To start a business in Malaysia, the first step is to set up a business entity with the Companies Commission of Malaysia. There are 2 types of business entities:

• The unincorporated entity and
• The incorporated separate legal entity.

The unincorporated entities are:

• Sole proprietorship and
• Partnership.

A sole proprietorship is an entity with 1 person, whereas a partnership is a business entity that is owned by at least 2 persons but not more than 20 persons. Both the sole proprietorship and partnership do not constitute separate legal entities, and the business partners can sue and be sued in their personal names. A business owner or partners are exposed to personal risks and liabilities.

The incorporated separate legal entities are:

• A company limited by shares or private limited company
• A company limited by guarantee
• Unlimited company and
• Limited liability partnership.

Private limited companies are the most established business entities as the shareholders of private limited companies are not exposed to personal risks and liabilities; their liabilities are limited to the number of shares that are owned by them.

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Private Limited Company (Sendirian Berhad)

• Liability of shareholders is limited to the amount of shares held by the shareholder.
• The minimum number of shareholders is 1 and the maximum number of shareholders is 50. If the number of shareholders exceeds 50, a private limited company will have to convert its status to a public company, which is an unlimited public company.
• Director will be appointed by the shareholders of a private limited company to manage such company. A director may or may not be a shareholder of the company.
• A private limited company is restricted from offering any of its shares to the public.
• The Companies Act 2016, Malaysia, largely regulates the power and duties of a private limited company.

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Shareholders of a private limited company are generally not liable for the debts of the company, aside from their financial contribution to the company.

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A private limited company pays a corporate tax on its profits. These profits may then be distributed to their shareholders as dividends.

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A private limited company must be registered with the Companies Commission of Malaysia, and the promoter of such company must file the necessary incorporation documents to the Companies Commission of Malaysia.

Digitalized process for company registration:

Instead of manually filling in the required forms downloaded from the SSM website, entrepreneurs can now register their Sdn Bhd online by filling in the Super Form on the MyCoID 2016 portal.

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A private limited company is a well-established and widely recognized business entity.

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A resolution of shareholders of a private limited company can be approved by way of written resolutions or shareholders' meeting.

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A resolution of directors of a private limited company can be approved by way of written resolutions, or directors may hold a board of directors' meeting as required.

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A private limited company must annually file its annual tax returns with the relevant tax authorities.

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A private limited company is required to file initial registration as well as annual filings.

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If number of shareholders of a private limited company exceeds 50, it must be converted to a public company.

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There are 4 types:

• Shareholders' voluntary winding up: the company is solvent, but the shareholders of the company decide to wind up the company
• Creditors' voluntary winding up: the company is insolvent, and the creditors choose to wind up the company to realize the company's assets
• Compulsory winding up by the court of Malaysia: the court finds that a particular company is unable to pay its debts and
• Striking off by the Companies Commission of Malaysia: the Companies Commission of Malaysia can strike off a company if such company is not carrying on a business, has contravened with the Companies Act 2016, is being used for unlawful purpose or has been wound up.

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Annual return and financial statement of a private limited company are filed annually to the Companies Commission of Malaysia. 

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• Must be a natural person and at least 18 years of age

• Must be of sound mind

• Must ordinarily reside in Malaysia by having a principal place of residence in Malaysia

• Not an undischarged bankrupt under the Insolvency Act 1967

• Not disqualified under the Companies Act 2016

• Has not been convicted, whether inside or outside of Malaysia, of any offense and

• Has not been imprisoned for any offenses prescribed under the Companies Act 2016 within 5 years immediately preceding their appointment.

For more information on directors’ duties, see our Global Guide to Directors’ Duties.

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• Must be a natural person and at least 18 years of age.

• Must be a citizen or permanent resident of Malaysia who ordinarily resides in Malaysia and has a principal place of residence in Malaysia.

• Must be a member of a body prescribed in the 4th Schedule of the Companies Act 2016 or a person licensed by the Companies Commission of Malaysia.

• Must be an undischarged bankrupt under the Insolvency Act 1967.

• Not convicted, whether in or outside Malaysia, of any offences prescribed under the Companies Act 2016.

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Not applicable for this jurisdiction.

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Not applicable for this jurisdiction.

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Not applicable for this jurisdiction.

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Not applicable for this jurisdiction.

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Local registered address with the corporate secretary is required.

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Corporate secretary is required to be a resident of Malaysia and have a principal place of residence in Malaysia.

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At least 1 director of a private limited company is required to be a resident of Malaysia and have a principal place of residence in Malaysia.

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Same requirements as for a director of a private limited company.

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Not applicable for this jurisdiction.

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Not applicable for this jurisdiction.

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A private limited company can have a minimum of 1 director. A private limited company can have a minimum of 1 shareholder and a maximum of 50 shareholders.

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A minimum of 1 shareholder.

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Subject to a constitution of a private limited company, a director may be removed by ordinary resolution subject to a special notice prescribed under the Companies Act 2016. The ordinary resolution for the removal of a director must be passed at a physical shareholders’ general meeting and cannot be passed by way of a written resolution.

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Not applicable for this jurisdiction.

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Not applicable for this jurisdiction.

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Quorum for shareholders meeting is not fewer than 2 members for a company that has more than 1 shareholder.

Quorum for board of directors meeting is fixed to the total number of directors and, if not fixed, it is a majority of directors. Quorum for board meeting is not fewer than 2 directors for a company that has more than 1 director.

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Not applicable for this jurisdiction.

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Yes.

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Not applicable for this jurisdiction.

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A 100-percent foreign-owned private limited company must increase its paid-up capital to RM500,000 for advisory and consultancy businesses and RM1 million for import, export, restaurant, and trading businesses.

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The common methods of profit repatriation in Malaysia are through dividends, interest, and royalties. Repatriation of profits may be done without restrictions, but withholding tax rates may be applied to dividends, interest, and royalties.

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Shareholders of a private limited company is subject to pre-emptive rights.

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The Companies Commission of Malaysia first approves the company name. A company name is unlikely to be approved if it is:

• Undesirable or unacceptable
• Identical to an existing company, corporation or business
• Identical to a name that is being reserved under the Companies Act 2016 or
• A name that the Companies Commission of Malaysia is ordered not to accept for registration by the Minister of Malaysia.

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Not applicable for this jurisdiction.

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Any amendment is passed by a majority of not less than 3/4 of the shareholders at a general meeting.

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Relevant licenses are required to conduct business depending on the nature of business.

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Not applicable for this jurisdiction.

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