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.
Becoming the Shareholder of a Sdn Bhd Company
When a shareholder leaves a Sdn Bhd company, the shares of that shareholder are to be transferred to another person. Such a transfer may either take place through the sale or gifting of those shares to another person. Any prospective shareholder may buy the shares of an exiting shareholder in a Malaysia-based Sdn Bhd company.
Transference of the ownership of Sdn Bhd company shares can either be conducted through the sale of the shares or the gifting of the shares to other people. Transference of shares is performed through a stock transfer form. The responsibility of completing this form belongs to the company director. After the form has been completed, a share certificate is to be issued to the new shareholder.
Benefits Granted to Shareholders of Sdn Bhd Companies in Malaysia
Protection of Personal Wealth
The shareholder is a partial owner of the company. However, the shareholder is also not responsible for any of the liabilities of the company. Therefore, the shareholder of a Sdn Bhd company can never lose more money than the capital which they have invested in the company.
Continuous Company Existence
A Sdn Bhd company has the same rights and obligations as those of a natural person. A Sdn Bhd company is therefore allowed to acquire assets, enter into contracts, sue, and be sued. Its separate legal status allows it to remain in existence even if the founder or one or more shareholders or directors sell their shares, die, or leave the company. Sdn Bhd companies exist until the company is dissolved. This continuous existence is an advantage which Sdn Bhd companies have over partnerships or sole proprietorships because their continuous existence of a company provide them with greater stability and capabilities to plan for business goals in the long-term.
Ability to Transfer Ownership
Those who are shareholders of Sdn Bhd companies are allowed to sell or transfer their shares to anyone. Such is not the case with partnerships or sole proprietorships. Owners of partnerships and sole proprietorships may not transfer ownership to anyone else unless they choose to sell the business entirely.
Greater Access to Capital and Funds
It is often easier for Sdn Bhd companies to raise money than it is for other business entities in Malaysia. This is because Sdn Bhd companies have the option of issuing bonds and share certificates to investors. This in turn makes them more likely to expand when compared to other business entities in Malaysia. Sdn Bhd companies are also often more able to receive loans when compared to other types of businesses. Such is the case because many financial institutions in Malaysia consider loans given to Sdn Bhd companies as being of lower risk than those given to other business entities.
Paul Hype Page & Co – SSM service provider and Asean Chartered Accountant.
Paul Hype Page & Co. have 3 physical offices in Singapore, Malaysia and Indonesia
Our Firm Goal is to assist Foreigner and Foreign Companies to set up business in Asean.
How we can help you:
We will call you back, please click below link and make appointment with our Sales consultant:
Step 1- Listen to your Business plan and Relocation needs.
Step 2- Analysis your Malaysia Tax Planning
Step 3- Recommend the most suited type of Company Incorporation, Open Bank account and Work Visa
Step 4- Arrange for your Spouse and Children Visa
Step 5- Assist as your company to hire staffs and handle all HR matters
Step 6- Every financial year end, we assist you with your yearly SSM Finanical and Tax Compliance
Step 7- Assist you to expand business to Malaysia, Indonesia, Vietnam and Thailand.
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