Advantages of Setting Up a Subsidiary Company in Malaysia
Foreign investors normally opt for a subsidiary company because of the following reasons:
Separate legal entity
As mentioned earlier, the subsidiary company is considered as a “legal person” and is separated from its parent or holding company. This means that the assets and debts are different from each entity. A subsidiary company is also allowed to operate a business that differs from the holding or parent company.
Unrelated management team
A subsidiary Company is able to form its own management team which is not related to its Holding/ Parent Company. Normally, a team of local officers are formed in order to abide with the country’s local culture and regulation. The daily decision making will be done by the internal management team without the need to request for approval from Holding/ Parent Company.
However, if such decision may impact the subsidiary Company as a whole, then the Board of Directors may need to prepare a proposal and present it to the representative of their Holding/ Parent Company.
Diverse branding and identities
Incorporating a subsidiary is a good choice for foreign investors who wish to expand and diversify their business without jeopardising the initial business nature carried out by the Holding/ Parent Company. Hence, big brands from clothing Companies commonly use this type of business structure to diversify their business entities.
Example: GAP and GAP Kids.