1StopConsultants
Your One Stop Solutions business partner in the SE Asia region!
   Home      MY-Types of Business entities
Types of Business entities
 
General
The most common types of business organization include sole proprietorships, partnerships and companies. Foreign companies may also operate through a branch in Malaysia.

Sole proprietorships and partnerships
Sole proprietorship is a type of business organization owned by one person only and a partnership may be formed by two or more persons, up to 20 persons.
The sole proprietor and partners do not have a separate legal identity from the sole proprietors and partnerships. A sole proprietorship or partnership must be registered with the Companies Commission of Malaysia (CCM).

Companies
The most common company structure in Malaysia is a company limited by shares. Such limited companies may be either private or public companies.
 A private company is one which restricts the transfer of its shares and has no more than 50 shareholders. A private company may not offer its shares to the public.
There are two means of setting up a subsidiary in Malaysia: by incorporating a new company or buying a shelf company. Buying a shelf company may take less time than forming a new company, although if all relevant documents are duly submitted, incorporating a new company may take less than one month.
The secretary of a company must be a natural person of full age who has their principal or only place of residence in Malaysia. The person must be a member of a prescribed body or be licensed by the CCM. 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 or her principal or only place of residence within Malaysia.

Branch
A foreign company may set up a branch in Malaysia by registering itself as a “foreign company” with the CCM under the Companies Act 1965. The foreign company must appoint one or more “agents” in Malaysia, who must be residents of Malaysia to accept, on the foreign company’s behalf, service of process and any notices required to be served on the foreign company.

Exchange controls
Malaysia has currency and capital controls governed by the Exchange Control Act 1953. Since 1 April 2005, the foreign exchange administration rules have been liberalized and simplified.
There is no restriction on the amount payable by residents to non-residents for the import of goods and services, or by non-residents to residents for the export of goods and services. However, such payment must be made in foreign currency with the exception of the currency of the state of Israel (Restricted Currency). There is no restriction for residents to enter into a forward foreign exchange contract with licensed onshore commercial and Islamic banks (licensed onshore banks) or approved investment banks, to buy foreign currency against the Malaysian ringgit or another foreign currency to make payment to a non-resident in respect of the imported goods.
Resident travelers are allowed to import or export Malaysian ringgit notes up to RM1,000, and to export foreign currency notes, including traveler’s cheques, up to an equivalent of uS$10,000. There is no limit on the value of foreign currency notes or traveler’s cheques that a resident may bring into Malaysia.
Non-resident travelers are allowed to bring in or take out of Malaysia ringgit notes up to RM1,000. A non-resident traveler may bring in any amount of foreign currency notes, including traveler’s cheques, into Malaysia. A declaration is required where the amount of foreign currency notes and traveler’s cheques exceeded uS$10,000. A non-resident traveler may take out foreign currency notes and traveler’s cheques up to the amount brought into the country or uS$10,000, whichever is higher.

There is no restriction on non-residents for the repatriation of capital, profits, dividends, interest, fees or rental by foreign direct investors or portfolio investors. Malaysian ringgit assets purchased by residents from non-residents may be settled in ringgit or foreign currency, other than a Restricted Currency. However, all remittances abroad must be made in a foreign currency other than in a Restricted Currency.
Resident companies and resident individuals with no domestic borrowing are free to invest abroad.
Resident companies with domestic borrowing can equally invest with no restriction on the amount if the investment is funded with their own foreign currency funds retained onshore or offshore, or funded from proceeds of listing through initial public offering on Bursa Malaysia Securities Berhad or any other foreign stock exchanges. However, they may only invest up to the equivalent of RM100million in aggregate on a corporate group basis if funded by foreign currency borrowing, or up to the equivalent of RM50million in aggregate on a corporate group basis per calendar year if funded from conversion of ringgit.
 Similarly, resident individuals with domestic borrowing can also invest with no restriction on the amount if the investment is funded with their own foreign currency funds retained onshore or offshore. However, they may only invest up to the equivalent of RM10million in aggregate if funded by foreign currency borrowing, or up to the equivalent of RM1million in aggregate per calendar year if funded from conversion of ringgit.
Resident companies converting ringgit for overseas investments must have minimum shareholders’ funds of RM100,000 and must be in operation for at least one year. Individuals who are residents may convert ringgit into foreign currency up to the amount required for investment in foreign currency securities under an employee share option or purchase scheme offered by their employer’s overseas parent or related companies.
Residents may also obtain trade financing facilities in foreign currency from licensed onshore banks nd licensed investment banks. A resident company is free to obtain trade financing facilities of any amount in foreign currency up to the equivalent of RM100 million in aggregate on a corporate basis from non-residents as well as through issuance of onshore foreign currency denominated bonds onshore and offshore. A resident individual may also obtain credit facilities in foreign currency up to an equivalent of RM10 million in aggregate from licensed onshore banks, licensed International Islamic Banks and non-residents. Any amount exceeding the above permitted limits would require prior permission of the Controller. There is no restriction for the resident to use the foreign currency credit facilities to finance its own activities in and outside Malaysia. There is also no restriction to repay or prepay permitted credit facilities.

With effect from 1 October 2007, the Central Bank of Malaysia has abolished the registration requirements on both the prepayment exceeding RM50 million equivalent on permitted foreign currency borrowing from a non-resident lender, and the repayment of foreign currency borrowing with no fixed tenure or repayment schedule which is deemed to be a prepayment.
Licensed onshore banks and approved investment banks may extend credit facilities in foreign currency to non-residents for any purpose. However, credit facilities extended for the purchase or construction of immovable property in Malaysia are subject to the same requirements as for ringgit credit facilities. There is no restriction on residents to extend any amount of ringgit credit facilities to non-resident controlled companies.