Sailing in Southeast Asia: Company Establishment and Legal Guidance for Chinese Enterprises Investing in Malaysia
With the continuous advancement of the "Belt and Road Initiative", Malaysia, leveraging its geographical advantage at the core of Southeast Asia, relatively sound legal system and open and inclusive multicultural environment, is increasingly becoming one of the important destinations for Chinese enterprises and individuals to "go global".
For Chinese investors planning to conduct business in Malaysia, understanding the local company establishment process and legal framework is particularly crucial. In Malaysia, the most commonly adopted and recommended form of business entity by foreign-funded enterprises is the private limited company (Sendirian Berhad, abbreviated as Sdn.Bhd.). This type of company has an independent legal person status, and its shareholders only bear limited liability corresponding to the shares they hold. In nature, it is quite similar to a limited liability company within the territory of China. This article will focus on introducing the specific steps for registering a private limited company in Malaysia and its main legal requirements.
The Malaysian Companies Act 2016 and its related rules stipulate the basic requirements for establishing a private limited company (Sdn.Bhd.)
01 Company Name
Select a suitable English name for the company. The name must be registered and reserved with the Companies Board of Malaysia (SSM), and ensure that it does not duplicate any existing companies. The name of a private limited company usually ends with "Sdn.Bhd."
02 At least one director must be 18 years old or above
1. Residence requirement: Directors must be permanent residents of Malaysia. Permanent residents of Malaysia usually refer to those holding Malaysian citizenship or long-term residence visas (Professional Visa (RP-T) or Malaysia My Second Home (MM2H) visa).
2. Exceptional circumstances: Foreigners may serve as directors and shareholders of a company. However, if they do not have permanent residency in Malaysia, they must simultaneously appoint a qualified local resident director.
3. Other restrictions: This includes that directors must not have a history of bankruptcy or a criminal record.
03 Shareholders
At least 1 person and at most 50 people.
1. Nationality restrictions: Foreign companies/individuals can become shareholders of a company without any nationality restrictions. Directors and shareholders can be the same person.
04 Statutory Secretary
Every company must have a legal secretary.
1. Professional Qualifications: The statutory secretary must be a member of any professional body designated by the Companies Commission Malaysia (SSM) (such as a chartered accountant, chartered secretary, or lawyer), or hold a secretary license issued by the Companies Commission Malaysia.
2. Appointment Restrictions: The secretary holding this position cannot concurrently serve as the sole director and sole shareholder of the company.
05 Share Capital
Minimum requirement: The minimum paid-in registered capital is 3,000 ringgit.
2. Foreign investment threshold: Although there is no statutory minimum capital, generally speaking, the government requires foreign companies to have a minimum paid-in capital of 1 million ringgit when applying for specific business licenses (such as wholesale and retail Trade (WRT) licenses). A company should determine its registered capital based on the type of business it operates and the subsequent license requirements.
The company shall have a valid registered address within the territory of Malaysia and keep all legal documents and account books. This address may not be the actual business address of the company. Under normal circumstances, companies will use the address of the office of the statutory secretary.
3. Structural planning and matter discussion: Determine the company structure, the composition of directors and shareholders, as well as the specific work content.
4. Document Preparation and Signing: Prepare the director's consent form, the identity documents of shareholders and directors, as well as the articles of association (optional but recommended to submit) for the relevant parties to sign. Registration documents, including personal information of shareholders and directors, the company's registered address, etc.
5. Submit the registration application: Submit the prepared registration documents (SUPER FORM) to the COMPANIES COMMISSION OF MALAYSIA (SSM)
6. Obtain the company registration certificate: After the application is approved, SSM will issue the company registration certificate.
7. Tax Registration: Register with the Inland Revenue Department of Malaysia (LHDN) and obtain a tax number.
8. Open a bank account: Complete the opening of the company's bank account.
9. Apply for a business license/industry permit: Depending on the nature of your business, apply for a business license and industry permit from the local government or other regulatory authorities.
06 Legal Risks and Compliance Tips
When Chinese enterprises invest in Malaysia, they should not only focus on the establishment of the company itself, but also pay special attention to the following compliance risks
Industry restrictions and license compliance: Malaysia has set foreign shareholding ratio limits or strict license requirements for certain industries (such as finance, telecommunications, media, retail, etc.). Before initiating the establishment, it is essential to confirm whether your business belongs to a licensed or restricted industry and plan the license application in advance (there may be requirements for local ethnic shareholding or special approval).
2. Employment regulations for foreign employees: The hiring of foreign employees must comply with strict employment and Employment Pass application procedures. The company needs to prove that the position cannot be filled by a local person, and there is usually a requirement for the proportion of local employees.
3. Tax Compliance: The company must comply with relevant regulations in Malaysia such as corporate income tax, service tax/sales tax (SST), and submit annual financial statements and tax returns on time.
4. Localization requirements: Some local governments or regulatory requirements of specific industries may encourage or require foreign-funded enterprises to support the "Bumiputera" policy or localization development in aspects such as procurement and employee employment.
07 Conclusion
The Malaysian market is brimming with opportunities, but its complex laws and regulations, local requirements, and industry entry barriers all demand that overseas enterprises must make legal plans in advance and conduct thorough due diligence.
Before commencing any investment activities, it should be carried out with the assistance of a professional team of lawyers who have experience in Malaysian law and cross-border affairs to ensure the compliance of the company's establishment and effectively predict and respond to legal risks in subsequent operations.
