Establishing a Presence
In Malaysia, persons who wish to carry on business in Peninsular Malaysia or the Federal Territory of Labuan may consider establishing their business through, among others, one of the following business organisations, namely a company limited by shares, a limited liability partnership (“LLP”) or a partnership. These forms of business organisations are governed by the Companies Act 2016, the Limited Liability Partnerships Act 2012 and the Partnership Act 1961, respectively. Businesses (sole proprietorships and partnerships) and companies must be registered with the Registrar of Businesses (“ROB“) and the Registrar of Companies (“ROC“) respectively. Limited liability partnerships must be registered with the Registrar of Limited Liability Partnerships.
Companies Act 206 (CA 2016)
The CA 2016 governs the registration, administration and dissolution of companies and provides for matters relating to companies in Malaysia. The CA 2016 came into effect on 31 January 2017 (save for Division 8 of Part III of the CA 2016 on the introduction of new corporate rescue mechanisms, which came into effect on 1 March 2018 and Division 8A of Part II of the CA 2016 on the introduction of a beneficial ownership reporting framework, which came into effect on 1 April 2024) and replaces its predecessor, the Companies Act 1965. The CA 2016 introduced substantive and administrative changes such as abolition of par value shares, changes to capital maintenance rules and introduction of a solvency test (which is applicable to redemption of redeemable preference shares, reduction of share capital, financial assistance and share buybacks as well as in the distribution of dividends), simplification of incorporation and administrative processes, increases in directors’ sanctions, new corporate rescue mechanisms and beneficial ownership reporting obligations.
Companies limited by shares, companies limited by guarantee, unlimited companies and branches of foreign companies are governed by the CA 2016. A company may be formed with a sole shareholder (whether individual or corporate) and a sole director. An individual may be both the sole shareholder and sole director of a company.
The CA 2016 abolished the concept of par value shares and provides that all shares issued before or after the coming into force of the CA 2016 have no par value. In tandem with this change, there is no longer a concept of authorised share capital and companies are no longer required to maintain a share premium account and a capital redemption reserve account. With the abolition of the concept of par value for shares, there is no prohibition on a company to issue shares at a discount (to par).
Consequentially, there is now no minimum price at which shares of a company may be issued although directors of a company continue to have an overriding fiduciary duty to ensure that the subscription price determined for the issue of shares in a company is made in good faith and in the best interest of the company.
Subsequent legislative developments have further refined the corporate regulatory framework under the CA 2016. The Companies (Amendment) Act 2024 (“CA (Amendment) Act 2024”) introduced a beneficial ownership reporting framework which took effect on 1 April 2024. Under this framework, three principal reporting obligations apply: (i) companies are required to maintain a separate register of beneficial owners; (ii) companies must take reasonable steps to identify their beneficial owners; and (iii) beneficial owners are required to notify the company of their beneficial ownership status and of any subsequent changes to their beneficial ownership information. Further details regarding the beneficial ownership reporting framework are set out in Section H below.
Limited Liability Partnerships Act 2012 ("LLPA 2012")
The LLPA 2012 provides for the registration, administration and dissolution of LLPs in Malaysia and came into force on 26 December 2012. The Limited Liability Partnerships (Amendment) Act 2024 (“LLP (Amendment) Act 2024”), which came into effect on 31 January 2025, introduced, among others, a beneficial ownership reporting framework under Part IIIA of the LLPA 2012 and a corporate rescue mechanism framework for LLPs under Sections 49A and 49B of the LLPA 2012. Further details regarding the LLP (Amendment) Act 2024 are set out in Section A below.
Registration of Business Act 1956 ("ROBA 1956")
The registration requirements for businesses of partnerships and sole proprietorships are prescribed by the ROBA 1956. The ROBA 1956 requires the registration of a new business to be done within 30 days from the date of commencement of the business. Partnerships and sole proprietorships are not required to lodge accounts with the ROB.
Forms of Business Organisations
There are seven different forms of business organisation available in Malaysia. These are:
i. Company Limited by Shares
ii. Company Limited by Guarantee
iii. Unlimited Company
iv. Branch of a foreign company
v. Limited Liability Partnership
vi. Partnership
vii. Sole Proprietorship
Company Limited by Shares
A company limited by shares may be a private limited company or a public limited company. A private company is identified as a “Sendirian Berhad” or “Sdn Bhd” while a public company is identified as a “Berhad” or “Bhd”. In a company limited by shares, the personal liability of its members is limited to the amount if any, unpaid on their shares.
The CA 2016 restricts the right of members of private companies to transfer their shares, restricts the number of members to a maximum of 50 and prohibits members from soliciting the public to subscribe for its shares. A private company is also prohibited from accepting deposits of money from the public whether with interest or not. A public company is not subject to the foregoing restrictions. A private company may convert to a public company as it expands and, sometimes, the reverse happens.
Company Limited by Guarantee (Berhad or Bhd)
A company limited by guarantee limits its member’s liability to the amount the member undertakes to contribute to the company in the event the company is wound up. A company limited by guarantee is typically used for non-profit purposes. A company limited by guarantee is required to have a constitution. It may not hold land unless a license has been obtained from the relevant Minister and it is not permitted to distribute dividends to its members.
Unlimited Company
An unlimited company is a company where the members’ liability for its debts is unlimited.
A creditor of the company can sue a member personally for debts of the company but the liability of the members only arises if the company is unable to meet its debt and is wound up.
On the winding up of an unlimited company, every past and present member shall be liable to contribute to the assets of the company for payment of its debts and liabilities and costs incurred in the winding up. However, a past member shall not be liable to contribute to the debts of the company if he ceased to be a member of the company for one year or more before the commencement of the winding up and he is not liable to contribute in respect of any debt or liability of the company incurred or contracted after he has ceased to be a member.
Branch of a Foreign Company
Under the CA 2016, a foreign company shall not carry on business in Malaysia unless it is registered with the ROC as a foreign company. The CA 2016 does not have an exhaustive definition of “carrying on business” as it defines “carrying on business”, to include “establishing or using a share transfer or share registration office or administering, managing or otherwise dealing with property situated in Malaysia as an agent, legal personal representative, or trustee, whether by servants or agents or otherwise”.
The CA 2016 does however provide some negative guidance on the meaning of carrying on business. It provides that a foreign company will not be regarded as carrying on business in Malaysia for the reasons only that it carries on any of the following activities in Malaysia (“Permitted Activities”):
- is or becomes a party to any action or suit or any administrative or arbitration proceeding or effects settlement of an action, suit or proceeding or of any claim or dispute;
- holds meetings of its directors or shareholders or carries on other activities concerning its internal affairs;
- maintains any bank account;
- effects any sale through an independent contractor;
- solicits or procures any order which becomes a binding contract only if the order is accepted outside Malaysia;
- creates evidence of any debt, or creates a charge on movable or immovable property;
- secures or collects any of its debts or enforces its rights in regard to any securities relating to those debts;
- conducts an isolated transaction that is completed within a period of 31 days, but not being one of a number of similar transactions repeated from time to time;
- invests any of its funds or holds any property; or
- imports goods temporarily under the Customs Act 1967 for the purpose of display, exhibition, demonstration or as trade samples with a view to subsequent re-exportation within a period of three months or within such further period as the Director General of Customs and Excise may in his discretion allow.
Foreign companies intending to carry on business in Malaysia may either incorporate a subsidiary or register a branch under the CA 2016. The branch of a foreign company does not have separate legal personality and is considered an extension of the foreign company. The foreign company will be liable for all debts and liabilities of the branch.
Pursuant to the Guidelines on Foreign Participation in Distributive Trade Services in Malaysia (“DTS Guidelines“), with effect from 1 November 1995, the establishment of a branch in Malaysia to carry on business in wholesale or retail trade is not permitted for a foreign company. Any foreign involvement in wholesale and retail trade would require the incorporation of the business locally by the foreign company. As the DTS Guidelines is merely a regulatory guideline and does not have the force of law, failure to comply is not an offence. Non-compliance could, however, result in administrative consequences for the company.
Limited Liability Partnership
A limited liability partnership (“LLP“) is an alternate business vehicle which combines the characteristics of a private company and a conventional partnership and is regulated under the LLPA 2012.
An LLP is a body corporate and has a legal personality separate from its partners (i.e. separate legal entity). Two or more individuals or bodies corporate may form an LLP for any lawful business in accordance with the terms of the LLP agreement executed amongst them. The LLPA 2012 does not impose a maximum number of partners of an LLP. The liabilities of the partners of an LLP are limited. An LLP is also capable of suing and being sued and has unlimited capacity to conduct business and hold property.
An LLP may be formed by professionals i.e. lawyers, chartered accountants and company secretaries for the purpose of carrying on their professional practice. Given that the liability of the partners of an LLP is limited, the LLP business vehicle helps start-ups and small and medium enterprises (“SMEs“) grow their businesses without having to worry about their personal liabilities and personal assets. The registration fee for a new LLP or for the conversion of a conventional partnership or private company into an LLP is RM500.
An LLP has perpetual succession and any change in the partners of the LLP will not affect the existence, rights or liabilities of an LLP.
Pursuant to the amendments introduced by the LLP (Amendment) Act 2024, LLPs now have certain obligations in relation to beneficial ownership, including:
- maintaining a register of beneficial owners (“BO Register”) and recording in the BO Register details such as the full name, address, nationality, identification, usual place of residence and the dates the person became and ceased to be a beneficial owner;
- lodging with the Registrar of Limited Liability Partnerships a notice of any change in the particulars in the BO Register;
- requiring any partner, by notice in writing, to disclose whether he is a beneficial owner and if not, to provide the names and details of any persons who are beneficial owners;
- where an LLP knows or has reasonable grounds to believe that a person is a beneficial owner, to require such person, by notice in writing, to state whether he is a beneficial owner, and if not, to state whether he knows or has reasonable grounds to believe that any person is a beneficial owner and to provide details of such person; and
- upon receiving the information as mentioned in subparagraphs (a), (b) and (c) above, the LLP must, within 14 days of receiving such information, record in the BO Register the date the notice was issued and the details of the information.
The LLP (Amendment) Act 2024 also imposes the following obligations on a beneficial owner of an LLP:
- where a person has reason to believe that he is a beneficial owner of the LLP, to notify the LLP and provide the prescribed information as soon as practicable;
- to notify the LLP of any changes to his particulars in the BO Register; and
- where a person ceases to be a beneficial owner, to notify the LLP of the date and particulars of the cessation.
In addition to the beneficial ownership framework, Sections 49A and 49B of the LLP (Amendment) Act 2024 also incorporate the concepts of corporate voluntary arrangement and judicial management for LLPs by adopting the framework under the CA 2016.
Partnership
A partnership is formed when two or more persons combine some or all of their resources, skill, ability or industry, with the objective of making a profit which will be shared by all partners. Partnerships are regulated by the Partnership Act 1961.
In a partnership, all partners are personally jointly liable, without limit, for the debts and obligations of the partnership. Any number of persons up to a maximum of 20 may form a partnership. If more than 20 persons intend to carry on business, the business must be registered as a company under the CA 2016 or must be formed under some other written law in Malaysia (for example, under the Legal Profession Act 1976).
Sole Proprietorship
A sole proprietorship is the simplest form of business ownership. It is formed essentially for businesses comprised of one person (being the sole proprietor). The sole proprietor is entitled to all profits of the business and is personally liable, without limit, for all debts and obligations of the business.
Requirements of a Locally Incorporated Company
According to the CA 2016, every company shall have at least one director who is ordinarily resident in Malaysia, although with respect to public listed companies, the Main Market Listing Requirements issued by Bursa Malaysia requires a minimum of 2 directors. A director of the company does not need to be a shareholder of that company.
A company incorporated in Malaysia must maintain a registered office in Malaysia where all books and documents required under the provisions of the CA 2016 are kept. Apart from company secretarial documents and statutory registers, a company is required to keep accounting records, financial statements and instruments of charges at its registered office. A notice must be made to the ROC if such documents are kept at a different place.
All business letters, notices and official publications (including in electronic form), websites, cheques, order invoices, receipts and letters of credit must contain the company name and registration number.
Generally, each equity share of a company carries one vote at a poll at any meeting of members of the company. A company may, however, provide for varying voting rights for its shareholders.
According to the CA 2016, a company has 30 days from its incorporation date to appoint a company secretary. The secretary of a company must be a natural person of full age who is a citizen or permanent resident of Malaysia and has his principal or only place of residence in Malaysia. He must be a member of a professional body prescribed under the CA 2016 or hold an individual licence issued by SSM. Any person who is qualified or who desires to act as a company secretary must register with the ROC before they can act as a company secretary.
The company must also appoint an approved company auditor for each financial year, although the CA 2016 gives discretion to the ROC to exempt certain private companies from the requirement to appoint an auditor. A private company qualifies for audit exemption if it is a dormant company, or fulfils at least two of the following criteria:
- The annual revenue of the company during the current financial year and in the immediate past two financial years do not exceed RM3 million;
- The total assets of the company in the current statement of financial position and in the immediate past two financial years do not exceed RM3 million; or
- The number of employees at the end of the current financial year and in the immediate past two financial years do not exceed 30.
The threshold criteria for audit exemption as described above will be implemented via a phased approach over a period of three years from 2025 to 2027, with the new exemption criteria being fully implemented for the financial period commencing on or after 1 January 2027.
Companies are not required to have a constitution, although companies may choose to adopt a constitution. For companies incorporated under the Companies Act 1965, unless otherwise revoked, its Memorandum and Articles of Association will be deemed to be its constitution. Where companies do not adopt a constitution, the default provisions on the rights, powers, duties and obligations of the directors and members under the CA 2016 apply.
Procedure for Incorporation (Locally Incorporated Company)
The CA 2016 has simplified the requirements for incorporating a company by requiring only one member and one director. This is a welcome move particularly for small businesses, start-up ventures and entrepreneurs as it facilitates the ability for one individual to maintain control over the company while having the benefit of limited liability.
Application to Confirm Availability and Reservation of Name
An application must be made to the ROC to confirm the availability of a proposed name of the company. The applicant may also apply for the reservation of the proposed name. The steps involved for the reservation of the proposed name are:
- Completion and submission of an application under Sections 27(1) and 27(4) of the CA 2016 to the ROC; and
- Payment of an RM50 fee for each name applied.
Thereafter, provided the ROC is satisfied that the name is not one which is undesirable, unacceptable or identical to another name, it will be reserved for 30 days from the date of the application or such longer period as the ROC may allow.
Application for Incorporation of Local Company
An application must be made to the ROC for incorporation of a local company. The information to be provided to the ROC for the purposes of incorporation of a company include:
- the name, status (whether the company is private or public) and proposed address of the registered office of the proposed company;
- the nature of business of the proposed company;
- details of each proposed member of the company including name, identification, nationality, place of residence / incorporation (as applicable);
- details of each proposed director;
- details of any secretary;
- in the case of a company limited by shares, the details of class and number of shares to be taken by a member; and
- in the case of a company limited by guarantee, the amount up to which the member undertakes to contribute to the assets of the company in the event of its being wound up.
The application for incorporation must include a statement by each promoter or director confirming his consent to act as promoter or director and that he is not disqualified to act as a promoter or director under the CA 2016.
Once the ROC is satisfied that the requirements for incorporation under the CA 2016 are complied with and upon payment of the relevant fee, the ROC will issue an electronic notice of registration. The company is incorporated on the date of incorporation specified in the notice of registration.
Fees for Incorporation
A flat fee for the incorporation of a company is payable depending on the type of company incorporated, as follows:
Type of Company | Fees (RM) |
Company Limited by Shares | 1,000 |
Company Limited by Guarantee | 3,000 |
Unlimited Company | 1,000 |
Post-Incorporation Obligations
Upon incorporation, the company and/or officers of the company are responsible for ensuring compliance with the CA 2016. Any change in the company’s name must be filed with SSM within 30 days from the date a special resolution is passed to change the company’s name, together with the appropriate fees.
The company’s annual return must be lodged with the ROC once in every calendar year, no later than 30 days from the anniversary of the company’s incorporation date (save for the calendar year in which the company was incorporated).
The company, directors and managers must keep such accounting and other records which will explain the financial position of the company and its transactions to enable true and fair profit and loss accounts and balance sheet (together with relevant reports) to be prepared and cause those records to be kept in such manner to enable them to be properly audited. The financial statements and records must be circulated to the members of the company within 6 months of its financial year end (in the case of a private company) or at least 21 days before its annual general meeting (in the case of a public company). The company must lodge the financial statements and reports for each financial year with the ROC within 30 days from the date such financial statements and records are circulated (in the case of a private company) or within 30 days from the date of its annual general meeting (in the case of a public company).
Every company must maintain statutory records and registers in compliance with the CA 2016 including register of option holders, register of members, register of mortgages/charges, register of debenture holders, register of directors, managers and secretaries, register of directors’ shareholdings, BO Register and minute books containing minutes of all proceedings of general meetings and of meetings of directors.
Companies are required to notify the ROC of changes to its particulars within the prescribed time. The key requirements are as follows:
Item | Prescribed time to notify ROC |
Change in registered office | Within 14 days of change |
Change in directors, managers and secretaries | Within 14 days of change |
Filing of Annual Return | Within 30 days of anniversary of incorporation |
Return of Allotment of shares | Within 14 days |
Change in Register of Members | Within 14 days of change |
Change in BO Register | Within 14 days of change |
Change in substantial shareholding | Notify company and ROC within 3 days (public listed companies) / 5 days (non-listed public companies) |
Change in nature of business | Within 14 days of change |
Change in business address | Within 14 days of change |
In addition, the Income Tax Act 1967 (“ITA”) provides that a company is required to retain sufficient records or documents for at least 7 years from the end of the year to which the income of the business relates for the purposes of tax assessments. Such records or documents includes records and books of accounts including a cash book, sales ledger, purchase ledger and a general ledger. Supporting documents such as invoices, bank statements, paying‐in slips, cheque stubs, receipt of payments, payroll records and copies of receipts issued should also be retained. This list is not exhaustive and the company should keep and retain in safe custody sufficient records to enable the income or loss of the company for the basis period for any year of assessment to be readily ascertained for the purpose of income tax. Matters related to the keeping of records and documents are set out in the Inland Revenue Board’s (“IRB”) Public Ruling No. 4/2000 (which are guidelines on keeping sufficient records for income tax purposes).
Requirements of a Foreign Company
A foreign company shall not carry on business in Malaysia unless it is registered as a foreign company under the CA 2016. A foreign company registered under the CA 2016 must comply with the CA 2016. Foreign companies must appoint an agent in Malaysia who shall be answerable for all such acts, matters and things that are required to be done by the foreign company under the CA 2016 and be personally liable for all penalties imposed on the foreign company for any contravention of the CA 2016. The foreign company must have a registered office within Malaysia at all times.
Procedure for Registration (Branch of a Foreign Company)
The application process for registration of a foreign company under the CA 2016 are as follows:
Application to Confirm Availability of Name
An application must be made to the ROC to confirm the availability of a proposed name of the company. The name to be used to register the foreign company should be the same as that registered in its country of origin. Similarly with a locally incorporated company, to confirm the availability of a proposed name of the company, an application and payment of the prescribed fee must be made electronically to the ROC using the MyCoID 2016 Portal on SSM’s website. Once approved, the name will be reserved for 30 days from the approval date. The reservation period can be extended upon payment of a prescribed fee.
Thereafter, provided the ROC is satisfied that the name is not one which is undesirable, unacceptable or identical to another name and that the requirements for registration below are met, the company shall be registered under that name by the ROC.
Application for Registration of Foreign Company
An application must be made to the ROC for registration of a foreign company under the CA 2016. The information to be provided to the ROC for the purposes of registration of a foreign company include:
- details of every shareholder in Malaysia, including name, identification, nationality, place of residence / incorporation (as applicable);
- details of each director in Malaysia;
- a list of its shareholders / members and details of the class and number of shares at its place of origin;
- for a foreign company limited without share capital, the amount up to which the member undertakes to contribute to the assets of the foreign company at its place of origin in the event of its being wound up; and
- details of the agent of the foreign company appointed under a memorandum of appointment or power of attorney.
The application for registration must include a statement by the appointed agent confirming his consent to the appointment.
The additional documents to be provided to the ROC include:
- a certified copy of the certificate of incorporation / registration of the foreign company;
- a certified copy of the Memorandum and Articles of Association or any other instrument defining its constitution (if available);
- a copy of the application and reservation confirmation for the availability of the company name; and
- a copy of the email notification approving the reservation of the company name.
If any of the abovementioned registration documents are in a language other than Bahasa Malaysia or English, a certified translation of such documents in either Bahasa Malaysia or English is required.
Once the ROC is satisfied that the requirements for registration under the CA 2016 are complied with and upon payment of the relevant fee, the ROC will issue an electronic notice of registration. The notification is conclusive evidence that the requirements as to registration have been complied with.
Fees for Registration
The fee payable for the registration of a foreign company depends on its share capital, as follows:
Share Capital (RM Equivalent) | Fees (RM) |
Not more than 1 million | 5,000 |
1 million – 10 million | 20,000 |
10 million – 50 million | 40,000 |
50 million – 100 million | 60,000 |
100,000,001 and above | 70,000 |
To determine the fees payable for registration of a foreign company, the share capital of the foreign company should be converted to the Malaysian currency (Ringgit Malaysia) at the prevailing exchange rate. In the event a foreign company does not prescribe any share capital, a flat rate of RM70,000 must be paid to SSM.
The ROC will issue a notice of registration of the foreign company within one working day upon compliance with the procedures and submission of the completed documents.
The certificate of registration of the foreign company will be issued by the ROC upon request, subject to the payment of a prescribed fee.
Post-Registration Obligations
Any change in the particulars of the company including the company’s name, constitution, particulars of directors, particulars of its agent, location of the foreign company’s registered office in Malaysia, the days and hours during which the foreign company’s registered office is open and accessible to the public and the address of the foreign company’s registered office in its place of incorporation or origin must be lodged with the ROC within 14 days from the date of change together with the appropriate fees. Any change in the share capital or authorised capital and in the case of a foreign company with no share capital, any increase in the number of members beyond the registered number, must be lodged with the ROC within 30 days from the date of change together with the appropriate fees.
Every foreign company is required to keep proper accounting records in Malaysia which will sufficiently explain the transaction and financial position of the foreign company arising out of its operations in Malaysia. The foreign company’s annual return must be lodged with the ROC once in every calendar year, no later than 30 days from the anniversary of the foreign company’s registration date. Every foreign company is required to lodge with the ROC a copy of its audited financial statements within 2 months of its annual general meeting, and audited financial statements showing the assets used and liabilities arising out of its operations in Malaysia.
Similar to a locally incorporated company, a foreign company is required to comply with the applicable requirements under the ITA and the IRB’s Public Ruling No. 4/2000.
In the event expatriates are to be employed, immigration and work authorisation requirements imposed by the Malaysian immigration authorities will need to be complied with.
Representative / Regional Office
Foreign investors can consider setting up a representative or a regional office in Malaysia to establish a presence for a minimum of 2 years to allow investors to decide if Malaysia is a right place for them to operate a business. A representative or a regional office is not a permanent business set-up and therefore is not governed by the ROBA 1956 or the CA 2016. Instead they are within the authority of the responsible statutory body such as MITI or BNM. MITI is responsible for the registration of regional and representative office in the manufacturing, service, logistics and trading sectors whereas BNM is responsible for the banking and finance sectors.
There is a difference between a representative office and a regional office. A representative office is usually set up to collect relevant information on investment opportunities, typically in the manufacturing and services sector. A representative office may also be established to enhance bilateral trade relations, promote the export of Malaysian goods and services or to carry out research and development. A representative office may be used to perform permissible activities for its head office/principal and it must be completely funded by sources outside of Malaysia. To set up a representative office, a foreign company must obtain the approval from MITI.
A regional office is typically set up as the coordination centre for the company/organisation’s affiliates, subsidiaries and agents in Southeast Asia and Asia Pacific. The regional office is also responsible for the designated activities of the company/organisation within the region it operates in.
There are certain activities that are not permitted to be undertaken by a representative office or regional office, for example trading activities (including import and export), commercial activities or activities involving lease warehousing facilities. They are also not permitted to enter into business contracts on behalf of the foreign corporation or provide services for a fee. The participation in the daily management of any of its subsidiaries, affiliates or branches in Malaysia is also prohibited.
A representative office or regional office only represents its head office/principal to undertake designated functions. A representative office or regional office must also confine its activities to promotion and liaison carried out on behalf of its parent company. The annual operational expenditure for new establishment of a representative office or regional office as well as an extension will be imposed at a minimum of RM300,000 or as proposed by the applicant, whichever is higher.
Licences / Registration
Companies seeking to commence business in Malaysia must consider the licences/registration required for the business. The following is a non-exhaustive list of general licenses/registration required for doing business in Malaysia.
Business Premise Licence and Signage Licence
Generally, companies doing business in Malaysia at physical premises are required to apply for business premise and signage licenses from the relevant municipal council.
Requirements for business premise and signage license vary depending on the location of the physical premises and the by-laws of the relevant municipal council.
Income Tax Registration
Companies are required to register for an income tax reference number with the IRB as provided under the ITA upon commencement of business.
Wholesale Retail Trade Licence (for foreign involvement)
All proposals for foreign involvement in distributive trade requires the approval of the Ministry of Domestic Trade and Cost of Living (“MDTCL”). The MDTCL would issue a Wholesale Retail Trade Licence (“WRT“), typically with a validity of 2 years. Please see Chapter 4 for further information on the WRT Licence requirements under the DTS Guidelines.
Beneficial Ownership
Under the CA 2016, a person is a beneficial owner of a company if he is a natural person who ultimately owns or controls over a company and this includes a person who exercises ultimate effective control over a company.
Under the Guidelines for the Reporting Framework for Beneficial Ownership of Companies (“BO Guidelines”) and the Case Studies and Illustrations of the Guidelines for the Reporting Framework for Beneficial Ownership of Companies (“BO Case Studies”), an individual is a beneficial owner of a company limited by shares if he satisfies one or more of the following criteria (“Criteria A to F”):
- Criteria A: holds, directly or indirectly, interest in not less than 20% of the shares of the company;
- Criteria B: holds, directly or indirectly, interest in not less than 20% of the voting shares of the company;
- Criteria C: has the right to exercise ultimate effective control, whether formal or informal, over the company or the directors or the management of the company;
- Criteria D: has the right or power to, directly or indirectly, appoint or remove a director(s) who holds a majority of the voting rights at the meeting of directors;
- Criteria E: is a member of the company and, under an agreement with another member, controls alone a majority of the voting rights in the company;
- Criteria F: holds less than 20% of the shares or voting rights but exercises significant control or influence over the company.
Under the BO Guidelines, if the shares are held through indirect ownership, the beneficial owner will be determined based on effective interest.
The beneficial ownership reporting framework introduced by the CA (Amendment) Act 2024 applies to all companies including foreign companies registered in Malaysia. The reporting obligations are as follows:
Duty to Maintain a BO Register
Every company must keep a separate BO Register and record the prescribed particulars, including the full name, address, nationality, identification and usual place of residence of each beneficial owner, the dates on which a person becomes and ceases to be a beneficial owner, and such other information as may be required by the ROC.
The BO Register must be kept at the company’s registered office or at any other place in Malaysia as notified to the ROC. The company must lodge with the ROC a notice of any change to the particulars in the BO Register within 14 days from the date of change.
The company must retain in the BO Register the particulars of any person who has ceased to be a beneficial owner for 7 years from the date of cessation.
Duty to Disclose Beneficial Owners
Companies are required to take all reasonable measures to identify their beneficial owner(s) in accordance with Criteria A to F.
A company may, by written notice:
- require any member to inform whether he is a beneficial owner or if not, to the extent possible, to indicate the persons by name and by other particulars sufficient to enable those persons to be identified as beneficial owners of the company, and to provide the prescribed particulars;
- require any person whom the company knows or has reasonable grounds to believe, is a beneficial owner, to confirm his status or if not, to state whether he knows or has reasonable grounds to believe that any other person is a beneficial owner and to give such particulars of that person that are within his knowledge, and to provide the prescribed information; and
- require any member or person whom the company knows or has reasonable grounds to believe, knows the identity of a beneficial owner, to state whether he knows, or has reasonable grounds to believe that any other person is a beneficial owner and to give such particulars of that person that are within his knowledge, and to provide the prescribed information.
Upon receiving such information, the company must, within 14 days, record in the BO Register the date the notice was issued and the information received. The company is also required to issue notices to beneficial owners to confirm or update their particulars where it has reasonable grounds to believe that a change has occurred or that the existing particulars are inaccurate.
In the event the company is unable to determine its beneficial owner after taking all reasonable measures, the company is required to identify its senior management in place of its beneficial owner.
The term “senior management” is not specifically defined in the CA (Amendment) Act 2024, BO Guidelines and the BO Case Studies. The BO Case Studies however suggests that such term refers to persons responsible for strategic decisions that fundamentally affect the business practices or general direction of the corporation or exercising executive control over the daily or regular affairs of the corporation and their name(s) must be submitted in place of the beneficial owner. Examples given in the BO Case Studies include, members of the board of directors/trustees or any similar body; and/or senior managing officials such as the chief executive officer, managing director or chief operating officer. Depending on the outcome of the assessment carried out by the company in identifying the senior management, the company can name more than one person holding a senior management position in place of the beneficial owner.
Ongoing Obligations of the Company
A company is required to issue a notice in relation to beneficial ownership information at least once in every calendar year for the purpose of submitting its annual return.
Obligations of Beneficial Owners
A shareholder who receives a notice from the company requesting for beneficial ownership information is obligated to inform the company whether he is a beneficial owner and provide the prescribed information including the criteria categorising him as a beneficial owner, and to indicate as far as possible persons by name and other particulars sufficient to enable any person to be identified as beneficial owners of the company.
A person who has reason to believe that he is a beneficial owner is required to notify the company as soon as practicable and provide the prescribed information.
A beneficial owner must also inform the company of any changes in his particulars, and a person who has ceased to be a beneficial owner must notify the company of the date and particulars of cessation.
Contribution Note
This chapter of the Guide to Doing Business in Malaysia was authored by the Partners listed, with the assistance of Tay Zien Han (Senior Associate, Christopher & Lee Ong), Sara Gui (Associate, Christopher & Lee Ong).
For more information, click here to read more Doing Business Guide.
Notice
The contents of this Guide are owned by CLO and subject to copyright protection under the laws of Malaysia and, through international treaties, in other countries. No part of this Guide may be reproduced, licensed, sold, published, transmitted, modified, adapted, publicly displayed, broadcast (including storage in any medium by electronic means whether or not transiently for any purpose) without the prior written permission of CLO.
Please note also that whilst the information in this Guide is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice for any particular course of action as such information may not suit your specific business or operational requirements. It is to your advantage to seek legal advice for your specific situation.
Disclaimer
Rajah & Tann Asia is a network of member firms with local legal practices in Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Our Asian network also includes our regional office in China as well as regional desks focused on Brunei, Japan and South Asia. Member firms are independently constituted and regulated in accordance with relevant local requirements.
