UPDATE

 Home / Getting Started / General Guidelines & Facilities / Starting Up Business

 GENERAL GUIDELINES & FACILITIES

STARTING UP BUSINESS
Starting Up Business

Immigration Procedures

Workforce for Industry

Banking, Finance & Exchange Administration

Environmental Management

Intellectual Property Protection

Infrastructure Support
Starting Up Business
1 Approval of Manufacturing Projects

Show All Hide All

 The Industrial Co-ordination Act 1975

Malaysia's Industrial Co-ordination Act 1975 (ICA) was introduced with the aim to maintain an orderly
development and growth in the country's manufacturing sector.

The ICA requires manufacturing companies with shareholders' funds of RM2.5 million and above or
engaging 75 or more full-time paid employees to apply for a manufacturing licence for approval by the
Ministry of International Trade and Industry (MITI).

Applications for manufacturing licences are to be submitted to the Malaysian Investment Development
Authority (MIDA), an agency under MITI in charge of the promotion and coordination of industrial
development in Malaysia.

The ICA defines:

"Manufacturing activity" as the making, altering, blending, ornamenting, finishing or otherwise
treating or adapting any article or substance with a view to its use, sale, transport, delivery or
disposal; and includes the assembly of parts and ship repairing but shall not include any activity
normally associated with retail or wholesale trade.
"Shareholders' funds" as the aggregate amount of a company's paid-up capital, reserves, balance of
share premium account and balance of profit and loss appropriation account, where:
Paid-up capital shall be in respect of preference shares and ordinary shares and not including any
amount in respect of bonus shares to the extent they were issued out of capital reserve created by
revaluation of fixed assets
Reserves shall be reserves other than any capital reserve created by revaluation of fixed assets and
provisions for depreciation, renewals or replacements and diminution in value of assets.
Balance of share premium account shall not include any amount credited therein at the instance of
issuing bonus shares at premium out of capital reserve by revaluation of fixed assets.
"Full-time paid employees" as all persons normally working in the establishment for at least six
hours a day and at least 20 days a month for 12 months during the year and who receive a salary.
This includes traveling sales, engineering, maintenance and repair personnel who are paid by and are
under the control of the establishment.

It also includes directors of incorporated enterprises except those paid solely for their attendance at
board of directors meetings. The definition encompasses family workers who receive regular salaries or
allowances and who contribute to the Employees Provident Fund (EPF) or other superannuation funds.

 Guidelines for Approval of Projects

The government's guidelines for approval of industrial projects in Malaysia are based on the Capital
Investment Per Employee (C/E) Ratio. Projects with a C/E Ratio of less than RM55,000 are categorised as
labour-intensive and thus will not qualify for a manufacturing licence or for tax incentives. Nevertheless, a
project will be exempted from the above guidelines if it fulfils one of the following criteria:

The value-added is 30% or more

The Managerial, Technical and Supervisory (MTS) Index is 15% or more
The project undertakes promoted activities or manufacture products as listed in the List of
Promoted Activities and Products - High Technology Companies
Existing companies (formerly exempted) applying for a manufacturing licence.

Expansion of Production Capacity and Product Diversification

A licensed company which desires to expand its production capacity or diversify its product range by
manufacturing additional products will need to apply to MIDA.

2 Incorporating A Company

Show All Hide All

 Methods of Conducting Business in Malaysia

In Malaysia, a business may be conducted:

1. By an individual operating as sole proprietor

2. By two or more (but not more than 20) persons in partnership, or
3. By a limited liability partnership (LLP), or
4. By a locally incorporated company or by a foreign company registered under the provisions of the
CA 1965
All sole proprietorships and partnerships in Malaysia must be registered with the Companies Commission
of Malaysia (SSM) under the Registration of Businesses Act 1956. In the case of partnerships, partners
are both jointly and severally liable for the debts and obligations of the partnership should its assets be
insufficient. Formal partnership deeds may be drawn up governing the rights and obligations of each
partner but this is not obligatory.

Company Structure

The CA 1965 governs all companies in Malaysia. The Act stipulates that a a company must be registered
with the SSM in order to engage in any business activity.

There are three (3) types of companies that can be incorporated under the CA 1965:

1. A company limited by shares is a company formed on the principle that the members’ liability is
limited by the memorandum of association to the amount, if any, unpaid on the shares taken up by
them
2. In a company limited by guarantee the liability of the members is limited by the Memorandum and
Articles of Association to the amount which the members have undertaken to contribute to the
assets of the company in the event the company is wound up.
3. An unlimited company is a company formed on the principle of having no limit placed on the liability
of its members

Company Limited by Shares

The most common company structure in Malaysia is a company limited by shares. Such limited companies
may be incorporated either as a Private Limited Company (identified through the words “Sendirian
Berhad” or “Sdn Bhd” as part of the company’s name) or a Public Limited Company (identified through the
words “Berhad” or “Bhd” as part of the company’s name).

A company having a share capital may be incorporated as a private company if its Memorandum and
Articles of Association:

1. Restricts the right to transfer its shares

2. Limits the number of its members to 50, excluding employees in the employment of the company or
its subsidiary and some former employees of the company or its subsidiary.
3. Prohibits any invitation to the public to subscribe for its shares and debentures
4. Prohibits any invitationto the public to deposit money with the company for fixed periods of payable
at call, whether interest-bearing or interest-free.

A public company can be formed or, alternatively, a private company can be converted into a public
company subject to Section 26 of the Companies Act 1965. Such a company can offer shares to the public
provided:

1. It has registered a prospectus with the Securities Commission

2. It has lodged a copy of the prospectus with the SSM on or before the date of its issue.

A public company can apply to have its shares quoted on the Bursa Malaysia subject to compliance with
the requirements laid down by the exchange. Any subsequent issue of securities (e.g. issue by way of
rights or bonus, or issue arising from an acquisition, etc.) requires the approval of the Securities
Commission.

 Procedure for Incorporation

To incorporate a company, an application must be made to the SSM using Form 13A together with a
payment of RM30(for each name applied) in order to determine if the proposed name of the intended
company is available. The application will be approved if name is available and the proposed name will be
reserved for the applicant for three months.

The following incorporation documents are to be submitted to the SSM within the three months from the
date of the approval of the company's name:

1. Memorandum and Articles of Association

2. Declaration of Compliance (Form 6)
3. Statutory Declaration by a person before appointment as a director, or by a promoter before
incorporation of a company (Form 48A)
4. Additional documents which would include:
The original Form 13A
A copy of the letter from SSM approving the name of the company
A copy of the identity card of each director and company secretary or a copy of the
passport where a foreign director is appointed.

The Memorandum of Association documents the company's name, the objectives, the amount of its
authorised capital (if any) proposed for registration and its division into shares of a fixed amount. The
Articles of Association describes the regulations governing the internal management of the affairs of the
company and the conduct of its business.

Once the Certificate of Incorporation is issued, the company shall be a body corporate, capable of
exercising the functions of an incorporated company and of suing and being sued. It has a perpetual
succession under common seal with power to hold land, but with such liability on the part of the members
to contribute to its assets in the event of it being wound up, as provided for in the CA 1965.

At present, the incorporation of local companies can be completed within one (1) day through the
introduction of the single interaction counter which was introduced since 1 April 2010. SSM undertakes
to process, approve and register a complete application in a speedy and efficient manner within the time
period stated as follows:

SSM's Client Charter

Company Registration Activity Time

Incorporation of a company 1 day

Conversion of status 1 day
Change of company name 1 day
Commencement of business for public companies 1 day
Registration of charge 2 days
Approval of a trust deed 5 days
Registration of prospectus 3 days
Uncertified copy of company documents 30 mins
Certified copy of company documents 1 hour

* Application for the approval of company name only, may be made without incorporating the company.

** Time taken begins from the moment payment is received until the certificate is issued.

Requirements of a Locally Incorporated Company

A company must maintain a registered office in Malaysia where all books and documents required under
the provisions of the Act are kept. The name of the company shall appear in legible romanised letters,
together with the company number, on its seal and documents.

A company cannot deal with its own shares or hold shares in its holding company. Each equity share of a
public company carries only one vote at a poll at any general meeting of the company. A private company
may, however, provide for varying voting rights for its shareholders.

The secretary of a company must be a natural person of full age who has his principal or only place of
residence in Malaysia. He must be a member of a prescribed body or is licensed by the Registrar of
Companies. The company must also appoint an approved company auditor to be the company auditor in
Malaysia.

In addition, the company shall have at least two directors who each has his principal or only place of
residence within Malaysia. Directors of public companies or subsidiaries of public companies normally
must not exceed 70 years of age. A director of the company need not necessarily be a shareholder of the
company.

 Registrations of Foreign Companies

A foreign company may carry on business in Malaysia by either:

1. incorporating a local company; or

2. registering a branch in Malaysia.

Foreign company is defined under the CA 1965 as:

1. a company, corporation, society, association or other body incorporated outside Malaysia; or

2. an unincorporated society, association, or other body which under the law of its place of origin may
sue or be sued, or hold property in the name of the secretary or other officer of the body or
 association duly appointed for that purpose and which does not have its head office or principal
place of business in Malaysia.

Registration Procedures

1. Applicant must first conduct a name search in order to determine if the proposed name for the
intended company is available. The name to be used to register the foreign company should be the
same as registered in its country of origin. Applications should be submitted to the SSM using Form
13A with a payment of RM30 for each name applied. When the proposed company’s name is
approved by SSM, it shall be valid for three months from the date of approval.
2. Upon approval, applicants must submit the following registration documents to the SSM within
three months from the date of approval:
A certified copy of the certificate of incorporation or registration of the foreign
company;
A certified copy of the foreign company’s charter, statute or Memorandum and Articles
of Association or other instrument defining its constitution;
Form 79 (Return by Foreign Company Giving Particulars of Directors and Change of
Particulars) If the list includes directors residing in Malaysia who are members of the
local board of directors of the foreign company, a memorandum stating their powers
that are executed by or on behalf of the foreign company, should be submitted to SSM.
A memorandum of appointment or power of attorney authorising the person(s)
residing in Malaysia, to accept on behalf of the foreign company any notices required to
be served on such foreign company;
Form 80 (Statutory Declaration by Agent of Foreign Company); and additional
documents consisting of the original Form 13A as well as a copy of the letter from SSM
approving the name of the foreign company.
Note: If any of the described registration documents are in languages other than Bahasa Malaysia or
English, a certified translation of such documents in Bahasa Malaysia or English shall be required.

3. Registration fees shall be made to the SSM as per the following schedule:
Authorised Share Capital (RM) Fees Payable (RM)

Up to 100,000 1,000

100,001 - 500,000 3,000

500,001 - 1,000,000 5,000

1,000,001 - 5,000,000 8,000

5,000,001 - 10,000,000 10,000

10,000,001 - 25,000,000 20,000

25,000,001 - 50,000,000 40,000

50,000,001 - 100,000,000 50,000

Above 100,000,001 70,000

 In determining the amount of registration fees, the nominal share capital of the foreign company should
first 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 RM1,000 shall be paid to SSM.

4. A Certificate of Registration will be issued by SSM upon compliance with the registration
procedures and submission of duly completed registration documents.
5. Upon approval, the company or its agent is responsible for ensuring compliance of the Companies
Act 1965. Any change in the particulars of the company or in the company’s name or authorised
capital must be filed with SSM within one month from the date of change together with the
appropriate fees. Every company is required to keep proper accounting records. Annual return
must be lodged with SSM once in every calendar year.
Note: Foreigners are advised to seek the services of an advocate and solicitor, an accountant or a
practising company secretary for further assistance.

 E-Services

E-Services were introduced as an alternative to the traditional method of conducting business with SSM
i.e. via counter services. It allows for the lodgement of documents (e-Lodgment Service) and the
procurement of corporate and business information (e-Info Service). Payments can be made via credit
card, direct debit or prepaid accounts.

E-lodgment or also known as e-filing would enable companies, business or their authorised personnel to
lodge selected statutory required documents over the Internet through the myGovernment portal/Public
Service Portal (PSP). Whereas e-Info service enables for the online purchase of corporate and business
information.

For further information please visit the SSM website at www.ssm.com.my or www.ssm.com.my

3 Guidelines On Equity Policy

Show All Hide All

 Equity Policy in the Manufacturing Sector

Malaysia has always welcomed investments in its manufacturing sector. Desirous of increasing local
participation in this activity, the government encourages joint-ventures between Malaysian and foreign
investors.

Equity policy for New, Expansion, or Diversification Projects

Since June 2003, foreign investors could hold 100% of the equity in all investments in new projects, as
well as investments in expansion/diversification projects by existing companies, irrespective of the level
of exports and without excluding any product or activity.

The equity policy also applies to:

Companies previously exempted from obtaining a manufacturing licence but whose shareholders'
funds have now reached RM2.5 million or have now engaged 75 or more full-time employees and
are thus required to be licensed.
Existing licensed companies previously exempted from complying with equity conditions, but are
now required to comply due to their shareholders' funds having reached RM2.5 million.

Equity Policy Applicable for Existing Companies

Equity and export conditions imposed on companies prior to 17 June 2003 will be maintained. However,
companies can request for these conditions to be removed and approval will be given based on the merits
of each case.

 Protection of Foreign Investment

Malaysia's commitment in creating a safe investment environment has attracted more than 8,000
international companies from over 40 countries to make Malaysia their offshore base.

Equity Ownership

A company whose equity participation has been approved will not be required to restructure its equity at
any time as long as the company continues to comply with the original conditions of approval and retain
the original features of the project.

Investment Guarantee Agreements

Malaysia's readiness to conclude Investment Guarantee Agreements (IGAs) is a testimony of the

government's desire to increase foreign investor confidence in Malaysia. IGAs will:

Protect against nationalisation and expropriation

Ensure prompt and adequate compensation in the event of nationalisation or expropriation
Provide free transfer of profits, capital and other fees
Ensure settlement of investment disputes under the Convention on the Settlement of Investment
Disputes of which Malaysia has been a member since 1966.

Malaysia has concluded IGAs with the following groupings and countries (in alphabetical order):

Groupings

Association of South-East Asian Nations (ASEAN)

Organisation of Islamic Countries (OIC)

Countries
 Albania Ghana Peru
Algeria Guinea Poland
Argentina Hungary Romania
Austria India Saudi Arabia
Bahrain Indonesia Senegal
Bangladesh Iran Slovak, Republic of
Belgo-Luxembourg Italy Spain
Bosnia Herzegovina Jordan Sri Lanka
Bostwana Kazakstan Sudan, Republic of
Burkina Faso Korea, North Sweden
Cambodia Korea, South Switzerland
Canada Kuwait Syarian Arab Republic
Chile, Republic of Kyrgyz, Republic of Taiwan
China, People's Republic of Laos Turkey
Croatia Lebanon Turkmenistan
Cuba Macedonia United Arab Emirates
Czech Republic Malawi United States of America
Denmark Mongolia United Kingdom
Djibouti, Republic of Morocco Uruguay
Egypt Namibia Uzbekistan
Ethiopia, Republic of Netherlands Vietnam
Finland Norway Yemen
France Pakistan Zimbabwe
Germany Papua New Guinea

Convention on the Settlement of Investment Disputes

In the interest of promoting and protecting foreign investment, the Malaysian government ratified the
provisions of the Convention on the Settlement of Investment Disputes in 1966. The Convention,
established under the auspices of the International Bank for Reconstruction and Development (IBRD),
 provides international conciliation or arbitration through the International Centre for Settlement of
Investment Disputes located at IBRD's principal office in Washington.

Kuala Lumpur Regional Centre of Arbitration

The Kuala Lumpur Regional Centre for Arbitration was established in 1978 under the auspices of the
Asian-African Legal Consultative Organisation (AALCO) - an inter-governmental organisation
cooperating with and assisted by the Malaysian government.

A non-profit organisation, the Centre serves the Asia Pacific region. It aims to provide a system to settle
disputes for the benefit of parties engaged in trade, commerce and investments with and within the
region.

Any dispute, controversy or claim arising out of or relating to a contract, or the breach, termination or
invalidity shall be decided by arbitration in accordance with the Rules for Arbitration of the Kuala Lumpur
Regional Centre for Arbitration.

Read more on Arbitration Act 2005

Tags: companies incorporation, equity policy

     
 

 QUICK LINKS
Getting Started

Resources

e-Services

Industries

Facts & Figures

Contact
 PREV NEXT

IMMIGRATION PROCEDURES
Workforce for Industry

FAQs Links 1Akses MyGov Portal Sitemap Contact us Terms of Service Privacy Policy Security Policy
Career Disclaimer

Quick Menu

Copyright © Malaysian Investment Development Authority (MIDA) 2015.

Disclaimer: While every effort has been made to ensure that the information provided in this website is accurate and reliable, MIDA shall not be
liable for any special, incidental or consequential damages that may result from the usage of information obtained from this Website. Best viewed in
1024 x 768 using Google Chrome or Mozilla Firefox. This website is mobile responsive.

Last Updated : Monday 13th June 2016