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INCORPORATION OF A COMPANY
Methods of Conducting Business
Procedure for Incorporation
Registration for Foreign Companies
INCORPORATION OF A COMPANY
Methods of Conducting Business
In Malaysia, a business may be carried on in any one of the following
forms:
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By an individual operating as a sole proprietorship
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By two or more (but not more than 20) persons in partnership
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By a locally incorporated company or by a foreign company
registered under the provisions of the Companies Act 1965.
All sole proprietorships and partnerships must be registered with the
Registrar of Businesses under the Registration of Businesses Ordinance
1956.
2.1.1 Company Structure
The Companies Act 1965 is the principal legislation governing
companies in Malaysia. Under the Act , every company intending to carry
on business in Malaysia must register with the Companies Commission of
Malaysia (CCM) before conducting any business activity. The Act provides for
three types of companies:
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A company limited by shares, where the personal liability of its
members is limited to the par value of their shares, the number of
shares taken or agreed to be taken by them.
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A company limited by guarantee, where the members guarantee to
meet liability up to a nominated amount if the company is wound up
to an amount nominated in the memorandum or articles of association
in case the company is wound up.
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An unlimited company, where there is no limit to the members’
liability.
2.1.2 Company Limited by Shares
The most common company structure in Malaysia is a company limited by
shares. Such limited companies may be either private (Sendirian Berhad
or Sdn. Bhd.) or public (Berhad or Bhd.) companies.
Private Companies
A company having a share capital may be incorporated as a private
company if its Memorandum or Articles of Association:
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restricts the right to transfer its shares;
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limits the number of its members to 50, excluding employees and
some former employees;
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prohibits any invitation to the public to subscribe for its shares
and debentures; and
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prohibits any invitation to the public to deposit money with the
company.
Public Companies
A company can be formed as a public company or, alternatively, a
company which is incorporated as a private company can be converted to a
public company subject to Section 26 of the Companies Act 1965.
A public company cannot offer shares to the public unless a
prospectus which complies with the requirements of the Companies Act has
been registered with the ROC. The proposal for the issue or offer of
shares to the public should first be submitted to the Securities
Commission for approval before a prospectus can be accepted for
registration.
A public company can apply to the Kuala Lumpur Stock Exchange (KLSE)
for permission to have its shares quoted on the Exchange, subject to
compliance with the requirements laid down by the KLSE. Any subsequent
issue of securities (e.g. issue by way of a rights or bonus, or issue
arising from an acquisition, etc.) requires the approval of the
Securities Commission.
Procedure for Incorporation
The first step for incorporation of a company is to make an application
to the ROC in the prescribed Form 13A with a payment of RM30.00 to
determine if the proposed name of the intended company is available and,
if so, the application could be approved and the proposed name would be
reserved for the applicant for a period of three months. A proposed name
which is of a kind which the Minister of Domestic Trade and Consumer
Affairs has directed the Registrar not to accept for registration vide
Gazette Notification No. 716 dated 30 January 1997 will not be approved,
without his consent.
The following documents should be lodged with the ROC within three
months from the date of approval by the ROC for the use of the proposed
name:
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Memorandum and Articles of Association
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Statutory declaration of compliance (Form 6)
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Statutory declaration by a person before appointment as a director,
or by a promoter before incorporation of a company (Form 48A)
The Memorandum of Association is the document stating the name, the
objects, the amount of authorised capital (if any) with which the company
proposes to be registered and the division thereof into shares of a fixed
amount.
The Articles of Association describes the regulations governing the
internal management of the affairs of the company and the conduct of its
business.
On the issue of the certificate of incorporation, the subscribers to
the Memorandum together with such other persons as may from time to time
become members of the company shall be a body corporate, capable of
exercising the functions of an incorporated company and of suing and being
sued. It has a perpetual succession under common seal with power to hold
land but with such liability on the part of the members to contribute to
the assets of the company in the event of it being wound up, as is
provided by the Act.
2.2.1 Requirements of a Locally Incorporated Company
A company must have a registered office in Malaysia at which all
books and documents required under the provisions of the Act should be
kept.
The Secretary of a company must be a natural person of full age who
has his principal or only place of residence in Malaysia. He must be a
member of a prescribed body or is licensed by the Registrar of
Companies, Malaysia.
The company shall have at least two directors who
each has his principal or only place of residence within Malaysia.
The company must appoint an approved company auditor to be the company
auditor in Malaysia.
Registration for Foreign Companies
A foreign company desiring to establish a place of business or carry on
business in Malaysia must apply for registration to the ROC. The
application which can be filed at the Registry of Companies in Kuala
Lumpur or through any of its branch offices in Malaysia, must be made in
the prescribed Form 13A.
When the approval has been obtained, such a branch must lodge with the
ROC the following documents:
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a certified copy of its certificate of incorporation (or a document
of similar effect)
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a certified copy of its charter statute on memorandum and articles
or other instrument constituting or defining its constitution
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a list of its directors and certain statutory particulars regarding
them (Form 77)
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where there are local directors, a memorandum stating the powers of
those directors
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a memorandum of appointment or power of attorney authorising one or
more persons resident in Malaysia to accept on behalf of the company,
service of process and any notices required to be served on the
company (Form 80)
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a statutory declaration in the prescribed form made by the agent of
the company.
The appointed agent is answerable for the performance of all acts
required to be done by the company under the Companies Act 1965. Any
change in agents must be reported to the ROC.
Every foreign company shall, within one month after it establishes a
place of business or commences to carry on business within Malaysia, lodge
with the ROC for registration, notice of the situation of its registered
office in Malaysia in the prescribed form.
A foreign incorporated company must file each year, within one month of
its Annual General Meeting, a copy of the Annual Return and, within two
months of its Annual General Meeting, a copy of the balance sheet of the
head office, a duly audited statement of assets used in and liabilities
arising out of its operations in Malaysia, and a duly audited profit and
loss account.
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