged within 01.06.2020 to 30.06.2020. Any later is subject to penalty.
    • The Annual General Meeting (AGM) is mandatory for all Public Limited Companies (Berhad). It must be held within 18 months from its incorporation date for first timers, and within 6 months for preceding years.
    • Once AGM is done and audited financial statement is lodged, the appointed tax agent must then file the annual corporate tax filing within seven (7) months from end of the accounting period. Example: Financial year ended is 31.12.2019, date audited report lodged is 30.06.2020, the final date tax submission should be done is before 30.07.2020. Any later is subject to penalty.
  • Higher level of transparency is required

    As per the complex annual compliance, a Public Limited Company (Berhad) profile is required to make it public for the third-party investors to easily access its information. A Public Limited Company (Berhad) is required to disclose more detailed data about the business and its performance for the year.

  • Ownership & control issues

    Public Limited Company’s (Berhad) stakeholders are generally more open, making it difficult to control who are the stakeholders within the Company. Therefore, the initial owners of the Company before it was made public might have the potential to lose its power, face disputes, and spend more time managing the shareholders expectations.

    Institutional shareholders can wield particularly high levels of influence, often expecting consultation and adoption of particular policies or standards in return to their investments.

Our Insights

A Public Limited Company (Berhad) in Malaysia does has its perks and enjoys certain rights and privileges which are not made available for other type of business entities. However, if the businessowner is not ready to face more complex structure with strict rules and regulation, then venturing into a Public Limited Company (Berhad) might not be such a good idea after all.

We know that incorporating a company in Malaysia can be challenging and choosing the right business entity is crucial to set up your business to success.

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Come down to our office or connect with us virtually for an incorporation assessment today.

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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