Guide to setup company in Malaysia in 2021
For a country with a tiger on its coat of arms, it seems ironic that Malaysia is not considered to be one of the Four Asian Tigers. Rather, is included as one of the five “Tiger Cub Economies”, that represent the five fastest developing economies in Southeast Asia. Despite this, the GDP gap between Malaysia and its more illustrious neighbour, Singapore has been ever-narrowing, representing that the efforts by the Malaysian government to revitalize their economy have borne fruit. These efforts include the new National Policy on Industry 4.0 (Industry4WRD) and the creation of the National Committee of Investment, which are aimed to shift Malaysia’s focus to high-tech industry and manufacturing, aiding the country’s transition from a commodities-based economy to a modernized 5G digital economy. Together with more specific initiatives in creating the Digital Free Trade Zone in Kuala Lumpur and the Labuan International Business and Financial Centre in Labuan, Malaysia is rapidly establishing itself as a prime candidate for businesses seeking an entry point into the equally promising Southeast Asian region. Incorporating your company in Malaysia is definitely a viable option and has become even easier with the relaxation of the Companies Act. Through this guide to setup company in Malaysia in 2021, we will show you the 6 steps to register company in Malaysia and commence operations within 5 weeks.
Step 1: Choosing a suitable corporate entity
- There are many different company structures in Malaysia, each tailored for different types of businesses. When deciding the most suitable company structure, it is important to consider various factors that include but are not limited to availability of personal liability protection, tax ramifications, ownership and management flexibility as well as compliance requirements.
- Common types of foreign companies include:
- Labuan International Business Company. A special form of limited liability company incorporated in the free trade zone of Labuan, it offers firms added benefits such as lower tax rates and the option to conduct several kinds of licensed activity such as forex trading.
- Limited Liability Company. Known locally as a Sendirin Berhad company, key benefits of this structure are that it is easy to incorporate and manage, offers liability protection, and can operate indefinitely regardless of transfer or changes in ownership or membership. However, raising capital might be difficult since it cannot be listed.
- Foreign offices. This includes structures such as branch and representative offices, which are only an option if you have a pre-existing incorporated parent company. Although they are easier to manage, branch offices do not offer limited liability, making the parent office fully liable for the debts of the branch office. On the other hand, representative offices are highly limited in terms of the scope of activities they may conduct, being prohibited from conducting any profit generating activities.
- Other company structures such as sole proprietorships, partnerships and unlimited companies cannot be incorporated by foreigners, and are thus less commonly seen.
Step 2: Reservation of company name
- You will need to reserve your preferred company name with the Companies Commission of Malaysia (SSM).
Step 3: Preparation of supporting documents
- In most cases, the directors and shareholders are required to provide basic KYC documents. Some of these documents include the names of directors, certified true passport copies, proof of address, bank reference letter and CV.
- Investors who are looking to incorporate in Malaysia will need a local registered office address, company secretary and resident director. This office will be used to maintain all corporate records and official documents whilst the director and secretary will act as local contact persons for the Malaysian government authority and ensure that all financial reports and tax filings are done.
- Based on the corporate structure of your choice and your desired business activity, you will also need to prepare the Articles of Association, business plan and other incorporation documents.
- The drafted Articles of Association should include key information about your company and its directors, the amount of subscribed share capital, share classes, duration of the company and other information with regards to your business activities.
Step 4: Filing for registration
- You can then proceed to file for registration with the Companies Commission of Malaysia.
- Upon approval, you will receive the Certificate of Incorporation, Memorandum and Articles of Association and other corporate documents.
- According to your business activities, you will also need to apply for the relevant business permits.
- One common license for most businesses is the Malaysia Wholesale Retail Trade License (WRT) that will be needed for firms that are providing one of the 4 main forms of distributive trades as listed below. The issuing authority is the Ministry of Domestic Trade, Cooperatives and Consumerism (MDTCC).
- Retail, Import and Export, Distributive Trade
- Services and Consultancy
Step 5: Corporate Bank Account Opening
- After successful company incorporation, you will need to open a corporate bank account in order to facilitate payments from customers and to suppliers. A separate corporate bank account from your personal bank account is usually required as it prevents creditors from piercing the corporate veil to lay claim to your personal assets, and also makes it a lot easier for you to track and manage the financial health and performance of your business. Corporate bank accounts also offer more convenient payment options in multiple currencies, facilitating any international transactions that your company would have to make.
- In general, a corporate bank account opening will take roughly four weeks. In most cases, the directors and shareholders will not be required to travel.
- Once your account has been successfully opened, you will receive your internet banking token and access codes.
Step 6: Financial reporting and taxation obligations
- Even after your Malaysian company has been successfully incorporated, it is important to continue ensuring that you meet the financial reporting and taxation obligations of the Malaysian regulatory system. This allows you to legally conduct business and avoid unnecessary fines and penalties.
- You will also need to prepare your company’s annual financial statements and tax returns as per recognised accounting standards. Depending on the size and type of your company, audits might also be required.
- If you plan to be physically present and working in Malaysia, you will also need to secure a work visa from the Immigration Department of Malaysia.