setting up a business in malaysia

SETTING UP A BUSINESS IN MALAYSIA

By Kenneth Foo Poh KheanFCIS, LL. B (Hons.), CLP

COPYRIGHT BY KENNETH FOO

Is This Your Dream?


Or Be an Entrepreneur!•Have a plan, vision, concept •Conduct a survey & research on your plan or vision

•Learn more from others•Put your plan into motion•Set up a vehicle


Types of Business Vehicles

•Sole Proprietor•Partnership•Limited Liability Partnership

•Limited Company


Sole Proprietor• A business wholly owned by an individual using his/her personal name or trade name.

• Example: Zainal Abidin Ali or New Town Kopitiam or Chong Big Pau

• Eligibility requirements :i. Must be a Malaysian citizen or

permanent resident; andii. Must be aged 18 and above.


Procedure to Register Sole Proprietor1) Filing of an application for approval of the

proposed trade name for the business.a) If the proposed business is registered under the

owner’s name, there is no need to obtain prior approval from SSM.

2) Filing of Borang A (Registration of a New Business).

(a) Form A shall contain the following information:2)The name of the business;3)The nature of the business;4)The date of the commencement of the business;5)The address of the place of business;6)Branch(es) of the business;


Procedure to Register Sole Proprietor• The following documents must be attached with Form A for submission:• Letter of approval of business name from SSM (if the trade name is used);

• Photocopy of owner’s IC;• Permit, license, approval or supporting letter from any other agency (if any)

• Fee payable – RM30 for personal name, RM60 for trade name, RM5 for each branch


Procedure to Register Sole Proprietor


After Registration – Changes & Renewal

• After registration, changes will be allowed by submitting:• Borang B1 - Change of Business Address• Borang B2 - Change in Type of Business• Borang B3 - Changes of Particulars on Branches• Borang B4 - Changes of Information of Owner

• ROBA requires the registration of changes in the business particulars to be lodged within 30 days from the date of such changes.

• Fee payable for above – RM20.00• Renewal - the owner may register the business for up to five (5) years. Application for renewal of Borang D must be made within 30 days before its expiry by filing Borang A1 with SSM or by renewing at the Pejabat Pos


Partnership• A partnership (perkongsian) is a business owned by two (2) or more persons but not exceeding 20.

• Business includes every form of trade, commerce, craftsmanship, calling, profession or other activity carried on for the purpose of gain, but does not include any office or employment or any charitable undertaking or any occupation specified in the Schedule of the Registration of Businesses Act 1956 (ROBA).


Procedure to Register Partnership


TERMINATION OF BUSINESS• Business may be terminated for the following reasons:• Cessation (closure) of the business;• Owner becomes an undischarged bankrupt;• Death of the owner;• Carrying out unlawful activities or activities which are

prejudicial to national security, public order or morality; or• Pursuant to a Court Order.

• Procedure – file Borang C (Notification of Termination of Registered Business) with SSM.

• Borang C shall contain:• (a) The date of termination; and• (b) Reason(s) for terminating the business.


TERMINATION OF BUSINESS• The completed Borang C must be signed by the business owner and the following documents must be attached:• (a) Certificate of Registration of Business (Borang D);

• (b) Copy of the Court Order if the termination is by an Order of the Court;

• (c) Copy of the Death Certificate (if applicable) [must be submitted within 4 months of death of owner]; or

• (d) Enclose relevant documents if the owner has become a bankrupt.

• Form C must be filed within 30 days from the date of termination of the business.


Limited Company• The most common type of company incorporated for purposes of carrying on business is a company limited by shares. A company limited by shares may be incorporated as a:• Private Limited Company – identified through the words ‘Sendirian Berhad’ or abbreviation ‘Sdn. Bhd’ as part of the company’s name.

• Public Limited Company – identified through the words ‘Berhad’ or abbreviation ‘Bhd’ as part of the company’s name.


Limited Company - Process• The requirements to form a sdn bhd or berhad company are:i. A minimum of two (2) subscribers to the

shares of the company (section 14 of the CA);ii. A minimum of two (2) directors (section of the

122 CA); andiii. A company secretary

• Both the director and company secretary shall have their principal or only place of residence within Malaysia (sections 122 and 139 of the CA respectively).


Limited Company - Process


Limited Company - Process• Form 48A (Statutory Declaration by a Director or Promoter before Appointment)

• The director or promoter declares under oath that:• he/she is not a bankrupt; and• he/she has not been convicted and imprisoned.

• Memorandum & Articles of Association• It defines the business of the company, share capital and

the subscribers. The Articles define the relationship between the members and directors and constitute the internal rules of the company.

• The first directors and secretaries must be named inside.• The subscribers to the company’s shares shall sign the

Memorandum and Articles of Association in front of a witness.


Limited Company - Benefits• Registered paid up capital can be as low as RM2-00 being the shares taken by the initial promoters of the company

• Private limited or public limited companies have all the powers to hold properties, to enter into contracts and to do everything within the objects stated in its Memorandum of Association

• Offers limited liability to its directors and shareholders as outsiders can only sue the company and not the individuals. Example – company sells an electrical item to a consumer. Item is defective but causes damage to the consumer. Consumer can only sue the company but not the directors or shareholders.


Limited Company - Disadvantages• Costly – incorporation of companies starts from RM1,800-00 compared to RM70 for sole proprietorship & partnership

• Legal compliance – limited liability companies are subject to the Companies Act 1965 and are required to hold an Annual General Meeting, to submit the audited accounts to SSM, to submit prescribed forms where there are changes (such as directors or their particulars) and to appoint a company secretary and auditor.

• It is not easy to close down a limited company as the process is called a winding up and costly


Winding Up a Company• There are two (2) modes of winding up under section 211 of the CA:

• Voluntary winding up; or• Winding up by the Court (also referred to as compulsory winding up)

• Voluntary winding up – the company must be solvent i.e. its liabilities is less than the assets

• Winding up by the Court – the Court will order the winding up when the company is unable to pay its debts, when the directors have acted in their own interests other than the shareholders, where the company fails to commence business within 1 year, etc.


Limited Liability Partnership (LLP)

• Governed by the Limited Liability Partnerships Act 2012 (Akta Perkongsian Liabiliti Terhad 2012)

• A hybrid between company and conventional partnership offering fundamentally: • the privilege of limited liability accorded to the partners

of the LLP; and• the flexibility of internal management.

• Suitable for small businesses, professionals, joint ventures & venture capitals

• The LLP is a body corporate and shall have legal personality separate from its partners, perpetual succession and unlimited capacity.


Limited Liability Partnership (LLP)• LLP may be formed:

• by a minimum of two persons (wholly or partly individuals or bodies corporate);

• for any lawful business with a view of profit; and• in accordance with the terms of the LLP agreement.

• LLP formed for professional practice must:• consist of natural person of the same profession; and

• have in force professional indemnity insurance as approved by the Registrar.


Limited Liability Partnership (LLP)• Information required for registration:

• proposed name of LLP• nature of business• address of registered office• name and details of partners• name and details of compliance officer• approval letter (in cases of professional practice).

• Flexible internal arrangement through:• LLP agreement; or• In the absence of agreement, default provisions covering the mutual rights and duties of LLP and its partners.


Liabilities of Partners• Any individual or body corporate can be a partner.• “Partner” means any person admitted as a partner in accordance to the LLP agreement and includes salaried partner.

• Any obligation arising from contract or tort will be the liability of the LLP and not the partners.

• A partner however will be jointly and severally liable for his own wrongful act or omission in the course of the business of the LLP.

• Liabilities of LLP will be borne out of the property of the LLP.


Cessation of Partner• Automatic cessation:

• Upon death/dissolution of a partner; or• in the case of a professional practice, the partner has been disqualified from carrying out the professional practice.

• Voluntary cessation:• a partner may cease to be a partner in accordance with the LLP agreement; or

• in the absence of such an agreement, by giving a 30 days notice to the other partners.

• Bankruptcy of a partner will not cause a partner to cease being a partner.


Dissolution of LLP• Court Ordered Winding Up

• Divisions 2 and 4 of Part X of Companies Act 1965 and the Companies Winding Up Rules 1972 will be applicable.

• Appropriate modifications • Voluntary Winding Up

• Application in writing to the Registrar when all assets and liabilities have been discharged.

• Application must be preceded by notice to all partners and advertisement of the intention to wind up.

• Registrar will order dissolution only if there is no objection received.


Dissolution of LLP•Striking off - the Registrar will strike LLP off the register on the following grounds:• No longer carrying on business;• Contravention of the Act;• Prejudicial to national interests; or• No liquidator acting in cases of court ordered winding up;

• Affairs have been fully wound up but no sufficient assets to obtain court order.


What are you waiting for?•Have a business plan!•Consult a company secretary, accountant or lawyer for the best possible business vehicle for you.

•Go ahead! The world is out there! A journey of a thousand li begins with one step!


THANK YOU!


setting up a business in malaysia

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