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Key Considerations Before a Foreigner Starts a Business in Malaysia

With the liberalisation in equity policy, foreign investors generally could hold 100% equity in majority industries except for strategic sectors of national interest.

For manufacturing sector, please refer Equity Policy in the Manufacturing Sector

For Services sector, please refer Liberalisation of the Services Sector in Malaysia

Despite that, there are specific sector regulations issued by the relevant governmental departments which impose stringent policies such as higher paid up capital requirements. For example, paid up capital requirement for a local owned trading company is RM2 whilst foreign owned trading company (foreign ownership more than 51%) is RM 1 million.

If 100% foreign participation is not allowed, the foreign investor(s) could consider to joint venture with a local partner. Joint venture with a local partner (who own more than 51% shares) could also help to lower the business entry requirements such as exemption from WRT license and thus reduces the associated costs..

There are many methods of conducting business in Malaysia – Sole Proprietor, Conventional Partnership, Limited Liability Partnership, Locally Incorporated Company or Foreign Company. However, foreigners cannot set up sole proprietorship or partnerships in Malaysia, unless they have permanent residency (PR) in Malaysia.

The choice on the type of business entity will also impact compliance requirements, tax structure and etc. Please click for the comparison of different business entities. You may also refer to the Foreign Company Setup Option.

The basic requirements to set-up a Locally Incorporated Company under Companies Act, 1965:-

(i) A minimum of two subscribers to the shares of the company (Section 14 CA);
(ii) A minimum of two resident directors (Section 122); and
(iii) A company secretary who can be either :

  • An individual who is a member of a professional body prescribes by the Minister  of Domestic Trade Cooperative and Consumerism; or
  • An individual licensed by the Companies Commission of Malaysia (SSM)

(iv) A minimum authorised capital of RM400,000 and paid up capital of RM2

Please note that a foreigner would be considered as resident director if his principal place or only place of residence within Malaysia i.e. he has employment pass or permanent resident pass in Malaysia.

3E’s Nominee Director Services could help the foreigners in fulfilling these requirements.

Please note that there are specific sector regulations issued by the relevant governmental departments for different industries. These include regulations that could impose restrictions on the foreign ownership of equity of a company, require higher paid up capital requirements and also prior regulatory approval before the commencement of business operations (i.e. specific approvals, business licences, permits or registrations).

Please take into consideration of all the requirements especially paid up capital requirements before you getting into the incorporation process. Set-up a company with minimum paid-up capital of RM2 is fast and relatively cheap but you may end up with business unable to operate as the Company not fulfil the licensing requirements and/or Foreigners unable to get employment passes to work in Malaysia.

Business licences can be categorized into 3 different logical groups, namely:

(For further details, please refer to Business Licences in Malaysia)

  • General licences
  • Sector Industry Specific licences
  • Activity Specific licences

The most common license required for a foreign owned company is WRT license.

This WRT license is applicable to any Foreign Participation (i.e. foreign equity at 51% and above) in the Malaysia Distributive Trade Services include wholesalers, retailers, franchise practitioners, direct sellers, suppliers, who channel their goods in the domestic market, and commission agents or other representatives including those of international trading companies.

The WRT license is required by all the said business sectors before they can apply for a professional work permit. For WRT, the minimum paid up capital requirement is RM 1 million, with company full set-up i.e. with business premises supported with valid tenancy agreement, phone line and etc.

Having a company in Malaysia doesn’t mean that the foreign investors/directors can already stay in Malaysia for long term. The foreign investors/directors would still be required to go through a work permit process or through an MM2H application in order to stay here for long term.

The requirements for setting up a Foreign Owned Company are highly depending on the activities undertaken, shareholders’ structure, work permit requirements and etc.

Please email us at info@3ecpa.com.my the following information in order for us to a better understanding of your Company’s requirements and provide you the relevant advisories and cost effective quotation.

  • Proposed Business Activity & Estimated Annual Income
  • Proposed Company’s Authorised & Paid Up Capital
  • Proposed Shareholders Structure i.e. Numbers of Shareholders, Shareholder’s Citizenship and shareholding percentage
  • Proposed Director Structure i.e. Numbers of Directors, Director’s Citizenship
  • Any Business Licenses required for the proposed business
  • Estimated Human Resources Requirements in Malaysia – Number of Staff (local / foreign)
  • Any employment pass required for the foreign director(s)