What Is a Private Limited Company (Sdn Bhd) in Malaysia?

11 min read|Last Updated: May 7, 2024|

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.

There are different types of business entities available in Malaysia. A business entity is an organisation formed voluntarily to carry out activities of trading goods or services to consumers for profitable gain or charitable purposes.

Most of the business entities are privately owned and administered by a few individuals. One of the most preferred types of business entity is the private limited company. A private limited Company otherwise known as “Sendirian Berhad” or “Sdn. Bhd.” is typically a small or medium-sized enterprise with a straightforward registration process.

Private Limited Company (Sdn. Bhd.) in Malaysia

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 the 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 allows the vast of industries available in the country except for strategic sectors for the national interest. The best structure to start a business is by incorporating a private limited Company (Sdn. Bhd.).

Advantages of a Private Limited Company (Sdn. Bhd.) in Malaysia

There are a lot of advantages incorporating a private limited Company (Sdn. Bhd.) in Malaysia can have and some of them:

  1. 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’ wealth is guarded and not personally liable towards debts accumulated by business
  2. Owning Property

    • As a “legal person”, a private limited Company (Sdn. Bhd.) can purchase assets such as buildings, 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 undergoing concern basis
  3. Ease in the 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 the Company’s daily operation if changes in shareholders
  4. 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 ceases, it will not affect the Company’s existence
  5. 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 the banker has to offer under its name
    • The Company may also encourage third-party investor to fund the business by offering their shares and planning the dividend pay-out
  6. Great corporate tax advantages

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

    • The Company Act 2016 has eased most of the annual compliance requirements such as the introduction of a single member/director in the Company, the abolition of the requirement to hold annual general meetings for private limited Companies (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

Disadvantages of incorporating a Private Limited Company (Sdn. Bhd.) in Malaysia

Even though there is a list of advantages incorporating a private limited Company (Sdn. Bhd.) can bring, there are certain downsides that entrepreneurs need to consider before incorporation.

1. 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 in 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 among the stakeholders.

2. 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 contribute to the daily operation but also add to 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 funds 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 a maximum of 50 shareholders at one time.

3. Unable to raise funds from the public

Another drawback of 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 funds. Their options remain by signing for loans from the bank, funds from their existing investors or selling off their existing assets.

4. 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.)

For an entrepreneur to incorporate a Sdn Bhd company in Malaysia, they are required to:

  • Have at least one director with a legitimate residential address in Malaysia
  • Appoint directors 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 of are:

1. Business plan

This will include what is the business activities that the Company will be carrying out, where will the operation take place, how many employees the Company plans to hire, who is the target market and potential suppliers and most importantly, why the business run in Malaysia.

2. 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 can be in between MYR 4,500 to MYR 6,000 (this includes Company Secretarial service, accounting, tax filing etc.).

3. 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.

4. Hiring of foreign workers

If the Company has plans to employ foreign expatriates, the paid-up capital requirement may vary from MYR 250,000 for 100% locally owned to MYR 500,000 for 100% foreign-owned. You will also be required to obtain a work visa or employment pass for the foreign worker.

You can read more about hiring foreigners in Malaysia here.

5. Key position within the Company

There are positions to be filled by third parties such as Company Secretary, auditor, and tax agent. Regardless the Company is owned locally or by foreigners, it can venture into all types of business activities. The difference is only on paid-up capital requirements.

6. Tax structure within the country

While most countries practice double taxation, Malaysia’s tax system is territorial. Both residents and non-residents alike are taxed based on their Malaysian-sourced income while foreign-sourced income is 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 is 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

Company Name Reservation

  • Directors NRIC / Passports are needed for our team to proceed with the company name reservation application
  • The 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 a similar name to a 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 the owner is needed for this type of proposed name)
  • Nature of business in general

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 the stakeholders of the 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 a clean background

Incorporating the Company

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

Once the Company is successfully incorporated, the Company Secretary should furnish you with 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

The documents above are crucial for the Company to initiate:

  • Bank account opening
  • Application of general license with local town hall
  • Registration of Employees Provident Fund (EPF) profile (required to register within 7 days from when the Company first hires an employee)
  • Registration of Social Security Organisation (SOCSO) profile (required to register within 30 days from when the Company first hires an employee)
  • Registration with Inland Revenue Board – Lembaga Hasil Dalam Negeri (LHDN)

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

According to the Company Act 2016, a private limited Company (Sdn. Bhd.) is still liable to complete its annual reporting 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 offence 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 statements, 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 offence 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.

READY TO INCORPORATE YOUR COMPANY IN MALAYSIA?

Come down to our office or connect with us virtually for an incorporation assessment today to find out the best entity for your Malaysia company setup.

FAQs

What are the types of entities I can incorporate in Malaysia?2024-05-07T11:31:24+08:00

In most cases, we recommend our clients to register a private limited company in Malaysia, also known as Sendirian Berhad (Sdn. Bhd.). The other types of entities that you can register include subsidiary company, public limited company (Bhd), foreign branch office, and foreign representative office.

Can I incorporate a company in Malaysia while being overseas?2024-05-07T11:31:37+08:00

Yes, we can support your Malaysia company registration remotely.

Can a foreigner incorporate a company in Malaysia?2024-05-07T11:31:44+08:00

Definitely – in fact, the government are encouraging foreigners to invest and set up a company in Malaysia! However, foreigners must have an EP and local residential address.

How do you incorporate a company in Malaysia?2024-05-07T11:31:55+08:00

Incorporating a company in Malaysia is not a difficult task. Fulfill all the requirements and you’re all set to have your new company up and running. Find out the detailed process in our article here!

What are the documents required for incorporation of company in Malaysia?2024-05-07T11:32:05+08:00

For successful incorporation of your Malaysia private limited company (Sdn Bhd), you will need to submit the following:

– Company name registration (Form 13A CA)
– Form 48A – Statutory declaration by a director or promoter before the appointment
– Form 6 – Declaration of compliance
– Details of both shareholders & directors
– Details of appointed company secretary
– Identification documents of all stakeholders
– Registered address in Malaysia
– Company constitution

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  1. Profile Picture For PHP
    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

    • Profile Picture For PHP
      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. Profile Picture For PHP
    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.

    • Profile Picture For PHP
      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. Profile Picture For PHP
    Nur December 2, 2019 at 9:48 pm - Reply

    What are the usual issues happens in private company?

    • Profile Picture For PHP
      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. Profile Picture For PHP
    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

    • Profile Picture For PHP
      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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