Business Entities

How to set up the business, particularly in Malaysia. We are here with vast experience and knowledge to help your goodself to set up your own company in Malaysia. Firstly let we give some brief info about setting up the business in Malaysia.


If you are about to start a business (for Foreign Investors if you are about to start a business in Malaysia), it is very critical to have good professional advice on getting the right business organisation form i.e. incorporated or not incorporated. The answer depends on your specific concern on personal liability, tax implication, business requirement, future plan, cost and other factors. There are also other issues that need to be considered such as tax matters and business plan. We can provide you with the necessary information, guidelines and advice to help you to decide on this matter.


There are so many ways to incorporate a Company. Normally when people decide to incorporate a Company, the following issue will be raised to the Company Secretary:

1. Can we get the name of our choice?
2. When can we get the Company?
3. When the Company will be ready to be used?
4. What are the “Dos” and “Don’ts” of the Directors and Shareholders?

We are confident to guide you through and get your company ready to commence business as soon as you want it. Should you prefer a shelf company, we will give you a list to choose from. Further, based on your specific situation, we can advise on the need to modify the standard articles of association and others.

Persons wishing to embark on any business operation will have three options to choose
from as to what they want their business entities to be. These are:
• A sole trader;
• A partnership; or
• A limited company.

This form of business is solely owned by one person. Management rests on that one person and his liability is unlimited. If such a business fails or is declared bankrupt, the creditors can sue him for all debts incurred. They can obtain a court order to claim against his personal assets. These can even include his house if such other assets are insufficient to cover the debts. One of the advantages of this form of business is that there are fewer formalities in terms of its formation and registration. It also involves less paper work.

In a partnership, a person trades jointly with one or more persons to carry out a business. Partnership must comprise at least two members. The maximum number allowed is twenty. Partnership is governed by the Partnership Act 1961. If the partners do not make their own agreement, or if their own agreement does not cover any  particular matter specified in the Partnership Act, provisions of the Partnership Act dealing with that particular matter will become applicable.
The advantages of operating sole proprietorship and partnerships are that you are not required to disclose your financial statements to general public. It will be relatively easy if subsequently you wish to convert your business into a limited company Losses incurred by such business can be set off against other personal income such as interests, rent and dividend as well as employment income (if any).

A limited company is incorporated under the Companies Act, 1965. It can be :-
• A company limited by shares;
The liability of a member’s contribution to the company’s assets is limited to the amount specified, unpaid on his shares if any. Once the shares are fully paid up there is, in general, no further liability, i.e. if the company becomes insolvent, or falls into liquidation, the members are not required to make any further contribution to discharge its debts.
In other words, the personal assets of a shareholder would not be available to the creditors of the company unless a personal guarantee had been given by the shareholder.

A company limited by shares can be divided into :-
(a) A private limited company (Sendirian Berhad)
 A private limited company is one which by its articles :-
(i) Restricts the right to transfer its shares (the transfer may be subject to the approvals of the                 directors             
(ii) Limits the number of its members to fifty (the minimum being two);
(iii) Prohibits any invitation to the public to subscribe for any shares in or debentures of the company;      and
 (iv) Prohibiting any invitation to the public to deposit money with the company for fixed periods or     payable at call.

(b) A public limited company (Berhad)
A public limited company is any company other than a private company whose shares may be offered to the public for subscription. Such shares are freely transferable. The company may apply to the Stock Exchange for permission for its shares to be listed, thus, providing an effective market for such shares.

• A company limited by guarantee;
The liability of members is limited to such amount as they undertake to contribute to the assets on winding-up. That amount is specified in its memorandum of association, which forms part of a company’s constitution. If the company is wound-up, each person who is a member at that time or has been a member within one year of winding up, may be required to contribute up to the amount of his guarantee towards payment of the debts incurred while he was a member. Past members are liable only if the present members default. Such companies are invariably non-profit-making concerns. They include professional bodies, trade societies, clubs et cetera.

• An unlimited company with or without a share capital.
There is no limit to the liability of the members. Such undertakings do not materially differ from partnerships or individual traders. A past member is liable only if he ceases to be a member within one year of the winding up. Unlimited companies must have special articles of association and are free to return capital to their members.

Advantages Of Limited Companies
• One of the major advantages of a limited company is that the shareholders are not liable for the company’s debts beyond the amount of share capital they have subscribed, provided there has been no deceit, fault or other malpractice.
• Another advantage of such a company is that it is easy to transfer the ownership, either wholly or partially, through the selling of all or part of its total shares, or through the issue of new shares to additional investors. There is no need to wind up the company in the event of deaths, or changes amongst the shareholders or directors.

Disadvantages of Limited Companies
• The public will have the access to the financial affairs of the company.
• The company has to comply with the requirements of the Companies Act, 1965.
• The company has to appoint auditors to verify and report its financial statements.
• Every limited company must have at least a company secretary to take charge of its statutory returns as well as board and shareholders’ meetings.
• The cost involved in forming a limited company is high. This includes the cost of capital due on authorised share capitals, the cost of formation expenses such as professional fees, filing fees, printing of memorandum and articles of association, share certificates, common seal et cetera.

An exempt private (EPC) company is a private limited company, the shares of  which are not held directly or indirectly by any corporation (i.e. another limited company), and which has not more than 20 members. An exempt private company need not file its annual accounts with the Companies Commission of Malaysia
(CCM) for the information of the public as long as the company files a certificate, signed by a director of the company, the secretary and the auditor of the company, that the company is able to meet its liabilities as and when they fall due. The EPC enjoys the privileges of giving the loans to the Directors of the Company. Therefore, in reality, most of the private Company limited by shares is an Exempt Private Company so long:-
(a) The shares of the Company are not held directly or indirectly by any corporation (i.e. another limited company), and
(b) Have not more than 20 members.

In Malaysia, every incorporated Company is governed by the Companies Act, 1966 and the law requires all incorporated company to have a qualified company Secretary. The number of Secretaries in the Company can be more than one person. The duties of company Secretary are to provide routine services such as compliance with the statutory requirements and compliance with the law of meeting. Further, the Secretary may also advice on specific corporate and company law matters.
If you wish to incorporate a Company with us, we will provide a qualified person to be your company secretary and provide the company secretary services to you.

Further, the laws also require the Company to have its own Auditors for the purpose of auditing the Company’s account in every calendar year. In Malaysia, Auditors also act as tax agent but with different entity. There are so many Audit and tax agent firms in Malaysia that can be selected and we may assist you on this matter.

As what we have discussed before, the law relating to incorporation of a company in Malaysia is governed by the Malaysian Companies Act, 1965. As per the act any company doing business or wishing to do business in Malaysia must register with the Companies Commission of Malaysia (CCM) under the Companies Act 1965. CCM or Suruhanjaya Syarikat Malaysia is the government body that governs the implementation of the Companies Act 1965 including the registration of a new company.

Companies can be registered as a local or foreign company. A local company can be either a (1) private company or (2) a public company. Most companies registered are local private company.

To register a local private Company will basically involve 2 stages i.e.
Stage 1: Name Search Application
Stage 2: Registration of Incorporation Documents
In Malaysia, all companies must have at least a company secretary as an official of the company. Only certain group of professional and people are allowed to act as company secretary under the Companies Act, 1965. As such, one usually registers a company through company secretary companies or audit firms or legal firms

Stage 1: Name Search Application
The first step in incorporating a new company is to determine if the proposed company name is available. A proposed name may not be available/allowed due to the following:
a) it resemble or may be mistaken for a name of any other existing company(unless letter of consent signed by a director and a secretary is provided); or
b) it falls under those specifically disallowed by the CCM.
The Minister of Domestic Trade and Consumer Affairs has directed the CCM not to accept the following names for registration as the name of any company or a foreign company unless the prior approval of the Minister is obtained:

  1. Names suggesting connection with a crown member of the Royal Family or Royal patronage including names containing such words as Royal, King, Queen, Prince, Princess, Crown, Regent Imperial;
  2. Names suggesting connection with a State or Federal Government department, statutory body, authority or government agency or any municipality or other local authority including names containing such words as Federal, State, National;
  3. Names suggesting connection with any ASEAN, Commonwealth or foreign government or with the United Nations or with any other international organization or cartel including names containing such words as ASEAN, UNESCO, NATO, EEC, OPEC;
  4. Names suggesting connection with any policies, party, society, trade union, cooperative society or building society;
  5.  Names including the following words or any word of like import:
(a) Are translations of a name of a company or foreign company registered under the Act; or
(b) May resemble or be mistaken for a name of any other company or foreign company registered   under the Act; or
(c) May resemble or be mistaken for a name that is being reserved for the purpose of incorporation of a new company or registration of a foreign company or for the purpose of change of name of a company or foreign company registered under the Act.

      6. Bank, Banker, Banking, Bumiputra, Bureau, Association, Congress, Club, Duty Free, Chamber of Commerce and Industry, Chamber of Manufacturers, Chartered, College, Consumer, Council, Credit, Exchange, Executor, Fair Price, Finance, Foundation, Fund, Guarantee, Institute, Insurance, Investment, International, Leasing, Made in Malaysia, Pioneer, Registry, Treasure, Trust, Unit Trust,University;
     7. The approval of the Marine Department of Malaysia is required for the word ‘Shipping’;
     8. The approval of the Director General of Insurance is required for words such as ‘Insurance’ and ‘Insurance Broker’;
    9.Names including a proper name which is not the name of a director;
    10. Names those are misleading as to the identity, nature, objects or purpose of a company or in any other manner;
    11.Names those are blasphemous or likely to be offensive to members of the public.

That are just a few as a guideline to set up a business entities in Malaysia. for further info and help doplease contact us.