The Ultimate Guide to Company Incorporation in Malaysia

Our modern economy is a beautiful thing!

Anybody, from anywhere in the world, can start their own business. They also can have instant access to millions of people through an internet connection. In our humble opinion, there's never been a better time for company incorporation.

But, where do you will incorporate your company? Does it make sense to incorporate in the country where you're operating or some other country? Thinking about starting your own business in Malaysia? Incorporating in another country may give your business certain advantages.

Today, we're going to talk about company incorporation in Malaysia. Whether you're a Malaysian resident, or a business owner looking to capitalise on the advantages of owning a Malaysian business, consider this your complete guide for business registration in Malaysia.

We'll start by covering the basics of incorporation. Next, we'll go over the process of how to incorporate a company in Malaysia. And, finally, we'll cover what incorporation in Malaysia can do for you and your business.

We have a lot of information we need to cover so let's get going.

What is Company Incorporation?

So, what does it mean when a company is incorporated? That's a great question. When a company incorporates they're adopting an "entity structure". There are several different types of entity structures throughout the globe.

The type of business that you run is going to dictate what type of entity structure you use. Each entity structure has different advantages for you as the business owner. There are several types of business vehicles to run business in Malaysia:

Sole proprietorship (also known as enterprise)
Partnership
Limited liability partnership
Company

One of the biggest differences between entity types is the tax benefits they offer. But, there are other reasons as to why you want to choose one business structure over another, as well.

The type of business structure we're going to be covering today is an Sdn. Bhd. Its official name is a Malaysian Private Limited Company.

Suruhanjaya Syarikat Malaysia (SSM)

Suruhanjaya Syarikat Malaysia, or the Companies Commission of Malaysia, is the regulatory body responsible for the administration and enforcement of the Companies Act 2016 and other related legislation in Malaysia. Its role is to oversee the incorporation, registration, and administration of companies and businesses in Malaysia.

Some of the specific functions and responsibilities of the Suruhanjaya Syarikat Malaysia include:

Incorporating companies and businesses (including sole proprietorship and partnership) in Malaysia.
Maintaining a register of companies and businesses (including sole proprietorship and partnership) registered in Malaysia.
Ensuring compliance with the act and regulation
Monitoring and enforcing the filing of annual returns, financial statements, and other required documents.
Investigating complaints of non-compliance or misconduct by companies and taking appropriate enforcement action.
The memorandum of association, sometimes referred to as the memorandum, is a legal instrument that forms and regulates the relationship between the firm and its external stakeholders.

Requirements for Setting Up a Company in Malaysia

Setting up company in Malaysia is simple and straight forward now. Under the Companies Act 2016, the requirements are:

Minimum Share Capital: For private limited companies, a minimum paid-up capital of at least RM1 is required at the time of incorporation. (We recommend to start with at least 1,000 at RM1,000 share capital)
Director requirement -A company must have at least one (1) director, residing in Malaysia.
Shareholder requirement- A company must have at least one (1) shareholder. There are no restrictions on the nationality of shareholders. The shareholder can be an individual or body of corporate
Company Name Approval: A company must have a unique name that is not already in use by another company. The proposed company name must be submitted for approval to the Companies Commission of Malaysia (SSM).
Registered Office Address: A company must have a registered office address in Malaysia where all official correspondence will be sent.

Benefits of Company Incorporation in Malaysia

Certain countries have very strict laws against foreigners owning businesses, real estate, etc. in their home country. The country may offer great tax rates, have a low cost of living, or have other advantages. But, the local governments work very hard to preserve those benefits for their own people.

An example would be The Philippines. No foreigners can own real estate in the Philippines. The only possible avenue foreigners have to own real estate within the country is marriage to a Filipino national.

One of the biggest advantages to an Sdn. Bhd. is that foreigners can own these businesses by themselves as long as they have a local address. This is an important aspect if you're looking to expand your business to Malaysia.

Foreigners can expand to the Malaysian market without having to relocate there. But, there are even more benefits to operating your business as an Sdn. Bdh. Let's go over them below:

1. Easy transfer ownership

If you choose to undergo company incorporation in Malaysia, your Sdn. Bhd. will allow to easily transfer ownership of the company. Shareholders can transfer their shares of the company over to other shareholders or investors without much trouble at all. The ownership transfer will also allow daily operations to remain the same.

2. Separate Legal Entity (SLE)

An Sdn. Bdh. incorporation of a company is treated as a "legal person". This gives your Private Limited Company a number of legal benefits. One of them is that your business can purchase land, vehicles, and other assets under its own name.

Your business entity can also "sign on the dotted line" to bind a contract. The advantage of this is more protection if a contractual agreement were to fall apart. If the other party wanted to pursue legal action, they would have to sue your company and not you personally.

This concept also works both ways. If you're being sued, the "corporate veil" offers you added protection. If you wish to sue someone, you can also do so under your company's name.

Having the "separate legal entity" aspect of an Sdn. Bhd. on your side also offers protection in another way. It offers shareholders protection of their personal wealth and assets. The reason is that shareholders aren't held personally liable for debts accumulated by the business.

3. Property Ownership

The fact that your legal entity is considered a "person" in the eyes of Malaysian law gives you the benefit of owning property in the business name. This doesn't just apply to real estate property. You can own land, vehicles, and other assets all under the umbrella of your Sdn. Bhd.

Shareholders also have no claim to any of the property held within the business. This can be helpful when it comes to business disputes. If you and a business partner have a falling out, there's no arguing over who gets what.

As long as the business remains in operation, everything would still stay in the company name. This means everyone can go their separate ways without any damage to the daily operations or overall production of the business.

4. Corporate Tax Benefits

Company incorporation in country like Singapore and Malaysia can offer some great tax benefits. Incentive programmes like pioneer status and investment tax allowance are offered to businesses choosing to incorporate in Malaysia.

You'll also have access to certain grant programmes. Two of them, in particular, are the SME Digitization Grant and the Automation Grant.

In addition to grants and incentive programmes, an Sdn. Bhd. will also receive a business-friendly tax rate. Businesses in Malaysia are taxed based on the business' "before tax" profit.

The first MYR 600,000 earned by the business will be taxed at 17%. Anything over that will be taxed at a rate of 24 percent.

5. Streamlined Annual Compliance

The requirements for annual compliance are less strict in Malaysia than in other countries. This is thanks to The Company Act of 2016.

Business owners no longer need to worry about procedures like bringing a new director into the business or the annual meeting requirement. Malaysia also chose to get rid of the exemption on audited corporate financial statements.

6. Continuous Existence

Once an Sdn. Bhd. is formed it will stay in existence until it's legally dissolved by its members. This gives the business much greater security and protection in the case of unexpected events.

For example, if a shareholder were to leave or pass away suddenly, other members of corporate management don't need to worry. The loss of the shareholder will not affect the company's existence.

7. Funding Access

Choosing to form your company incorporation as an Sdn. Bhd. will give you better access to funding. This is because your company is considered a "legal person".

Since your Sdn. Bhd. has a separate legal entity, you can open a bank account and apply for loans from the bank all under the company name.

Being a private limited company also allows you to leverage capital from investors. An Sdn. Bhd. can invite third-party investors to fund the business. You can do this by offering shares of the business up for purchase.

You'll need to work with your corporate management, and your potential investors, to negotiate the price of the shares as well as a dividend payout.

The Ultimate Guide to Company Incorporation in Malaysia

Disadvantages of Company Incorporation in Malaysia

Forming your company as an Sdn. Bhd. in Malaysia certainly has its advantages. But, it's not all sunshine and rainbows. Like anything else, there are some drawbacks to forming a private limited company.

Here are some of the disadvantages to consider when forming your Sdn. Bhd.

1. Shareholder Limit

Shareholders can be a powerful funding tool for your business. We see, in the section of this article on advantages, that an Sdn. Bhd. allows you to leverage investors for funding. However, there's a limit to that.

An Sdn. Bhd. has a limit of 50 shareholders. This can severely limit the amount of funding that shareholders can inject into your business. The result is that it may slow down daily operations or limit your growth.

If you think that your business may require a lot more funding to grow, it may be wise to consider another type of corporate structure.

2. Divided Ownership

In the beginning, starting an Sdn. Bhd. as a sole owner is an easy process. But, the goal is for your business to grow over time. Once that happens, you'll be bringing more directors and shareholders on board.

The problem with that is, because of the structure of an Sdn. Bhd., every decision needs to go to a vote. As your group of shareholders and board members grows, it's more likely that there will be conflict among these members.

Therefore, it may be more difficult for the business to remain flexible and make decisions quickly as time goes on.

How to Incorporate a Company in Malaysia?

So, what exactly is required to incorporate a company in Malaysia? There's some paperwork and a few steps that are required. Here is a quick rundown of what you'll need to get your business up and running.

The information and documents required for incorporation are:

Preferred Company Name(s)
Nature of business and MSIC Industries code of your business
Contact information of your business - address, email, phone number
Information and ID copy of your shareholders and the shareholding allotment
Information and ID copy of your directors

Once you have the proper paperwork in order, you'll need to walk through the following steps:

Fill up the incorporation form on our website or contact Altomate team to provide the above information
Our team will perform name check and inform result of name check
If preferred company name is available, the pre-incorporation (incorporation form and sec 201) will be sent to you to sign
Once KYC check and signing completed, we will proceed to submit your company registration with SSM.
If all are in order, SSM will usually approve the company registration in 1-2 working days.
Once successfully incorporated, we will send to you the incorporation details (incorporation date and company reg no) and relevant documents:

Sec 14 Superform
Sec 15 Notice of Registration
Sec 17 Certificate of Incorporation

Getting Your Company Profile

SSM e-Info is an online platform provided by the Companies Commission of Malaysia (SSM) that allows individuals and businesses to access and obtain various information and services related to companies and businesses registered in Malaysia. You may visit https://www.ssm-einfo.my/

Some of the products of SSM e-Info include:

Company and business name search;
Company and business profile (Users can access detailed profiles of companies and businesses registered with SSM, including their registration status, business activities, directors' details, and financial information.);
Financial statement search and etc

Common Pitfalls to Avoid When Setting Up a Company in Malaysia ❌

Starting a business in Malaysia can be exciting, but it also comes with its own set of challenges. Here are some common pitfalls to avoid when setting up a company in Malaysia:

Failing to Conduct Adequate Market Research: It is important to conduct thorough market research before starting a business in Malaysia. Without a clear understanding of the market and the competition, your business may struggle to survive.
Choosing the Wrong Business Structure: Choosing the wrong business structure can have serious implications for your company's taxes, liability, and governance. It is important to seek professional advice when selecting the right structure for your business.
Inadequate Financial Planning: Inadequate financial planning can lead to cash flow problems and even bankruptcy. It is important to have a solid business plan and to ensure that you have adequate funding to start and sustain your business.
Not Complying with Legal and Regulatory Requirements: Failure to comply with legal and regulatory requirements can result in fines, legal action, and even the closure of your business. It is important to understand and comply with all the relevant laws and regulations in Malaysia.
Poor Record Keeping: Proper record keeping is essential for the long-term success of your business. Keeping accurate financial records will help you make better business decisions and will also make it easier to comply with tax and legal requirements.

By avoiding these common pitfalls, you can increase your chances of success when setting up a company in Malaysia. Seeking professional advice and assistance can also help you navigate the complexities of starting a business in Malaysia.

Company secretary

Under Sec 236 (1) of Companies Act 2016, a Company is required to appoint its company secretary within thirty (30) days from the date of incorporation a company. (a Company secretary shall be one that is registered with SSM and holds a valid practising certificate).

Compliance with legal requirements- to ensure that the company complies with all legal requirements and regulations
Board of directors support- to provide support to the board of directors, including preparing and distributing board meeting agendas, recording minutes of meetings
Company records management- to maintain accurate and up-to-date records of the company's affairs, including its share register, statutory books, and other important documents.
Filing of statutory documents- to ensure that all required statutory documents, such as annual returns and financial statements, are filed with the relevant authorities in a timely manner.

Ongoing Compliance Requirements with SSM

Display of company name and company registration number

A company must display/show the registered name and registration number at:

The registered office
Every place the business is carried on
Every place where the books are kept; and
Business letters, notices and other publications, Websites, Bills of exchange, promissory notes, endorsements and order forms, Cheques, Order invoices and other payment receipts

Documents to be kept at Registered Office

A company is required to keep its statutory documents, registers, minutes, resolutions books, records and other documents as required by the Registrar.

If there is a change to the address that the documents are kept, the company has to notify the Registrar within 14 days of the change.

Maintain proper accounting/financial records

A company is required to keep proper accounting and other records which sufficiently explain the transactions and financial position of the company. The proper records will help to substantiate the true and fair view of the profit and loss and balance sheet.

Any account transaction must be properly recorded in the accounts within 60 days from the transaction dates. All accounting and other records must to be retained for at least 7 years.

Company secretary and Director

A company must maintain a minimum one company secretary and at least one (1) director at least 18 years old and principally residing in Malaysia.

For more detailed guidance on how to start your business:

Getting Down to Business

Company incorporation in Malaysia is an amazing vehicle for your business. Forming an Sdn. Bhd. can be the perfect move to start your business on the right foot. Consider how much you want to grow and your business' group dynamic before making the decision.

If you're looking to form an Sdn. Bhd. in Malaysia, or have any other questions on starting your business, contact the team at Altomate. Feel free to look at our Company Incorporation Services too!

Our Package

🎉 Inclusive SST and disbursement
🎉 SSM registration fee RM1,010
🎉 Appointment of up to 5 directors/shareholders
🎉 3 sets of CTC SSM forms
🎉 Free bank referral and bank account opening
🎉 First board resolution

What you get?
⭐ Fast incorporation within 3 working days ⚡ ⚡
⭐ 100% DIGITAL and Online. You can sign document electronically (No need to travel or print paper)
⭐ 1 to 1 business consultation on business start up
⭐ Enjoy special privileges and on-site visit 🚗 by our partnering bank- Alliance Bank and UOB Bank

We're here to answer any questions, provide resources, and give you the exact answers you need to get your business to the next level. We thank you for reading this article and hope it gave you some new thoughts and business ideas to move forward with.

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