Definition of a Sdn Bhd Company
Berhad (Bhd) is a suffix used by companies in Malaysia to identify them as public limited companies. The suffixes Berhad, BHD (in block letters), or Bhd after a company’s name all serve this same purpose. The suffix Sdn, which stands for Sendirian Berhad (Sdn Bhd), indicates that the company in question is a private limited company. All locally incorporated private limited companies in Malaysia must include “Sdn Bhd” after the company’s name. Public limited companies in Malaysia, meanwhile, are to have “Bhd” or “Berhad” after the name of the company.
How Sdn Bhd Companies Differ from Bhd Companies
Both Bhd and Sdn Bhd companies are companies which are allowed to issue shares. This advantage is one important reason why both are the most common types of business entity which exist in Malaysia. Both Sdn Bhd and Bhd companies alike have a limited number of shares. The liabilities of the shareholders of Sdn Bhd and Bhd companies are restricted to the amount specified on their unpaid shares.
However, Sdn Bhd and Bhd companies differ in several significant ways. One of these relates to the size of the company. Most Sdn Bhd companies tend to be small or medium-sized enterprises (SMEs). Bhd companies, on the other hand, are usually among the largest companies in Malaysia. Bhd companies usually have more stringent financial reporting standards than do Sdn Bhd companies because Bhd companies are required to disclose their financial statements to the public. When Sdn Bhd companies expand to other countries, they usually use the suffix Ltd. On the other hand, when Bhd companies do so, they use the suffix Plc. Bhd companies have greater access to capital than do Sdn Bhd companies because they have the ability to access public equity and debt financing when they are in need of additional finances. When incorporating a Sdn Bhd company, there are stipulations to be followed which do not apply to Bhd companies. These stipulations involve company share transfers, number of shareholders, public subscriptions to company shares, and collection of public deposits.
Regardless of whether you are interested in starting a Bhd, Sdn Bhd, or any other type of company in Malaysia, we at Paul Hype Page & Co will be able to assist you with this matter. Our knowledgeable and competent incorporation team will guide you through the process of company incorporation in Malaysia. We will also see to it that you obtain all necessary licenses and permits for the setup and successful operation of your new Malaysia-based business.
Why a Sdn Bhd Company Must Have Shareholders
According to Malaysia’s current corporate laws, most companies in Malaysia are only allowed to be incorporated if they are limited by shares. Companies which are limited by shares are companies which are formed with their shareholders’ liabilities limited to the amount of capital which they have invested in the company.
A shareholder is defined as person or legal entity, including a private limited company, which is the legal owner of one or more shares in a public or private company. Shareholders may also be referred to as members of a company. Shareholders can be considered to be the owners of the company.
Management of the Operations of the Company
Shareholders play both direct and indirect roles in managing a Sdn Bhd company’s operations. They are tasked with electing directors who are to appoint and supervise senior officers. Among these directors are the chief executive officer and chief financial officer. Shareholders also play an indirect role in company management through their actions related to the company in the stock market. Sdn Bhd companies which generate large amounts of free cash flow often face pressure from shareholders to return some of the excess cash to shareholders. This excess cash is typically returned in one of two ways: in the form of dividends or share buybacks.
Determining the Control of a Company
Shareholders determine who will have ultimate control of a Sdn Bhd company. A company which does not have any single majority shareholder is in a position which is vulnerable to hostile takeover attempts. Shareholders can prevent such moves if they are satisfied with the performance of the current management or if they believe that offering price is insufficient. Shareholders may also make suggestions to the company management to consider options such as selling off the company or merging with another company if they believe that such actions will be of great benefit to the company.
Costs Related to Shareholders
Sdn Bhd companies are required to pay for certain additional costs which are related to shareholders. Such costs include legal and other fees related to regulatory disclosures, investor communications expenses, and the costs of holding events such as extraordinary general meetings, annual general meetings, conference calls which have significant impacts on the company, and other important events and meetings.