Foreign companies can either incorporate a local branch or register the foreign company in the country with the Companies Commission of Malaysia (CCM) by applying for a name search, lodging the registration documents and paying for the registration fees online or at the CCM counters nationwide.
Generally, companies have the following options for business formation:
- Subsidiary Company – a locally incorporated company which can be owned by local or foreign companies or both. A subsidiary company can undertake all business activities and is treated as a local resident entity which is taxable in Malaysia. A resident director (not necessarily a Malaysian, but who must reside in Malaysia) must be appointed to set up the company. Subsidiary companies can choose to incorporate as a (a) private entity, as in limited by shares (Sdn Bhd), which is the most commonly chosen option or (b) public entity, as in limited by guarantee (Bhd).
- Branch Office – a locally registered entity that acts as an extension of the foreign parent. It is 100% owned by the head company abroad. Therefore, its liabilities are extended to the parent company, and its business activities are limited to that of its parent company. The revenue generated locally will be subjected to tax at the prevailing local tax rate. At least one resident agent must be appointed to set up the branch in Malaysia.
- Representative Office – This type of entity exists only for the purpose of market research, administrative or liaison purposes. It cannot engage in any revenue generating activities. Even though it has no ownership structure, the representative office’s liabilities are extended to its parent company. The source of funding to operate this structure must come from abroad, and the operational expenditure must be at least MYR 300,000 per annum.
Local and foreign companies and businesses operating in Malaysia must be registered or incorporated with the Companies Commission of Malaysia (CCM). This is the federal authorized agency regulating the business or company’s conduct under the Companies Act 2016.
Registering a Branch office
The process to register a branch office first starts by submitting a name search to CCM using Form 13A together with a payment of MYR 50 for each name applied, to verify if the name applied for the company is available. In the event the intended name is available, it will be reserved for a period of 30 days up to a maximum of 180 days for the company, with an additional prescribed fee of MYR 50 (EUR 10.2) for every 30 days or part thereof from the extension period. It is required that the name registered by the company in Malaysia matches the name used by the company in the foreign country.
Within 30 days from the date of the name approval, companies must submit the following information to CCM:
- The name, identification, nationality and the ordinary place of residence of every shareholder in Malaysia and if any of these persons is a body corporate; the corporate name, place of incorporation or place of origin, registration number and the registered office of the body corporate.
- The name, identification, nationality and the ordinary place of residence of every person who is appointed as a director of the foreign company in Malaysia.
- The list of its shareholders or members at its place of origin.
- In the case of a foreign company with share capital, the details of class and number of shares at its place of origin.
- The name and address of a person who is a resident in Malaysia, who is appointed by the foreign company as its agent under a memorandum of appointment or power of attorney.;
- Statement by the agent of the foreign company confirming his/her consent for the appointment.
There are also additional registration documents required for this process, as described below. For these documents, certified translations of the documents in Bahasa Malaysia or English are required if they are in other languages. These include:
- A certified copy of the certificate of incorporation or registration of foreign company.
- A certified copy of Memorandum of Articles or other instrument defining its constitution, if available.
- A copy of application and reservation for availability of names.
- A copy of email for approval notification of reservation of name.
A registration fee is payable for the registration of foreign companies in Malaysia. The fee is determined based on the amount of shared capital in MYR value. If the foreign company does not prescribe any share capital, a flat rate of MYR 70,000 (EUR 14,341) shall be paid to CCM as the registration fee.
A notice of registration of foreign company will be issued within one working day by CCM upon compliance with the procedures and submission of duly completed documents. The certificate of registration of foreign company will be issued by CCM after payment of the prescribed fee.
Registering a Local Company or Subsidiary
Incorporating a local company or setting up a subsidiary in Malaysia is quite similar to the registration of a foreign company but it has no registration fee based on share capital. It is recommended to incorporate a subsidiary in Malaysia if a foreign company chooses to operate on a long-term basis in the country.
Companies can choose to either do a direct incorporation or name reservation followed by incorporation, as follows:
In the direct incorporation approach, a company combines the name reservation and incorporation process. For this, the company must complete the information required online during the application for the name and incorporation of a company, and pay the incorporation fees. If the proposed name is approved by CCM, the application to incorporate the company would be directly processed.
In the name reservation approach, the applicant must first complete the information for the name of the company online with the fee of MYR 50.00 for each name applied. If the name is approved by SSM, the name is reserved for 30-180 days from the date of approval. Within the name reservation period, the applicant can apply for incorporation with the appropriate incorporation fee.
Unlike the registration of foreign companies, there is no registration fee based on share capital for incorporation of local companies in Malaysia. The fee payable depends on the type of entity incorporated – for an entity limited by shares (Sdn Bhd), the fee is MYR 1,000, and for a company limited by guarantee (Bhd), the fee is MYR 3,000. These are flat rates regardless of the shares/guarantees held by the company.
When incorporating a local company, the following information is required:
- The proposed name of the company.
- The status, whether it is a private or public company.
- The proposed type of business.
- The address of registered office.
- The business address.
- Complete detail of director(s) and promoter(s).
- Declaration from the director(s) or promoter(s) that he/she is not an undischarged bankrupt either in or outside Malaysia; and has not been convicted of any offence whether in or outside Malaysia.
- Declaration of Compliance. This declaration states that the applicant has complied with all requirements of the Companies Act 2016. The declaration should be made by the individual who is responsible for the incorporation.
- Additional documents requested may include a copy of consent letter from the corporate body named as the member of the company; a copy of certificate of director’s qualification; and a consent letter from relevant agency, if any.
Once the Registrar is satisfied that all information provided is complete and complied with the required procedures, a notice of incorporation approval and registration will be issued. A certificate of incorporation will only be issued by CCM upon request together with the prescribed fee.
Within 30 days of incorporation the company must appoint a company secretary who shall be registered with CCM and possesses a valid practicing certificate issued by CCM. If required by the company, it can file the constitution of the company after the incorporation as well.
Once incorporated, companies must obtain the necessary license/permit/approval from relevant authorities such as MIDA or the Ministry of Domestic Trade and Consumer Affairs or local authorities such as the Kuala Lumpur City Hall before commencing business in Malaysia. Foreign companies will need a Malaysian address, which usually is the company secretary’s address used during the registration process. The address will be used for registration with other government agencies including the Employee Provident Fund (EPF) and Social Security Organization (SOCSO), for employment matters. Local authority licenses will be required for business premises and signboards, which must be operated in accordance with the approved business use by the local authorities.
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