Malaysia is a hub for foreign investments. The country has ranked 10th in the world economy on the foreign direct investment confidence index. More and more foreign investors are opting to invest in Malaysia.
Malaysia has attracted over 5000 foreign investors all from different countries who have, in turn, diversify the local market. There are different profitable market operations a foreign investor can venture in.
In terms of foreign investments and diversity, the real estate sector has shown a lot of promise. 23.7% of all foreign investments in 2018 have been attributed to this sector. Other important sectors in Malaysia include the petroleum sector, which accounts for 16.3% of the economy, the greenfield investment, which increased from 151 to 189 in the year 2018, the basic metal industry which takes up 6.5% of the economy and electronics sector. The bottom line is there are endless possibilities of investment options for foreign investments in Malaysia.
Specificity of the registering
A company comes into being in Malaysia once the company’s articles of associations have been drafted. The process also involves providing all the compulsory documents for registration. A company can either be registered as a company limited by either shares or guarantee or unlimited company. The requirements of the incorporation process include the number of partners, the names of the first directors, the company secretary, and promoters.
The incorporation process is a straightforward matter that can be handled by our company incorporation experts on your behalf. Our specialists can take charge of filing for a company name by submitting the proposed business name for approval. You can provide up to three names that will be vetted to ensure they meet the requirements of the law.
Upon approval of the name by the Companies Commission of Malaysia, incorporation documents such as the articles and memorandum of association should be submitted within three months. Once the local authorities verify that the documents are in compliance with the requirements, the company will receive a registration certificate!
Types of companies
If you are a foreigner looking to start a company in Malaysia, there are several types of companies to choose from. The choice depends on the capital you want to invest and the future prospects you may have given the local market. The types of companies include:
This is the simplest type of company to start. It is a company run by a single natural person. The owner is responsible for providing all the capital and bears unlimited liability, meaning their personal assets may be used to pay off a loss in case of dissolution or loss. The owner is, however, not required to conduct an audit and annual filing requirements.
Private limited company
This type of company is suitable for investors who want to finance a medium-sized or small business entity. The partners in a private limited company are liable for the company’s debts according to the shares they own or share capital they have invested. In a limited company, the owners and the business are deemed to be two separate legal entities which can be sued or sue in their own name.
Public limited company
This option is very similar to the private company limited except for a few factors. For instance, a public company limited can offer shares to the public while a private ltd cannot. A public company also needs to fulfill some requirements a private company is not such as carrying out an audit and holding annual general meeting.
The subsidiary or branch for company formation in Malaysia
Apart from the above types of companies, there is also the option of a subsidiary or branch of an already existing company. A foreign investor can start a subsidiary that is wholly dependent on the mother company. The limitation of such incorporation, however, is that the branch office can only carry out the businesses already being conducted by the parent company. It’s more of an expansion, and investors need to consider that some business activities are only limited to the parent company. Here are some things to note about a branch:
As a part of the required registration process, a representative must be selected. The representative must be a local and national resident of Malaysia.
The branch must conduct an audit carried out by an external auditor on all the documents and financial statements. The branch is also obligated to faithfully file its annual financial reports. If you start a branch in Malaysia, it must bear the same name as the parent company. A branch is not an independent legal entity but some sort of expansion that must clearly bear the name of the parent.
A branch is taxed as a foreign company, and the tax applicable will be higher than that of local companies. If you want to beat the taxation system, you can opt to incorporate a subsidiary instead of a branch.
Subsidiaries are termed as a separate legal entity from the parent company. A subsidiary is more independent in terms of both management and legal requirements. Although the foreign investor is allowed full ownership of the company or subsidiary, there are a few limitations. A subsidiary is limited to only a few economic sectors such as banking, tourism, education, ad agriculture in Malaysia. The incorporation procedure followed is the same as that used in local businesses except for some business entities. A few steps may change here and there, but the process is the same overall.
The representative office for Company Formation in Malaysia
Another common option for foreign investors looking for a suitable type of company in Malaysia is a representative office. Such an entity cannot, however, be used as a base for commercial activities. It is suitable for an investor who is more interested in doing market research and corporate operations for their parent company. A representative office does not follow any accounting procedures or requirements since everything already set by the parent company.
The incorporation procedure of a subsidiary in Malaysia is simple since a subsidiary is considered as a separate e legal entity from the parent company. The first step for the founders of a subsidiary is to select the appropriate form of business. A private limited company is the most common form since it allows foreigners to own 100% of the company shares. In some economic sectors, however, foreigners are required to have a local representative who is a resident of Malaysia. Foreigners will be guided by our team of experts in Malaysia on the fields regulated by local government and any other matter which may be brought to their attention.
A subsidiary may be formed by a sole natural person or corporate body. Any foreigner wishing to incorporate a foreign company in Malaysia is required as a general rule of thumb to invest a minimum of RM 500,000 as capital, but the investors are not limited. They can increase the capital as they desire but nothing below the threshold. Our experts will assist in filing for a suitable company name. A subsidiary or private company limited is required to have a maximum number of 50 members or twenty in terms of a corporate body. The names of the directors who may be foreigners or Malaysian citizens are required for the process to be complete. If the director(s) is a foreigner, they will be required to have a physical address in Malaysia.
Our team of experts in Malaysia offers all legal services for foreign clients. You can request legal assistance in all services listed below and more to smoothen the incorporation process.
Virtual office: we offer legal assistance in finding a way in which your business can obtain an official business address in Malaysia. This is a common requirement for all businesses being incorporated in Malaysia.
Accounting: we have experts in all fields of accounting who offer basic bookkeeping, maintain all financial records, carry out audits and filing taxes. You can also be given legal assistance in matters concerning submissions of goods and payroll services.
Tax compliance services: foreigners can access legal assistance in everything concerning the taxation system depending on the type of company-operated. Our assistance also covers companies looking to register for taxes or apply for VAT and investment deductions. On matters tax, you also can also get a consultation on ways of reducing taxes through legal exemptions the company may be entitled to. Also, our team of experts will inform you whether or not your company is a beneficiary of the signed agreement between Malaysia and certain select countries for double taxation to reduce the burden of tax.