Setting Up Foreign Owned Company in Malaysia
As one of the most vibrant countries in Southeast Asia, Malaysia offers many advantages as an investment destination. This has been affirmed by robust growth in private investment in the country, which has expanded at a compounded annual growth rate of 13.9% from the start of the ETP in 2010 to RM146.1 billion (US$39.89 billion) in 2014.
From manufacturing to distribution or technical expertise in the services sector, the country offers opportunities and capabilities across the value chain. Whether investors want to utilise Malaysia as their target market or as a regional gateway, organisations and their employees alike will find a myriad of opportunities upon their arrival here. (See more at Why Malaysia?)
Basic Requirements to Set Up a Company in Malaysia under Companies Act
Private Limited Company (identified through the words ‘Sendirian Berhad’ or ‘Sdn. Bhd.’) is the most common business vehicle in Malaysia. (Find out more on Foreign Company Setup Options in Malaysia)
The basic requirements to set-up a Locally Incorporated Company under Companies Act, 1965 are the same for both Malaysian and Foreigner setup:-
(i) A minimum of one subscribers to the shares of the company (Section 14 CA);
(ii) A minimum of one resident director (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 paid up capital of RM1
Both the director and company secretary shall have their principal or only place or residence within Malaysia.
The Companies Act, 1965 does not stipulate any equity conditions on Malaysian incorporated companies. However, to increase local participation in business, the government encourages joint-ventures between Malaysian and foreign investors. Specific equity conditions may be imposed for specific approvals, operating licences, permits or registrations by the regulating Ministries/Agencies, depending on the activities undertaken.
With the liberalisation in equity policy, foreign investors generally could hold 100% equity in majority industries except for strategic sectors of national interest such as water, telecommunications, ports, energy and etc. Nevertheless, foreigners are advisable to confirm whether the proposed business activities are permitted and the requirements for foreign set-up in Malaysia.
For Manufacturing sector, please refer Equity Policy in the Manufacturing Sector
For Services sector, please refer Liberalisation of the Services Sector in Malaysia
For every industry, there are specific sector regulations issued by the relevant governmental departments. 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).
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
Wholesale, Retail Trade (WRT) License
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.
Visa / Pass to Stay in Malaysia
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 in order to stay here for long term.
For further information, please refer articles below:-
• Visa Requirements in Malaysia
• Passes Requirements in Malaysia
• Employment of Expatriates in Malaysia
• Summary of Immigration Process
• Company’s Paid Up Capital Requirements for Employment of Expatriate
• Requirements to Apply for Expatriate Employment Pass
• Approvals Required from Agencies/ Regulatory Bodies for Employment Pass Application
• List of Positions Not Applicable for Expatriate Positions