Malaysia Private Limited Company Guide
Most companies in Malaysia are registered as Private Limited companies. Such Private Limited companies usually required to have the suffix ”Private Limited”, “Pte Ltd” or “Ltd” as part of the company name. In some parts of the world, Private Limited companies are commonly referred to as corporations, Incorporated (“Inc.”), limited liability companies, unlimited companies as part of their name, though the latter cannot be used in Malaysia . The registration of companies in Malaysia is done through the Accounting and Corporate Regulatory Authority (ACRA).
A Private Limited company in Malaysia is considered an independent legal entity separate from its owners — it can sue and be sued in its own name, and the company’s directors and shareholders (minimum 1 shareholder and maximum 50 shareholders) are not liable for the company’s debts. The limitation does not mean that the liability of the company to its creditors is limited— instead, it is the company members/shareholders’ liability to the company that is limited. As long as the shares are paid up, then there are no other obligations of the members/shareholders to the company’s creditors, and their personal assets are protected from these creditors.
Types of Companies in Malaysia
Private Limited Company
It is a locally incorporated company where the maximum number of shareholders is limited to 50. A private company is one whose memorandum or articles of association restricts the right of its members to transfer their shares in the company.
The restriction on the right to transfer shares in a private company usually takes the form of a requirement that the transfer be first approved by the company’s board of directors or a requirement that the shares be first offered to be transferred to existing shareholders.
Exempt Private Company (EPC)
The company is an Exempt Private Company if it does not have more than 20 shareholders, and none of the shareholders is a corporation. Such companies are exempted from some of the provisions of the Companies Act . For example, an exempt private company with an annual revenue of less than $5 million is exempted from the audit requirements under the Act and does not need to file its financial statements with the ACRA. It is also exempted from prohibitions against loans to its directors or to companies related to its directors.
Public Company Limited by Shares
A Public Company Limited by Shares is a locally incorporated company in which the number of shareholders can be more than 50. Public companies may or may not be listed on a stock exchange. Where they are so listed, they are usually referred to as “listed companies”. The company may raise capital by offering shares and debentures to the public. A public company must register a prospectus with Monetary Authority of Malaysia before making any public offering of shares and debentures.
Public Company Limited by Guarantee
A Public Company Limited by Guarantee is one which carries out non-profit activities with national or public interest, such as promotion of art or charity. The Minister may approve the registration of the company without the addition of the word “Limited” or “Berhad” to its name.
Incorporation of Malaysia Companies
A incorporation of a Malaysia Company comes into existence upon registration under the Companies Act. It can have a minimum of 1 member. The members can be individuals or a corporations. Members of a company are most commonly referred to as ‘shareholders’.
The Private Limited company is governed by the Malaysia Companies Act, and has to also comply with the laws, rules and regulations under ACRA and the Inland Revenue Authority of Malaysia, among others.
Share capital of Malaysia Private Limited Company
When a Malaysia Private Limited Company is formed, it must issue one or more subscriber shares to its initial members. It may increase capitalisation by issue of further shares. The issued share capital of the company is the total number of shares existing in the company multiplied by the nominal value of each share.
Shares in a private company are usually transferred by private agreement between the seller and the buyer, as shares in a private company may not by law be offered to the general public.
Registration and Compliance for Private Limited Companies
Upon registration, companies must comply with the regulatory provisions of the Companies Act and any Rules made under the Act.
All companies must have at least one director who is ordinarily resident in Malaysia. Only individuals who have attained the age of 18 years and who are otherwise of full legal capacity may be appointed as a company’s director.
The following persons are disqualified from acting as company directors:
- Undischarged bankrupts (unless they get permission from the High Court or the Official Assignee);
- Persons who are under disqualification orders made by the Court;
- Persons convicted of specified offences or offences involving fraud or dishonesty punishable with imprisonment for three months or more. (The disqualification is for five years from the date of conviction of the relevant offence, or, where the person has been sent to prison, from the date of release).
Appointment of a Competent Company Secretary
Companies must also appoint a competent Company Secretary whose main responsibility is to ensure regulatory compliance.
Registered Office Address for Private Limited Company
Every Private Limited company must have a registered office, which does not need to be its usual business address. It is sometimes the company’s lawyers or accountants, for example. All official letters and documentation from the government departments (including ACRA & Inland Revenue) will be sent to this address, and it must be shown on all official company documentation. If a company changes its registered office address after incorporation, the new address must be notified to ACRA.
Approvals, Licences and Permits
Apart from registration with ACRA, certain businesses activities are subject to further regulatory control by other government agencies in Malaysia. Special approvals or licences may have to be obtained before the relevant business activity can commence. Some of the businesses which require special approval or licence include finance companies, investment funds, insurance companies, travel agents, manpower agencies and private schools.
Appointment of Auditors
All Malaysia incorporated companies must appoint an auditor within 3 months from the date of incorporation, unless the company is exempted from audit requirements. To be exempted from audit requirements, a company must satisfy all of the following criteria:
- The company does not have any corporate shareholders;
- The total number of individual shareholders must be less than 20;
- The annual turnover of the company must be less than S$5 million.
Malaysia Exempt Private Company (EPC)
A Private Limited company whose shares are not held by any corporate body and has no more than 20 shareholders who are all natural persons automatically qualifies as an Exempt Private Company (EPC).
|Exempt private company||Non-exempt private company|
|Number of Shareholders||Less than 20 members||More that 20 but less than 50 members|
|Type of Shareholders||Individuals||Individuals and/or corporations|
|Audit requirement||Not necessary unless its revenue in that financial year exceeds the prescribed
|Yes, unless it is dormant|
|Company’s loan to director||Possible||Restricted|
Annual Filing Requirements for Malaysia Companies with ACRA
|Filing Requirements||Definition||Solvent –
able to meet its debts when they fall due
not able to meet its debts when they fall due
|Small EPC||EPC with annual revenue up to S$5 million||
|Normal EPC||EPC with annual revenue more than S$5 million||
|Dormant EPC||EPC that do not have any accounting transactions* (no business activities)||
|A company limited by shares with at most 50 shareholders||Active|
- must audit accounts
- must file accounts
- need not audit accounts
- must file accounts
- A company limited by shares where the number of shareholders can be more
- A company limited by guarantee
- Listed company on SGX
- must audit accounts
- must file accounts
- need not audit accounts
- must file accounts
Advantage of Incorporating a Malaysia Private Limited Company
Among the advantages of a Private Limited company is that, by incorporating a Private Limited company, the entrepreneur conveys a professional commitment therefore increasing the company’s chances of obtaining commercial loans from banks/ financial institutions. A Private Limited company is also a vehicle that enjoys special tax exemptions and incentives— for instance, the first S$100, 000 of taxable income is exempt from taxes and effective tax rates can be as low as 5.6% on taxable income of up to S$300, 000.
Malaysia Corporate Tax Rates for newly setup Private Limited Companies
No more than 20 individual shareholders
Where there are corporate shareholders, at least 1 shareholder should be an individual with minimum 10% shareholding
Advantages of INCORPORATING a Malaysia Private Limited company
- Shareholders not personally liable for debts and losses of company.
- Profits taxed at corporate tax rates. Dividends are tax free in the hands of shareholders
- Newly incorporated companies are entitled to tax incentives and exemptions.
- The company, as a separate legal entity, does not cease to exist if one or more of its shareholders die.
- Ownership of a company can be transferred and additional shareholders can be appointed.
- Shareholders’ personal assets are protected since they are not personally liable for debts and losses of company.
- Ownership is transferable and additional shareholders can be appointed thus enabling additional capital injection for expansion purposes.
- Conveys a professional commitment and vision hence maximises the potential of loans from banks and other financial institutions and also establishes a credible image among the business community.
- Company is perpetual and business operations are undisturbed by changes in shareholders or the holding pattern.
Disadvantage of Incorporating a Malaysia Private Limited Company
Among the disadvantages of incorporating a Private Limited company is that Directors must disclose to the company information about their interests in the company’s shares, contracts and debentures. A Private Limited company’s memorandum and/or articles of association is also supposed to restrict the right of its members to transfer their shares in the company by stipulating that any transfer has to be first approved by the company’s board of directors or that the shares be first offered to be transferred to existing shareholders.
- It is governed by rules and regulations stipulated in the Malaysia Companies Act. Violation of rules and regulation will result in penalties.
- Annual Returns and Directors’ Reports are required and must be filed, and thus the company must have at least one director and one company secretary.
- Greater disclosure and administration requirements, therefore operation costs are generally higher.
- Directors must disclose to the company information about their interests in the company’s shares, contracts and debentures.
- Companies can be more expensive to set up.
- Companies must maintain on-going compliance with ACRA/IRAS
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