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| Home > Services > Company Formation |
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Setting-up a new business is usually perceived as a battlefield by any entrepreneur or foreign company looking into investing in a market, where the general public does not necessarily know the rules. It is even more sensitive when the market we would like to invest in actually consists in a new culture, new rules and a way of communicating sometimes different. But whatever is the country we want to invest in, there is a part of risk to be managed and some guarantees that must be fulfilled.
As a South-East Asian country, Malaysia is sometimes perceived by foreigners as a closed market where they may face a certain culture shock. It is actually a country that largely welcomes foreign investments and treats foreign investments on a case-to-case basis with a lot of consideration. There are two main ways when planning to penetrate and set-up a business in Malaysia: either an offshore company which is proper for international business, or private limited which will straight away start commercial activities in Malaysia. A third way would be, for a foreign company, to open a Branch office, which is somehow an intermediate solution that we shall elaborate in a next article.
A representative or a Regional office is a cost center that entitles any foreign company to prospect the Malaysian or the regional market. Under such structure, it will not be allowed to conduct business and invoice for product or service in Malaysia. On the other hand, it allows a foreign company to have a legal entity in Malaysia and obtain a work permit for its representative without having a paid-up capital and pay corporate tax in Malaysia. Each application for the set-up has to be approved by the MIDA, a division from the Ministry of International Trade &Industry, which also gives the approval for the work permit of the representative and its dependants. The approval is granted for two years and can be renewed for up to eight years, as the logic, from the Malaysian Authorities point of view, is to maximize the chances that the office will be upgraded to a private limited. Each application, whether the first one or the renewal, must justify the objectives to be in Malaysia and show that there is potential fur further investment. As for most of the communications with the Malaysian Administration, you may do it yourself, however the process can be time-consuming and there are good consultants familiar with how to present your case and ensure a speedy approval from the Authorities – It generally takes between 3 to 6 weeks to get the status and work permit approved.
The set-up of a private limited (Sdn. Bhd.) Is quite simple. You just fill up an application form with three proposed names for your company. The validation with the Company Commission of Malaysia (C.C.M.) will take about a 1-2 days. You will then have to have at least two directors with each having a share of at least 1 Ringgit and your company is registered. This first step is quite simple however and depending on your intended activities, your company set up will need to respect certain criteria. The Foreign Investment Committee guidelines might impose restrictions on shareholding and the directorship of your company might need to involve local Bumiputera partners if your company’s capital investment is less than RM500,000. But more than that amount, local director is no more required.
Company with Authorized and Paid-up capital will have to be in accordance especially if you need to get work permits, the trend today ranges RM500,000 for service sector companies and RM1,000,000 minimum paid–up capital for trading companies. Companies with foreign ownership that are engaged in distributive trade are required to obtain a wholesale and retail trade (WRT) license from the Malaysian Ministry of Domestic Trade and Consumer Affairs (MDTCA) before they can apply for an Employment Pass or VPTE. "Distributive trade" refers to wholesale and retail trade of goods and services. Other companies with foreign ownership that are not engaged in distributive trade do not require a WRT license but must obtain an approval or support letter from MDTCA before they can apply for an Employment Pass or VPTE. This is where consultants come into the picture, helping you to choose the best set-up depending on your intended objectives.
For further information about procedure and fees, kindly contact our experts.
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