In Malaysia, there are vast opportunities to establish a business due to its robust economy and government initiative to promote entrepreneurship, competition, and innovation in the workforce. Not only limited to locals, but foreigners are also allowed to set up a company here. 

Tips: A foreigner is able to 100% own a Private Limited Company (Sdn. Bhd.) as long as he has a local residential address.

There is different type of business entities available in Malaysia. A business entity is an organization formed voluntarily to carry out activities of trading goods or services to consumers for profitable gain or charitable purpose. Each organization is determined by its business plan which include the outcome of its operation and main activity. 

Most of the business entities are privately owned and administered by few individuals. In Malaysia, one of the most preferred type of business entity is theprivate limited company.

Private Limited Company (Sdn. Bhd.)

Malaysia has become one of the prime destinations in Asia for company registration amongst foreigners. It offers many advantages as an investment destination, favourable tax regime as well as strong government support. 

With the revision of the Company Act 1965 to Company Act 2016, foreign investors are now allowed to solely own a Company (becoming a director and shareholder) without the need to appoint a local nominee director. This is allowed in the major vast of industries available in the country except for strategic sectors for national interest. The best structure to start a business is by incorporating a private limited Company (Sdn. Bhd.). 

A private limited Company or otherwise known as “Sendirian Berhad” or “Sdn. Bhd.” is typically a small or medium sized enterprises with a straightforward registration process which cost only MYR 1,060. 

This type of business structure is considered as a “legal person”. The Company can own assets, bind a contract as well as sue other entities in courts under its own name. The best part is it allows an entrepreneur to keep their finances and assets separately from the business. They are only liable towards the Company’s debts up to the amount they have invested for the business. Hence, this business structure is beneficial for a Company to have investment without risking stakeholder personal wealth.

Why incorporate a Private Limited Company (Sdn. Bhd.)?

There are a lot of advantages incorporating a private limited Company (Sdn. Bhd.) can have and some of the most famous ones are:

  • Separate Legal Entity

    • This business structure is considered as “legal person” which can purchase assets under its own name, bind a contract as well as sue another entity in courts 
    • Stakeholders’ personal wealth are safe guarded and not personally liable towards debts accumulated by business 
  • Owning Property

    • As a “legal person”, a private limited Company (Sdn. Bhd.) can purchase assets such as building, land, vehicles, and many more under its name 
    • Stakeholders have no rights to claim upon an asset owned by the Company as long as the Company is under going concern basis 
  • Ease in transfer of ownership

    • The shareholders are at liberty to purchase, sell or transfer their shares to other existing shareholders or potential investors. 
    • There will be no direct impact towards Company’s daily operation if occur changes of shareholders 
  • Uninterrupted Existence

    • The private limited Company (Sdn. Bhd.) has a perpetual succession which means it will only cease to exist once it is legally dissolved 
    • If any stakeholder departs or ceased, it will not affect the Company existence 
  • Better access to funding

    • As a “legal person”, the private limited Company (Sdn. Bhd.) can initiate a bank account opening and opt for the loan packages banker has to offer under its own name 
    • The Company may also encourage third party investor to fund the business by offering their shares and plan the dividend pay-out 
  • Great corporate tax advantages

    • Tax incentives such as pioneer status, investment tax allowance and SME Digitalisation Grant Scheme and Automation Grant are normally offered to private limited Company (Sdn. Bhd.) 
    • The business will only be taxed based on the profit before tax with first MYR 600,000 at 17% and a further of 24% on subsequent balance
  • Manageable annual compliance

    • The Company Act 2016 has eased most of the annual compliance requirement such as the introduction of single member/director in the Company, abolition of the requirement to hold annual general meeting for private limited Company (Sdn. Bhd.) and the exemption to submit audited financial statement unless it meets the criteria 
    • The Company will be automatically operating under the Company Act 2016 framework instead of a Memorandum of Association (MoA) or Article of Association (AoA) unless stated otherwise by the shareholders 

The disadvantages of incorporating a Private Limited Company (Sdn. Bhd.)?

Even though there is a list of advantages incorporating a private limited Company (Sdn. Bhd.) can bring, however, the disadvantages still make entrepreneur think twice before proceeding:

  • Divided ownership

    Initially, setting up a private limited Company (Sdn. Bhd.) as a sole owner (director and shareholder) might come in handy. However, as time goes by and the business grows, more people might be involved with the decision making.  

    Even though the Company is exempted from annual general meetings, any decisions made by the appointed board of directors must still be written in circular resolutions which in turn will need the shareholder’s votes to conclude the matter. This can be a problem if there is conflict amongst the stakeholders.  

  • Unable to appoint more than 50 shareholders at one time

    Having investors within a Company is crucial to ensure the operation planning can be done in the long run. Funds injected by shareholders not only contributes to the daily operation, but also in adding the assets owned by the Company that in the end generate revenue for the year.  

    If the Company wishes to expand its business activities which might need more fund or investors, maintaining as a private limited Company (Sdn. Bhd.) might not be beneficial at this stage. As a private limited Company (Sdn. Bhd.), it is only allowed to appoint maximum of 50 shareholders at one time.

  • Unable to raise funds from the public

    Another drawback by incorporating a private limited Company (Sdn. Bhd.) is that the Company is not able to sell its shares to the public as an alternative way to raise its fund. Their options remain by signing for loans from the bank, funds from their existing investors or selling off their existing assets.

  • Restricted share transfer options

    It is well known that a private limited Company (Sdn. Bhd.) is formed by a close group of individuals such as business partners or family members. This also means, any decision to appoint an outsider to become one of the shareholders might be restricted.  

    Any newly issued shares issued shares must always be offered to the existing shareholders first before any outsiders can invest in them. The appointed board of directors will also have a say in this. They can decide whether the decision to transfer the shares to a new investor is beneficial to the Company or not.  

Requirements to establish a Private Limited Company (Sdn. Bhd.)

Advantages and disadvantages are the norm in whatever decision we decided on. As long as the advantages weight more and brings prosper to the betterment of our live, we should take the risk and venture into it.  

In order for an entrepreneur to incorporate a private limited Company, they are required to:

  • Have at least one director with legitimate residential address in Malaysia

  • Appoint director who are at least 18 years old

  • Inject a minimum paid up capital of MYR 1

Some of the crucial items they are advised to also take note off are:

  • Business plan – What is the business activities that the Company will be carrying, where will the operation takes place, how many employees the Company plans to hire, who is the target market and potential suppliers and most importantly, why must the business run in Malaysia

  • Registration and annual compliance recurring cost – The registration fee via an appointed Company Secretary can be around MYR 2,500 and the annual compliance recurring cost can be in between MYR 4,500 to MYR 6,000 (this includes Company Secretarial service, accounting, tax filing etc.)

  • Business licenses – Which industry will the business be involved with. A specific industry such as manufacturing will need to apply manufacturing license before they can proceed to operate.  Even a consultation business which will be renting an office will also need a general license from the town city hall which is renewable each year

  • Will the Company hire foreign expatriates – If the Company has plans to employ foreign expatriates, the paid-up capital requirement may vary from MYR 250,000 for 100% local owned to MYR 500,000 for 100% foreign owned.

  • Key position within the Company – There are positions to be filled by third party such as Company Secretary, auditor, and tax agent. Regardless the Company is owned locally or by foreigner, it can venture into all type of business activities. Difference is only on paid-up capital requirements 

  • Tax structure within the country – While most country practice double taxation, Malaysia tax system is territorial. Both residents and non-residents alike are taxed based on their Malaysian-sourced income while foreign-sourced income are not taxable even though the Company is local.

Procedure of incorporating a Private Limited Company (Sdn. Bhd.)

If you were to engage with Paul Hype Page & Co., all incorporation applications will be submitted electronically to Companies Commission of Malaysia – Suruhanjaya Syarikat Malaysia (SSM) by our certified Company Secretary. 

The standard timeline needed are an estimation of:

  • Name reservation – 1 to 3 working days

  • Company incorporation – 3 to 7 working days

Preliminary Works

  • Client must complete the Know Your Client (KYC) in our patented platform

  • Our team will check and confirm if the name proposed is available within 24 hours

Name reservation

  • Directors NRIC / Passports are needed for our team to proceed with the name reservation application

  • Proposed name must have a definition

    Examples: 

    1. ABC Ice Cream Sdn. Bhd. – A – Apple, B – Banana, C – Cherry Ice Cream Sdn. Bhd.  
    2. Oishii Sushi Sdn. Bhd. – Oishii means delicious in Japanese 
    3. Ramu Pharma Sdn. Bhd. – Ramu is the name of the director in the Company (a consent letter will be required for this type of proposed name) 
    4. Paul Hype Page Sdn. Bhd. – Paul Hype Page is similar name to sister Company in Singapore (a consent letter will be required for this type of proposed name) 
    5. Petronas Sdn. Bhd. – Petronas is a trademark name (a consent letter from owner is needed for this type of proposed name) 
  • Nature of business in general

  • Cost to submit name reservation is MYR 50

Signing of Incorporation Documents

  • Once proposed name is approved, a Company has 30 days to complete the incorporation procedure

  • Our team will prepare the documents and generate them via our platform for stakeholders of Company to read and sign off

  • All signing will be done online, hence there is no need for our clients (local or foreign) to be physically present

Risk assessments

  • Once signatures are completed, our team will proceed with the risk assessment task

  • This step is part of the risk and compliance assurance to ensure all stakeholders within the Company have clean background

Incorporating the Company

  • Once our team confirms stakeholders are clear, we may proceed with the final step, which is submission of incorporation application

  • Client must choose business activity code (maximum 3 at one time) and explain in general the business description of the business activities

  • One of the appointed directors must have a local residential address if all stakeholders are foreigners

  • If the Company already has a business address, kindly let our team know for us to include it during the initial stage

  • A minimum of MYR 1 as initial paid-up capital (Our suggestion is to at least put in MYR 1,000 as the initial paid-up capital)

  • Cost to submit incorporation application is MYR 1,010

Once the Company is successfully incorporated, the Company Secretary should furnish you the documents below:

  • Section 14 – Superform [Application for registration of a Company]

  • Section 15 – Notice of Registration [Certificate issued by SSM to confirm the Company is successfully incorporated]

  • Section 17 – Certificate of Incorporation

  • Section 46 – Particular of registered address

  • Section 58 – Particular of directors

  • Section 58 & 236 (2) – Appointment of first Company Secretary

  • Section 78 – Particular of shareholders and shares

Annual Compliance for Private Limited Company (Sdn. Bhd.)

According to Company Act 2016, a private limited Company (Sdn. Bhd.) is still liable to complete its annual compliance lodgement which includes:

  • Annual return  A company must file its annual return within 30 days from their anniversary of incorporation date. Failure to comply is an offense punishable with a fine not exceeding MYR 5,000

  • Financial statement – Even though the Company Act 2016 has eased the requirements to file audited financial statement, a private limited Company (Sdn. Bhd.) is still liable to lodge their financial statements (audited or unaudited) within 6 months from the Company financial year end. Failure to comply is an offense punishable with a fine not exceeding MYR 5,000

  • Income tax return – Regardless of the Company status being dormant or active, they are still liable to submit their tax return within 7 months from their financial year end. The particulars include the amount of chargeable income and tax payable by the Company

FAQs

Does a Labuan Company require a director who is ordinarily resident in Malaysia?2021-06-04T19:39:58+08:00

No, a Labuan Company does not require a director who is ordinarily resident in Malaysia.

How long does it take to setup a Holding Company in Malaysia?2021-06-04T19:39:18+08:00

As long as all documents are in order and all legal requirements are met, the incorporation process should take between one to two weeks.

Do I need a Corporate Secretary if I want to register a Sdn Bhd?2021-06-04T19:38:24+08:00

Yes, you need to appoint a company secretary within a month (30 days) of the incorporation of your Sdn Bhd as per Section 236 of the Companies Act 2016.

What are types of companies in Malaysia?2021-06-04T19:36:15+08:00
  1. Sendirian Berhad (Sdn Bhd) / Private Limited Company
  2. Company Limited by Guarantee
  3. Sendirian (Sdn)Sole Proprietorship / Unlimited Company
  4. Berhad (Bhd) / Public Limited Company
  5. Foreign Company
  6. Perkongsian Liabiliti Terhad (PLT) / Limited Liability Partnership (LLP)

The mentioned types have their own nature of specifications. Refer here to find out which type of company suits your current.

How long does it take to register a company in Malaysia?2021-06-04T19:34:23+08:00

The process could take up to [5-10 working days] upon submission of documents. However, the mentioned is the ideal timeline where the actual progress could have delay due to several factors (i.e., special approval required from external ministries or missing documents during submission to SSM).

Can foreigners incorporate and fully own a company in Malaysia?2021-06-04T19:32:52+08:00

Yes, foreigners can incorporate and fully own a Malaysian Sdn Bhd. However, according to the Malaysian Companies Act of 2016, your company must have at least 1 director with a residential address in Malaysia.

However, do note that specific industries may have their own local director/shareholding requirements. For example, classes of a recruitment agency license require a local director and shareholder.

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8 Discussions

  1. Khadijah October 17, 2021 at 9:04 am - Reply

    To check , if one of shareholder(director) want to take over share of another shareholder, under PLT company, may I know how the procedure.
    Is it any form related need to fill up.

    Please advise

    • Paul Hype Page October 20, 2021 at 8:53 am

      Hi Khadijah,

      For share transfer, you will need to obtain approval from the Board of Directors. If approved, you are required to complete the Share Transfer Form (Form 32A) – this will need be witnessed by a neutral party. After which, completion of the transfer will be stamped at any LHDN office.

      You need to make sure the right paperwork is used. The best will be to get your company secretary to assist you with it.

      Should you require a company secretary to assist, feel free to reach out to us on WhatsApp and we’ll can share more about our services.
      https://wa.me/6584833084

      Best Regards,
      Paul

  2. Tokhwa Chew June 13, 2020 at 12:54 pm - Reply

    Hi, how much a limited company and private limited company need to prepare to apply for it? Is there any yearly payment required? We only want to apply for the licence.

    • Tiwi June 26, 2020 at 9:36 am

      Hi Tokhwa
      The costs for incorporation vary based on your needs, for example if you are a local the price will be RM 2,048. If you are a foreigner, the price would cost between RM 8,648 to RM 11,848. In addition, the paid-up capital and any annual fees, depends on the nature of your business. To further answer your questions, please contact us at the link below, so we can better understand your needs and provide accurate advice to you.

      Thank you for your question and hope to hear from you soon.
      Warm regards
      Paul

  3. Nur December 2, 2019 at 9:48 pm - Reply

    What are the usual issues happens in private company?

    • Tiwiyah Kumaran December 5, 2019 at 9:33 am

      Hello Nur,

      To incorporate a private limited company in Malaysia, you will require a company secretary, at least two shareholders and directors who are residents of Malaysia, a number of shareholders between two and 50, and a sufficient amount of paid-up capital which will depend on the business field you enter.

      For further information on incorporation in Malaysia, please contact us.

      Thank you.
      Paul

  4. Goh Sin Seng October 30, 2019 at 9:30 am - Reply

    If I register a pte Ltd company, is there a limit to the number of shareholders. If there is a limit what is the maximum number of shareholders before a pte. Ltd must be converted into a Ltd company.

    Thanks

    • Tiwiyah Kumaran November 7, 2019 at 9:48 am

      Hello Sin Seng,

      In Malaysia, private limited companies and limited companies are known as Sdn Bhd and Bhd companies respectively. A Sdn Bhd company may have anywhere between two and 50 shareholders, but a Bhd company may have more than 50 shareholders.

      Please contact us for any information regarding the incorporation of a Sdn Bhd company in Malaysia.

      Thank you.
      Paul

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