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OF COMPANY MALAYSIA

INCORPORATION OF COMPANY IN MALAYSIA

rporation of a company in Malaysia is governed by the Malaysian Companies Act, 1965. As per the act any company doing business or wishing to do business in Malaysia must register with
ssion of Malaysia (CCM) under the Companies Act 1965.

CORPORATION

any, a person must apply to the Company Commission of Malaysia (CCM) using Form 13A together with a payment of RM30 in order to determine if the proposed name of the intended
f it is, the application will be approved and the proposed name reserved for the applicant for three months.

period of three months will be granted if the name is available, during which time the company must submit copies of documents like Memorandum and Articles of Association, Statutory
nce and Statutory Declaration, plus relevant fees.

ge the following documents with the CCM within the three months to secure the use of the proposed name:

um and Articles of Association

n of Compliance (Form 6)

declaration by a person before appointment as a director, or by a promoter before incorporation of a company (Form 48A).

ssociation shall describe the

s name, the objects,

nt of its authorized capital (if any) proposed for registration and

n into shares of a fixed amount.

ion describes the regulations governing the internal management of the affairs of the company and the conduct of its business.

ation will be bestowed by the Registrar of Companies once registration procedures are completed and approved.

Incorporation is issued, 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
ons 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
in the event of it being wound up, as provided for in the Companies Act.

A LOCALLY INCORPORATED COMPANY

ain a registered office in Malaysia where all books and documents required under the provisions of the Act are kept. The name of the company shall appear in legible romanized letters,
any number, on its seal and documents.

with its own shares or hold shares in its holding company. Each equity share of a public company carries only one vote at a poll at any general meeting of the company. A private company
for varying voting rights for its shareholders.

pany 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
ny must also appoint an approved company auditor to be the company auditor in Malaysia.

ny shall have at least two directors who each has his principal or only place of residence within Malaysia. Directors of public companies or subsidiaries of public companies normally must not
. It is not incumbent that a company director should also be a shareholder.

OREIGN COMPANIES

ring to conduct business or establish a place for one in Malaysia must register with the CCM. The same registration procedure applies whereby an application must be submitted on Form
a Lumpur or any of its branch offices in Malaysia, with a payment of RM30. If the intended name of the foreign company is available, the application will be approved and the name reserved

nts must lodge the following documents with the CCM:

copy of its Certificate of Incorporation (or a document of similar effect) from the country of origin

copy of its Charter, Statute or Memorandum and Articles of Association or other instrument constituting or defining its constitution

s directors and certain statutory particulars regarding them (Form 79)

re are local directors, a memorandum stating the powers of those directors

ndum of appointment or power of attorney authorizing one or more persons resident in Malaysia to accept on behalf of the company, service of process and any notices required to be
the company

y declaration in the prescribed form made by the agent of the company (Form 80)

ndertakes all acts required to be done by the company under the Companies Act, 1965. Any change in agents must be reported to the CCM.

shall, within a month of establishing a place of business or commencing business within Malaysia, lodge with the CCM for Registration notice of the situation of its registered office in
cribed form.

company must file a copy of the annual return each year within one month of its annual general meeting. Within two months of its annual general meeting, the company must file a copy of
e 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.

guage other than Bahasa Malaysia or English must have an accompanying certified translation. The Registrar of Companies will bestow upon the applying company the status of a foreign
Malaysia once all procedures are completed and approved.

OMPANIES COMMISSION OF MALAYSIA (CCM) RM US$


30 8
mpany, fees range according to nominal share capital, e.g.:

ding RM100,000 (US$26,316) 1,000 263


M500,000 (US$131,579) but does not exceed RM1 million (US$263,158) 5,000 1,316

M5 million (US$1.3 million) but does not exceed RM10 million (US$2.6 million) 10,000 2,632

M50 million (US$13.2 million) but does not exceed RM100 million (US$26.3 million) 50,000 13,158

70,000 18,421
RM100 million (US$26.3 million)

Company Secretarial Services


RM US$
Bhd. (private limited company) 2,000 526
(limited company) 3,500 921

Professional Fees Retainer Fees


RM US$

50 13 100 26

100 26 150 39
ve

150 39 300 79

200 53 750 197


d

300 79 2000 526

ory fee (minimum, per hour) 300 79


ociation of the Institute of Chartered Secretaries & Administrators

RM / LAWYERS SERVICES PROVIDED IN MALAYSIA :

custody, Malaysia Corporate Lawyers, Agreement, provident fund, Registered marriage, Court marriage Lawyers, Special/ Foreign marriage, Incorporation of company, Rent, eviction, tenancy, Lease Lawyers, Malaysia Labour laws, Appeals, S
l, medical, negligence, Insurance claims/ accidents Lawyer, Malaysia Citizenship/ immigration Lawyers, Copyright Laws, Consumer, district Lawyer, State, national, Dowry, Wills & Probate, Trust & Estates Lawyers, Intellectual Property Law
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Title search, mutation relationship, Conveyance, Transfer of Property Law, Malaysia Property lawyer, deeds, drafts, power of attorney, Recovery, Taxation Laws in Malaysia

LAWYER BY LOCATION

________________________________________________________________________________________
Company Law In Malaysia

BASIC INFORMATION ABOUT COMPANY LAW IN MALAYSIA

A company must have a minimum of two directors, being natural persons of full age and having their
principal or only place of residence in Malaysia and not under bankruptcy .Directors need not be
shareholders of the company. A director has onerous duties under the Companies Act as in common law.
The duties of directors stipulated in the Companies Act are not exhaustive and generally directors are
imposed with statutory duties, duty of care and fiduciary duties. In addition, directors are also governed by
a Code of Ethics.
A register of directors is kept at the registered office of the company and is available for public inspection.
(1) Every company shall have at least two directors, who each has his principal or only place of residence
within Malaysia.
(1A) In subsection (1), "director" shall not include an alternate or substitute director.
(2) No person other than a natural person of full age shall be a director of a company.
(3) The first directors of a company shall be named in the memorandum or articles of the company.

(4) Any provision in the memorandum or articles of a company which was in force immediately before the
commencement of this Act and which operated to constitute a corporation as a director of the company
shall be read and construed as if it authorized that corporation to appoint a natural person to be a director
of that company.
(5) On the commencement of this Act any corporation which holds office as a director of a company shall
cease to hold office and the vacancy may be filled as a casual vacancy in accordance with the articles of
the company.
(6) Notwithstanding anything contained in this Act or in the memorandum or articles of a company or in
any agreement with a company, a director of a company shall not resign or vacate his office if, by his
resignation or vacation from office, the number of directors of the company is reduced below the minimum
number required by subsection (1) and any purported resignation or vacation of office in contravention of
this section shall be deemed to be invalid.

Persons connected with a director.


(1) For the purposes of this Division a person shall be deemed to be connected with a director if he is -
(a) a member of that director's family; or
(b) a body corporate which is associated with that director;
(c) a trustee of a trust (other than a trustee for an employee share scheme or pension scheme) under
which that director or a member of his family is a beneficiary; or
(d) a partner of that director or a partner of a person connected with that director.
(2) In paragraph (1) (a), "a member of that directors's family" shall include his spouse, parent, child
(including adopted child and stepchild), brother, sister and the spouse of his child, brother or sister.

(3) For the purposes of paragraph (1) (b), a body corporate is associated with a director if -
(a) the body corporate is accustomed or is under an obligation, whether formal or informal, or its directors
are accustomed, to act in accordance with the directions, instructions or wishes of that director;
(b) that director has a controlling interest in the body corporate; or
(c) that director or persons connected with him, or that director and persons connected with him, are
entitled to exercise, or control the exercise of, not less than fifteen per centum of the votes attached to
voting shares in the body corporate.

Undischarged bankrupts acting as directors.


(1) Every person who being an undischarged bankrupt acts as director of, or directly or indirectly takes
part in or is concerned in the management of, any corporation except with the leave of the Court shall be
guilty of an offence against this Act.
Penalty: Imprisonment for five years or one hundred thousand ringgit or both.
(2) The Court shall not give leave under this section unless notice of intention to apply there for has been
served on the Minister and on the Official Receiver and the Minister and the Official Receiver or either of
them may be represented at the hearing of and may oppose the granting of the application.

About Shelf Companies

Ready Made or Shelf companies are companies which are already incorporated under the Companies
Act, and are available to investors who require a Malaysian company on an urgent basis. These
companies are normally dormant and have the minimum number of Malaysians, as required under the
Companies Act, being named as the subscribers to the Memorandum of Association and first directors in
the Articles of Association of the companies. The cost of the purchase of such companies includes the
payment of minimum capital registration fee and statutory minute book, registers and the common seal of
the company. The name of the shelf company may be changed to another name subject to the approval
of the ROC.

About Banking Procedure


Kindly click here to get your banking Information.

Publication Of Name

(1) The name of the company (whether or not it is carrying on business under a business name) in legible
romanized letters and the company number of the company shall appear on-
(a) its seal; and (b) all business letters, statements of account, invoices, official notices, publications, bills
of exchange, promissory notes, endorsements, cheques, orders, receipts and letters of credit of or
purporting to be issued or signed by or on behalf of, the company, and if default is made in complying with
this subsection the company shall be guilty of an offence against this Act. (1A) Where a company has
changed its name pursuant to section 23, the former name of the company shall also appear beneath its
present name on all documents, business letters, statements of account, invoices, official notices,
publications, bills of exchange, promissory notes, endorsements, cheques, orders, receipts and letters of
credit of, or purporting to be issued or signed by or on behalf of, the company for a period of not less than
twelve months from the date of the change, and if default is made in complying with this subsection the
company shall be guilty of an offence against this Act.
(2) If an officer of a company or any person on its behalf-
(a) uses or authorizes the use of any seal purporting to be a seal of the company whereon its name does
not so appear;
(b) issues or authorizes the issue of any business letter, statement of account, invoice, official notice or
publication of the company wherein its name and former name (if applicable) is not so mentioned; or
(c) signs issues or authorizes to be signed or issued on behalf of the company any bill of exchange,
promissory note, cheque or other negotiable instrument or any endorsement, order, receipt or letter of
credit wherein its name and former name (if applicable) is not so mentioned,he shall be guilty of an
offence against this Act, and where he has signed, issued or authorized to be signed or issued on behalf
of the company any bill of exchange, promissory note or other negotiable instrument or any endorsement
thereon or order wherein that name and former name (if applicable) is not so mentioned, he shall in
addition be liable to the holder of the instrument or order for the amount due thereon unless it is paid by
the company.
Name to be displayed on all offices.
(3) Every company shall paint or affix and keep painted or affixed on the outside of every office or place in
which its business is carried on, in a prominent position in romanized letters easily legible its name, and
also, in the case of the registered office, the words "Pejabat Yang Didaftarkan" and if it fails so to do the
company shall be guilty of an offence against this Act. Penalty: One thousand ringgit. Default penalty.
(4) In this section, "company number" means the number allocated by the Registrar to a company on its
incorporation.
Registered office of company.
(1) A company shall as from the day on which it begin to carry on business or as from the fourteenth day
after the date of its incorporation, whichever is the earlier, have a registered office within Malaysia to
which all communications and notices may be addressed and which shall be open and accessible to the
public for not less than three hours during ordinary business hours on each day, Saturdays, weekly and
public holidays excepted.
(2) If default is made in complying with subsection (1) the company and every officer of the company who
is in default shall be guilty of an offence against this Act. Penalty: One Thousand Ringgit. Default penalty.
Interpretation.
(1) In this Act, unless the contrary intention appears—"accounting records", in relation to a corporation,
includes invoices, receipts, orders for payment of money, bills of exchange, cheques, promissory notes,
vouchers and other documents of prime entry and also includes such working papers and other
documents as are necessary to explain the methods and calculations by which accounts are made up;”
accounts" means profit and loss accounts and balance sheets and includes notes or statements required
by this Act (other than auditors' reports or directors' reports) and attached or intended to be read with
profit and loss accounts or balance sheets;” annual general meeting" in relation to a company means a
meeting of the company required to be held by section 143;
"annual return" means—
(a) in relation to a company having a share capital, the return required to be made by subsection 165(1);
and (b) in relation to a company not having a share capital, the return required to be made by subsection
165(5),
and includes any document accompanying the return;
"appointed date" has the same meaning as is assigned to that expression in the Companies Commission
of Malaysia Act 2001 [Act 614];
"approved company auditor" means a person approved as such by the Minister under section 8 whose
approval has not been revoked;
"approved liquidator" means an approved company auditor who has been approved by the Minister under
section 8 as a liquidator and whose approval has not been revoked;
"articles" means articles of association;
"banking corporation" means a licensed bank, a licensed merchant bank and an Islamic bank;
"books" includes any register or other record of information and any accounts or accounting records,
however compiled, recorded or stored, and also includes any document;
"borrowing corporation" means a corporation that is or will be under a liability (whether or not such liability
is present or future) to repay any money received or to be received by it in response to an invitation to the
public to subscribe for or purchase debentures of the corporation in accordance with Division 4 of Part IV;
"branch register" means—
(a) in relation to a company—
(i) a branch register of members of the company kept in pursuance of section 164; or(ii) a branch register
of holders of debentures kept in pursuance of section 70,
as the case may require; and
(b) in relation to a foreign company, a branch register of members of the company kept in pursuance of
section 342;
"certified", in relation to a copy of a document, means certified in the prescribed manner to be a true copy
of the document and, in relation to a translation of a document, means certified in the prescribed manner
to be a correct translation of the document into the national language or into the English language, as the
case requires;
"charge" includes a mortgage and any agreement to give or execute a charge or mortgage whether upon
demand or otherwise;
"Commission" means the Companies Commission of Malaysia established under the Companies
Commission of Malaysia Act 2001;
"company" means a company incorporated pursuant to this Act or pursuant to any corresponding
previous enactment;
"company having a share capital" includes an unlimited company with a share capital;
"company limited by guarantee" means a company formed on the principle of having the liability of its
members limited by the memorandum to such amount as the members may respectively undertake to
contribute to the assets of the company in the event of its being wound up;
"company limited by shares" means a company formed on the principle of having the liability of its
members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by
them;
"contributory", in relation to a company, means a person liable to contribute to the assets of the company
in the event of its being wound up, and includes the holder of fully paid shares in the company and, prior
to the final determination of the persons who are contributories, includes any person alleged to be a
contributory;
"corporation" means any body corporate formed or incorporated or existing within MalaysiaMalaysia and
includes any foreign company but does not include— or outside
(a) any body corporate that is incorporated within Malaysia and is by notice of the Minister published in
the Gazette declared to be a public authority or an instrumentality or agency of the Government of
Malaysia or of any State or to be a body corporate which is not incorporated for commercial purposes;(b)
any corporation sole;(c) any society registered under any written law relating to co-operative societies;
or(d) any trade union registered under any written law as a trade union;
"corresponding previous written law" means any written law relating to companies which has been at any
time in force in any part of Malaysia and which corresponds with any provision of this Act;
"Court" means the High Court or a judge thereof;
"creditors' voluntary winding up" means a winding up under Division 3 of Part X, other than a members'
voluntary winding up;
"debenture" includes debenture stock, bonds, notes and any other securities of a corporation whether
constituting a charge on the assets of the corporation or not;
"default penalty" means a default penalty within the meaning of section 370;
"director" includes any person occupying the position of director of a corporation by whatever name called
and includes a person in accordance with whose directions or instructions the directors of a corporation
are accustomed to act and an alternate or substitute director;
"Division" means a Division of this Act and a reference to a specified Division is a reference to that
Division of the Part in which the reference occurs;
"document" includes summons, order and other legal process, and notice and register;
"emoluments", in relation to a director or auditor of a company, includes any fees, percentages and other
payments made (including the money value of any allowances or perquisites) or consideration given,
directly or indirectly, to the director or auditor by that company or by a holding company or a subsidiary of
that company, whether made or given to him in his capacity as a director or auditor or otherwise in
connection with the affairs of that company or of the holding company or the subsidiary;
"equity share" means any share which is not a preference share;"exempt private company" means a
private company in the shares of which no beneficial interest is held directly or indirectly by any
corporation and which has not more than twenty members none of whom is a corporation;
"expert" includes engineer, valuer, accountant and any other person whose profession or reputation gives
authority to a statement made by him;
"filed" means filed under this Act or any corresponding previous written law;"financial year", in relation to
any corporation, means the period in respect of which any profit and loss account of the corporation laid
before it in general meeting is made up, whether that period is a year or not;
"foreign company" means—
(a) a company, corporation, society, association or other body incorporated outside Malaysia; or(b) an
unincorporated society, association or other body which under the law of its place of origin may sue or be
sued, or hold property in the name of the secretary or other officer of the body or association duly
appointed for that purpose and which does not have its head office or principal place of business in
Malaysia;
"guarantor corporation", in relation to a borrowing corporation, means a corporation that has guaranteed
or has agreed to guarantee the repayment of any money received or to be received by the borrowing
corporation in response to an invitation to the public to subscribe for or purchase debentures of the
borrowing corporation;
"limited company" means a company limited by shares or by guarantee or both by shares and guarantee;
"liquidator" includes the Official Receiver when acting as the liquidator of a corporation;
"lodged" means lodged under this Act or any corresponding previous written law;
"manager", in relation to a company, means the principal executive officer of the company for the time
being by whatever name called and whether or not he is a director;
"marketable securities" means debentures, funds, stocks, shares or bonds of any Government or of any
local authority or of any corporation or society and includes any right or option in respect of shares in any
corporation and any interest as defined in section 84;
"members' voluntary winding up" means a winding up under Division 3 of Part X, where a declaration has
been made and lodged in pursuance of section 257;
"memorandum" means memorandum of association;"minimum subscription"—
(a) in relation to any shares of an unlisted recreational club which are offered to the public for
subscription, means the amount stated in the prospectus relating to the offer in pursuance of paragraph
4(a) of the Fifth Schedule;(b) in relation to any issue of, offer for subscription or purchase of, or invitation
to subscribe for or purchase, shares made pursuant to the Securities Commission Act 1993 [Act 498],
means the amount stated in the prospectus relating to the issue, offer or invitation in pursuance of the
requirements of the Securities Commission relating to contents of prospectuses, as the minimum amount
which in the opinion of the directors must be raised by the issue of the shares so offered;
"Minister" means the Minister charged with the responsibility for companies;"office copy", in relation to
any Court order or other Court document, means a copy authenticated under the hand or seal of the
Registrar or other proper officer of the Court;
"officer" in relation to a corporation includes—
(a) any director, secretary or employee of the corporation;(b) a receiver and manager of any part of the
undertaking of the corporation appointed under a power contained in any instrument; and(c) any liquidator
of a company appointed in a voluntary winding up,
but does not include—
(d) any receiver who is not also a manager;(e) any receiver and manager appointed by the Court; or(f)
any liquidator appointed by the Court or by the creditors;
"Official Receiver" means the Director General of Insolvency, Deputy Director General of Insolvency,
Senior Assistant Directors of Insolvency, Assistant Directors of Insolvency, Insolvency officers and any
other officer appointed under the Bankruptcy Act 1967 [Act 360];
"preference share" means a share by whatever name called, which does not entitle the holder thereof to
the right to vote at a general meeting or to any right to participate beyond a specified amount in any
distribution whether by way of dividend, or on redemption, in a winding up, or otherwise;
"prescribed" means prescribed by or under this Act;
"principal register", in relation to a company, means the register of members of the company kept in
pursuance of section 158;
"printed" includes typewritten or lithographed or reproduced by any mechanical means;
"private company" means—
(a) any company which immediately prior to the commencement of this Act was a private company
underthe repealed written laws;(b) any company incorporated as a private company by virtue of section
15; or(c) any company converted into a private company pursuant to section 26(1), being a company
which has not ceased to be a private company under section 26 or 27;
"profit and loss account" includes income and expenditure account, revenue account or any other account
showing the results of the business of a corporation for a period;
"promoter", in relation to a prospectus issued by or in connection with a corporation, means a promoter of
the corporation who was a party to the preparation of the prospectus or of any relevant portion thereof;
but does not include any person by reason only of his acting in a professional capacity;
"prospectus" means any prospectus, notice, circular, advertisement or invitation inviting applications or
offers from the public to subscribe for or purchase or offering to the public for subscription or purchase
any shares in or debentures of or any units of shares in or units of debentures of a corporation or
proposed corporation and, in relation to any prospectus registered under the Securities Commission Act
1993, means a prospectus as defined under that Act;
"public company" means a company other than a private company;
"registered" means registered under this Act or any corresponding previous written law;
"Registrar" means the Registrar of Companies as designated under subsection 7(1);
"regulations" means regulations under this Act;
"related corporation", in relation to a corporation, means a corporation which is deemed to be related to
the first-mentioned corporation by virtue of section 6;
"repealed written laws" means the written laws repealed by this Act;
"resolution for voluntary winding up" means the resolution referred to in section 254;
"rules" means rules of court;
"securities" has the same meaning as is assigned to that word in the Securities Commission Act 1993;
"share" means share in the share capital of a corporation and includes stock except where a distinction
between stock and shares is expressed or implied;
"statutory meeting" means the meeting referred to in section 142;
"statutory report" means the report referred to in section 142;
"Subdivision" means a Subdivision of this Act and a reference to a specified subdivision is a reference to
that Subdivision of the Division in which the reference occurs;
"Table A" means Table A in the Fourth Schedule;
"this Act" includes any regulations;
"transparency", in relation to a document, means—
(a) a developed negative or positive photograph of that document (in this definition referred to as an
"originalphotograph") made on a transparent base, by means of light reflected from or transmitted through
the document;(b) a copy of an original photograph made by the use of photo-sensitive material (being
photo-sensitive material on a transparent base) placed in surface contact with the original photograph;
or(c) any one of a series of copies of an original photograph, the first of the series being made by the use
of photosensitive material (being photo-sensitive material on a transparent base) placed in surface
contact with a copy referred to in paragraph (b), and each succeeding copy in the series being made, in
the same manner from any preceding copy in the series;
"trustee corporation" means—
(a) a company registered as a trust company under the Trust Companies Act 1949 [Act 100]; or(b) a
corporation that is a public company under this Act or under the laws of any other country, which has
been declared by the Minister to be a trustee corporation for the purposes of this Act;
"unit", in relation to a share, debenture or other interest, means any right or interest therein, by whatever
term called;
"unlimited company" means a company formed on the principle of having no limit placed on the liability of
its members;
"unlisted recreational club" has the same meaning as is assigned to that expression in the Securities
Commission Act 1993;
"voting share", in relation to a body corporate, means an issued share of the body corporate, not being—
(a) a share to which, under no circumstances, there is attached a right to vote; or(b) a share to which
there is attached a right to vote only in one or more of the following circumstances:
(i) during a period in which a dividend (or part of a dividend) in respect of the share is in arrears;(ii) upon a
proposal to reduce the share capital of the body corporate;(iii) upon a proposal affecting the rights
attached to the share;(iv) upon a proposal to wind up the body corporate;(v) upon a proposal for the
disposal of the whole of the property, business and undertakings of the body corporate;(vi) during the
winding up of the body corporate.
(1A) In this Act—
(a) "licensed bank", "licensed business", "licensed discount house", "licensed finance company", "licensed
institution", "licensed merchant bank", "licensed money broker", "nonscheduled institution", "scheduled
business" and "scheduled institution" shall have the meanings assigned thereto in subsection 2(1) of the
Banking and Financial Institutions Act 1989 [Act 372]; and(b) "Islamic bank" or "Islamic banking business"
shall have the meaning assigned thereto in the Islamic Banking Act 1983 [Act 276].
(2) For the purposes of this Act a person shall not be regarded as a person in accordance with whose
directions or instructions the directors of a company are accustomed to act by reason only that the
directors act on advice given by him in a professional capacity.
(3) For the purposes of this Act a statement included in a prospectus or statement in lieu of prospectus
shall be deemed to be untrue if it is misleading in the form and context in which it is included.
(4) For the purposes of this Act a statement shall be deemed to be included in a prospectus or statement
in lieu of prospectus if it is contained in any report or memorandum appearing on the face thereof or by
reference incorporated therein or issued therewith.
(5) For the purposes of this Act any invitation to the public to deposit money with or to lend money to a
corporation shall be deemed to be an invitation to subscribe for or purchase debentures of the corporation
and any document that is issued or intended or required to be issued by a corporation acknowledging or
evidencing or constituting an acknowledgement of the indebtedness of the corporation in respect of any
money that is or may be deposited with or lent to the corporation in response to such an invitation shall be
deemed to be a debenture, but an invitation to the public by a prescribed corporation as defined in
subsection 38(7) shall not be deemed to be an invitation to the public to deposit money with or to lend
money to the corporation for the purpose of Division 4 of Part IV.
(6) Any reference in this Act to offering shares or debentures to the public shall, unless the contrary
intention appears, be construed as including a reference to offering them to any section of the public,
whether selected as clients of the person issuing the prospectus or in any other manner; but a bona fide
offer or invitation with respect to shares or debentures shall not be deemed to be an offer to the public if it
is—
(a) an offer or invitation to enter into an underwriting agreement;(b) made to a person whose ordinary
business it is to buy or sell shares or debentures whether as principal or agent;(c) made to existing
members or debenture holders of a corporation and relates to shares in or debentures of that corporation
and is not an offer to which section 46 of the Securities Commission Act 1993 applies; or(d) made to
existing members of a company within the meaning of section 270 and relates to shares in the
corporation within the meaning of that section.
(7) Unless the contrary intention appears any reference in this Act to a person being or becoming
bankrupt or to a person assigning his estate for the benefit of his creditors or making an arrangement with
his creditors under any written law relating to bankruptcy or to a person being an undischarged bankrupt
or to any status, condition, act, matter or thing under or in relation to the law of bankruptcy shall be
construed as including a reference to a person being or becoming bankrupt or insolvent or to a person
making any such assignment or arrangement or to a person being an undischarged bankrupt or insolvent
or to the corresponding status, condition, act, matter or thing (as the case requires) under any written law
relating to bankruptcy or insolvency.

See Also

• Power of companies in Malaysia • Company Statutory Records And


• Memorandum and Articles of Annual Returns
Association • Accounting Records And Company
• Articles of Association Auditors
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COMPANY LAW
• COMPANY LAWS
○ About Company Secretary
 About Company Secretary
 Secretaries Ethics
○ About Director
 About Company Directors
 Directors Ethics
○ Companies Act, 1965
 Memorandum Of Association
 Articles of Association
 Company Statutory Records And Annual
Returns
 Accounting Records And Company Auditors
 Company Law
 Power Of Companies
○ Fact Of Malaysia

CERTIFIED SECRETARIAL & MANAGEMENT FIRM IN MALAYSIA


www.registercompany.com.my & www.setiausahasyarikat.com & www.dmcorporate.com
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Cases Highlights
BANKING
Securities for advances - Loan - Summary judgment, appeal against -
Whether there were triable issues - Pleadings, whether defective -
Collateral contract - Duress - Estoppel - Conversion of wrong amount -
Manifest error in certificate of indebtedness - Whether summary
judgment correctly granted - Rules of the High Court 1980, O. 14
Melewar Leisure Sdn Bhd v. Danaharta Managers Sdn Bhd
(KN Segara, Sulong Matjeraie, Jeffrey Tan JJCA) [2011] 1 CLJ 857 [CA]

CONTRACT
Shares, sale of - Contra losses - Claim by plaintiff stockbroking company
for outstanding sum due in defendant´s trading account - Undue
influence - Procedure - Breach of T+5 rules and regulations of Kuala
Lumpur Stock Exchange - Contracts Act 1950, ss. 16, 20
Pan Malaysia Equities Sdn Bhd v. Angeline Tan Eei We
(Hamid Sultan Abu Backer J) [2011] 1 CLJ 923 [HC]

CASE OF THE WEEK


PP lwn. MAZLAN MUSTAFFA
MAHKAMAH RAYUAN, PUTRAJAYA
HASAN LAH HMR, AHMAD MAAROP HMR, SULAIMAN DAUD HMR
[RAYUAN JENAYAH NO: K-05-69-04]
24 SEPTEMBER 2010
UNDANG-UNDANG JENAYAH: Akta Dadah Berbahaya 1952 - Seksyen 39B(1)(a) -
Elemen milikan - Pengetahuan - Dadah tidak ditemui dalam milikan atau kawalan fizikal
responden - Rumah di mana dadah ditemui bukan di bawah milikan eksklusif responden
- Sama ada responden harus dilepaskan dan dibebaskan
KETERANGAN: Maklumat membawa kepada penemuan dadah - Kebolehterimaan -
Hakim bicara menolak pengemukaan maklumat sebagai keterangan - Sama ada
maklumat diperolehi secara 'menindas dan melalui pujukan' - Sama ada pernyataan
dibuat oleh tertuduh sendiri - Akta Keterangan 1950, s. 27 - Hakim perbicaraan
mempunyai budibicara untuk menolak keterangan jika diperolehi melalui kelakuan
bertentangan dengan taraf-taraf kewajaran

.: Company Law Cases

Accrual of cause of action - Contract - Breach - Running of time - Whether disparate obligations to pay from time to time can be construed as a single continuing obligation so as to
circumvent s. 6(1)(a) Limitation Act 1953- Whether provisions of Limitation Act cease to apply to a breach of Contract if parties remain in contractual relationship
The Great Eastern Life Assurance Co Ltd V. Indra Janardhana Menon
Siti Norma Yaakob CJ (Malaya), Steve Shim CJ (Sabah & Sarawak), Abdul Hamid Mohamad FCJ [2005] 4 CLJ 717 [FC]

Breach of Trust - Tracing remedy - Whether Trust money used for some purpose other than intended purpose can be traced into its end product
PERMAN SDN BHD & ORS v. EUROPEAN COMMODITIES SDN BHD & ANOR
Gopal Sri Ram JCA , Hashim Yusoff JCA , Zaleha Zahari JCA [2005] 4 CLJ 750 [CA]
COMPANY LAW BASICS

Which business structure to choose?

Identity of a company

How to form a company

Duties and Liabilities of Company Directors

Company Director's Code of Ethics

Company Secretaries Code of Ethics

How to apply for a Company Secretary's License

ABOUT SHAREHOLDER AGREEMENTS

INTRODUCTION
This article discusses the uses of formal agreements between shareholders of a private company and the
company.
The term "shareholder agreement" is used to describe such agreements, although differences in scope of
such agreements means that the term is not really a hint as to the contents of the agreement. Some only
set out a method of having one shareholder buy out another in the event of a dispute. Others deal with
the consequences of the death of a shareholder. Others set out rules for determining company policy and
management. Yet others give certain shareholders rights to acquire or dispose of shares in certain
circumstances. Often agreements combine all or several of these aspects.
Shareholder agreements are discussed under the following headings
1. Dispute Resolution
2. Restrictions on Share Transfers
3. Outside Offer
4. Death
5. Short Term Disability
6. Long Term Disability
7. Management
8. Puts
9. Calls
10. Financing
11. Defaults
12. Employment
13. Management Companies
14. Key Players
15. Upkeep
16. Timing & Conclusion

1. Dispute Resolution
Where a bitter dispute arises between shareholders, it may be that the only point of agreement is that
they cannot both continue in the business together. However decisions as to who should leave, and the
price of that person's departure may be very difficult and time-consuming. In addition, conflict between
shareholders can cause the business itself to lose value. This can result from inattention to the business
because of the dispute, or because customers become aware of the dispute and decide to find a supplier
that they perceive to be less volatile. Finally, resolving the dispute between shareholders is likely to
require either extended negotiations or litigation - or both. This usually means large bills for lawyers,
business valuators and tax specialists. It also involves a lot of time and stress for the principals.
A shareholder agreement can minimize both the time frame and the costs involved. Typically a
shareholder agreement deals with dispute resolution by adopting one of several possible methods of
enforced share sales. These should determine these points:
• Who buys and who sells?
• What the price is?
• When does the sale take effect?
A standard method is the "shot-gun" provision. It works this way:
• The first dissatisfied shareholder gives a notice to the other shareholder(s), naming a price per
share.
• The other must either buy the first shareholder's shares at the price or sell his/her shares to the
first shareholder at the same price.
• A time period is pre-set for a response to the notice, and the time until the sale takes effect is also
pre-set.
Other methods may involve one shareholder having either the right or the obligation to acquire the shares
of other shareholder(s) at a price based on a formula, or by a third party. A formula could include a
percentage of gross (or net) revenues in previous financial periods or perhaps a percentage of book value
of assets. A third party might be the company accountant, charged with determining value according to
pre-set criteria. Alternately, it might be an outside person charged with making a fair market value
determination. 2. Restrictions on Share Transfers In a publicly-traded company, neither the management
of the company nor the shareholders care very much who owns shares at any given time (except where
one shareholder or a group have a control block of shares). After all, being a shareholder in a public
company does not involve you in management decisions.
However, in a small private company, the identity of shareholders is very much an issue In effect, to the
principals, the company is almost like a partnership - and you want to pick your partners, not have them
imposed on you.
So, most shareholder agreements contain provisions to deal with this. A common provision is a right of
first refusal. This means that if a shareholder obtains a commitment from an outsider to purchase shares,
the shares have to be offered under the same terms to the existing shareholders for a specified period. If
the other shareholders do not want shares to go to the outsider, they merely have to match the price.
A more severe restriction might be a complete prohibition to sales to outsiders, but that may be quite
unattractive to minority shareholders.
A middle course might be a pre-emptive offer. A shareholder desiring to sell shares may be required to
send a notice to the other shareholders specifying the offer to sell. The offer must be kept open for a fixed
period. If all the shares offered for sale are not purchased by the other shareholders, the selling
shareholder then has the right to offer the remaining sharers for sale to outsiders for another fixed period -
but only on terms no more favourable than the other shareholders were offered.

3. Outside Offer
Sometimes, an outsider will offer to buy 100% of a company but not all the existing shareholders want to
take the offer. A provision may be added to a shareholder agreement that those who do not want to sell
must buy the shares of those who do want to sell, on the same terms as the outside offer.

4. Death
Typically, the death of a shareholder actively involved in a business creates problems on two fronts. The
surviving shareholder(s) no longer have the benefit of the deceased contributing to the business, and may
need to replace that person with a new shareholder. The family of the deceased want to be compensated
for the deceased's interest in the business. The obvious solution is to provide a mechanism for the shares
of the deceased to be sold to the company, the other shareholder(s) or a new shareholder.
The weakness with the concept of a simple sale of shares from the deceased is finding the money.
Having just lost an active shareholder, neither the surviving shareholder(s) nor the company itself will
have enough spare cash to pay for the shares. If the family of the deceased does not need a lot of cash
right away, the problem may be dealt with by providing for a series of payments over a period of perhaps
several years. In this case, there should be restrictions on the surviving shareholders to ensure that the
payments are duly made.
If the family of the deceased is not able to wait for payments, it may be that life insurance provides the
best solution. Two methods are commonly used:
• criss-cross insurance, where each shareholder owns coverage on the other shareholder(s), and
the proceeds are earmarked for the surviving shareholder(s) to buy the shares of the deceased.
• insurance owned by the company itself on the lives of each of the shareholders, so that the
company will use the proceeds to re-purchase the shares of the deceased. Where shares are
repurchased by the company, they are in effect eliminated, leaving the surviving shareholders
with proportionately larger interests.
The tax consequences of the two schemes differ. In the past the second method provided a valuable tax
saving opportunity for the deceased, but not as favourable treatment for the surviving shareholders. Now,
the situation is less clear because of 1995 changes to the Income Tax Act, dealing with tax treatment of
losses.
Generally, the amount to be paid for the shares of a deceased shareholder is determined by:
• the amount of life insurance proceeds available; or
• reference to a value determined between the shareholders by agreement every year; or
• a formula based on recent financial statements.

5. Short Term Disability


Usually, agreements dealing with short term disability will provide for shareholders who are employed by
the company to receive full salary for a number of months, even if unable to work. This provides some
financial stability for the disabled shareholder, but imposes a burden on the working shareholder(s).
For this reason, many shareholders purchase disability insurance, so that a certain number of days after
the disability strikes, the disabled shareholder will start to receive monthly payments from the insurer. In
that case, the company's obligation to keep paying salary will normally cease on the same date the
disability insurance starts generating payments. An alternative is to have the salary continue on a reduced
basis where there is no disability insurance.
Disability provisions are usually structured to ensure that a disabled shareholder cannot remain forever
under short-term disability coverage by returning to work for brief periods between bouts of absence from
work.

6. Long Term Disability


It is unusual for agreements to provide for continuing salary payments to a shareholder who is disabled
for a long period.
Instead, agreements may provide for a forced sale of the disabled shareholder's shares. This benefits that
shareholder by turning shares for which a ready market may not exist, into cash. It benefits the working
shareholder(s) by ensuring that profits do not have to be split with a shareholder who is, in effect, no
longer contributing to the company's success.

7. Management
Particularly where there are more than two shareholders, or where there is a minority shareholder,
provisions restricting management may be important protection for those who can be out-voted. Typically,
the agreement will provide that certain decisions require unanimous approval and others a specified
percentage in excess of 50%. An example might be:
 Unanimous Decisions
• Elections of directors
• Issuance of new shares
• Sale of the entire business
• Changes to share rights
• Executive salaries and bonuses
• Dividends
 70% Majority Decisions
• Expenditures on capital items in excess of $20,000 per item
• Decisions to call on shareholders to lend to the company

8. Puts
A "Put" is defined as the option of selling shares at a fixed price on a given date. In a shareholder
agreement, one shareholder may be granted a put which allows the shareholder to require one or more
other shareholders to buy some or all of his/her shares at either a fixed price or a price determined by a
formula. The put may have a period of time before it can be exercised, or it may expire if not exercised
before a specified date, or it may remain in effect virtually indefinitely.
9. Calls
A call is more or less the reverse. It confers an option to buy stock at a fixed price on a given date. So,
one shareholder may be granted the right to buy a certain quantity of shares from one or more of the
other shareholders by notice, at a price that is either fixed or determined by a formula. The same
comments about time made in relation to puts apply.

10. Financing
Typically, agreements provide that the primary source of borrowing funds for the company will be
institutional lenders (banks, trust companies, credit unions, and so on). However, if funds are required
and cannot reasonably be obtained from conventional sources, the shareholders amy agree to each
personally lend the company a proportionate share of the amount required.
Where one or more shareholders is unable or unwilling to contribute the required amount, the agreement
may provide that that shareholder is in default. This may allow the others to force the defaulter to sell
his/her shares, often at a discounted value. As well, there may be a provision for another shareholder to
make the loan that the defaulter should have made and charge a high interest rate to the defaulter for
doing so.
When loans are made to the company by institutional lenders, shareholders may be required to sign "joint
and several" unlimited guarantees. This means that each shareholder is personally responsible for 100%
of the amount owed by the company to the lender. Where one shareholder is virtually without assets, this
may mean very little - you can't get blood from a stone. But the other shareholder(s) should be
concerned. For if one shareholder does not cover a proportionate share of the guarantee, the other(s) will
be forced to pay more than a fair share. It may be possible to negotiate with the lender to either "cap" the
guarantees at an amount less than the entire indebtedness, or to make the guarantees several but not
joint so that each shareholder is only responsible for a proportionate share.

11. Defaults
Normally, a shareholder agreement provides that certain acts or omissions by a shareholder are
considered breaches of the agreement and result in special rights being conferred on the other
shareholders.
As noted above, financial defaults can result in interest being charged against the defaulter at a high rate.
There are two reasons for the high rate. The first is to make it more attractive for the defaulter to meet the
financial obligations, even if that means borrowing the funds to do so. The second is to compensate the
other shareholder(s) for having to step in and put up more than a proportionate share of the money.
Another common consequence of default is an option for the other shareholder(s) to buy the defaulter's
shares. Often, the price is determined by a formula designed to approximate fair market value, but is then
reduced by a percentage. The reduction is that justified on the basis that it is the defaulter who created
the situation, not other shareholder(s). The timing of a buy-out may well not suit the other shareholder(s).
Events of default usually include:
• not carrying out obligations under the agreement
• going bankrupt or being insolvent
• permitting any creditors to attempt to seize one's shares.
Other events of default might include:
• having one's spouse apply under the Family Relations Act for a portion of one's shares
• ceasing to be a Canadian resident (under some circumstances, this could adversely affect the
company's tax treatment).

12. Employment
In most small companies, the shareholders (or at least some of them) are also active employees. While
written employment contracts for key employees are a wise idea (for reasons ranging from limiting
exposure on wrongful dismissal suits, to protection of confidential information, to income tax), shareholder
agreements often are used to set the ground rules for terms of employment contracts, particularly in
relation to salaries and benefits. As well, there may be advantages to putting non-competition provisions
in a shareholder agreement rather than in the employment contract.

13. Management Companies


In some small companies, the principals do not own any shares in the company at all. Instead, they
control personal (or family) holding companies which own shares in the company which really runs the
business. Reasons for doing this may range from tax implications to estate planning. Tax advice (as
always) will be important.
From a corporate point of view, management companies add a layer of complexity to the shareholder
agreement. The holding companies will be parties to the agreement, since they are the shareholders. The
principals must also be parties. After all, all references to the death or disability of a shareholder have to
be changed to death or disability of a principal.
As well, a number of additional provisions come into play. Foremost is a restriction on the shareholdings
of each holding company. Without such a restriction, the shares of a holding company could be sold by a
principal to a third party. The practical effect would be to defeat the concept that no change in players in
the company should occur without existing players having a first option to take over the position of the
player leaving the company.

14. Key Players


There are a number of people who are or should be involved in the creation of a shareholder agreement.
These include:
Shareholders

Generally, all shareholders should be party to an agreement, although it is possible to omit, for
example, non-voting shareholders.
Spouses

Obviously, if spouses are shareholders, they should be included in the agreement. Like the other
shareholders, spouses should each receive independent advice. This ensures that they have an
opportunity to protect their interests in the agreement. It also reduces the likelihood of a spouse
later challenging the enforceability of the agreement on the basis that the spouse did not sign
voluntarily or failed to understand the meaning of the agreement.
Insurance Agents

Most shareholder agreements that deal with the consequences of death or disability rely on
insurance. It is essential to involve the insurance agent in the preparation of those parts of the
agreement to ensure that the insurance policies and the agreement mesh properly.
Lawyers

The complexities of shareholder agreements are such that they should not be drafted by the
shareholders. In fact, only lawyers with considerable commercial experience should draft the
agreements.
Accountants

Unless the lawyer drafting the agreement is also a tax expert, an accountant with tax expertise
should be involved in the preparation of the agreement to ensure that the tax implications are
dealt with correctly. This has a further advantage in that the accountant will be familiar with the
agreement and can raise an alarm when changes to tax laws create a need to change the
agreement.
15. Upkeep
As mentioned above, changes to tax laws may make changes to an agreement necessary. Adding new
shareholders usually requires at least the signing of a document by which the new shareholder formally
becomes a party to the agreement. Changes in the size of the company, its business, the financial
circumstances of the shareholders, and other internal matters may justify at least a review of a
shareholder agreement.
Where shareholders are required to decide annually on an agreed valuation of the company (usually to
provide for a sale price where a shareholder dies or becomes disabled within the following year), a diary
system may be critical to ensuring that the job is done regularly.

16. Timing & Conclusion


Most businesspeople starting up new companies agree that a shareholder agreement is important. Two
reasons are put forward frequently for not putting the agreement in place at the beginning:
• we are too busy getting the business up and running (and anyway, we all get along really well)
• we don't have the cash yet.
The first reason really doesn't hold water. Running a small business means you are always busy. So, if
you don't have time to get around to a shareholder agreement at the beginning, face it: you won't later on.
Ever. As far as getting along really well, that is the way almost all businesses start. Yet, like marriages, a
significant number of small companies encounter disputes between shareholders. By then, the goodwill
between shareholders has evaporated, and it is not possible to sign a shareholder agreement.
Shareholder agreements serve a wide range of purposes. Every small company with more than one
shareholder should have one. Really, the answer to the second reason for passing on shareholder
agreement is you can't afford not to have one.
The discussion above is of necessity general. Shareholder agreements can cover items not mentioned
above and are capable of almost unlimited customization.

The basics of setting up a business entity in Malaysia isn’t so difficult to understand: First off,
let’s start with Types of Business Entities. There are three (3) different types of business entities
to choose from:
1. Sole Proprietorship (also known as Sole Trader)
2. Partnership business entity
3. Limited Company (SDN. BHD. or Sendirian Berhad or BHD. or Berhad)
Understanding different types of business entities available in Malaysia for:
1. Foreign Companies
2. Limited Liability Partnership (LLP) – Coming soon

Sole Proprietor (or Sole Trader)

Like many other countries out there, the Sole Proprietorship business entity in Malaysia is
owned solely by one individual, as his/her liability is unlimited. What unlimited liability means
is: If a business fails or is declared bankrupt, creditors can sue the sole proprietor’s owner for all
debts owed to respective merchants. This means personal assets, personal income and
employment income are all liable.
Advantages of a Sole Proprietorship Business Entity
• Less paperwork & additional formalities (registration is easy, fast and fewer
documents are needed)
• Price of entity formation is much cheaper and is not required by the
Malaysian government to be audited.
• Not required to disclose financial statements to the public.
• Easy to convert into limited company (SDN BHD)

Partnerships

The “Partnership” business entity is a joint-entity holder with two or more persons to carry out a
legal business in Malaysia. The Companies Commission of Malaysia requires that partnership
entities MUST comprise of at least two (2) members and a maximum twenty (20) members.
Partners in a partnership business entities are also bounded by unlimited liability.
Differences
Generally, the Sole Proprietorship & Partnership business entity is similar to each other in many
ways. Some of the differences include:
1. Own partnership agreements are to be made – Or set to default, governed by
Malaysia’s Partnership Act 1961.
2. Sole Proprietors are owned by ONE (1) owner whereas Partnerships are
owned by TWO (2) or more.

Limited Company (SDN BHD or BHD)

Sendirian Berhad (SDN BHD) is a private limited company, where it prohibits any invitation to
the public to subscribe to any of its shares, deposit money with the company for investment or
subscription. Minimum members in a private limited company is TWO (2) and maximum is
FIFTY (50).
Berhad (BHD) is a public limited company where its shares can be offered to the public for
fixed periods and any other forms of subscription. The minimum amount of members’
(shareholders) are TWO (2) and maximum of unlimited amount of members.
There are three (3) types of limited companies in Malaysia:
1. Limited by Shares
2. Limited by Guarantee
3. Unlimited company with/without share capital
Companies Limited by Shares
Liability of members’ contribution to this company is limited to the amount specified on their
unpaid shares. Should the company becomes insolvent or goes into liquidation, members are not
obligated to pay off the company’s debts if and unless any one of the members gives a personal
guarantee.
Also, members’ personal assets, employment and personal income are not liable to any of the
company’s debts. This type of business entity is the most common one in Malaysia.
Companies Limited by Guarantee
In a limited company’s Memorandum and Articles of Association, members’ liability is limited
to the amount they ‘guarantee’ or undertake during winding up – In which the amount is
specified in the Memorandum, agreed and signed by all members.
In many cases, companies limited by guarantee are often registered by non-profit
organizations, public societies and clubs.
Unlimited Companies
Unlimited companies are no different from sole proprietorship and partnership business entities.
One of the only difference is that they have a special articles of association and are free to return
capital to its members’.
Advantages & Disadvantages
• Members’ (also called “Shareholders”) are not liable for the company’s debts
beyond the amount of share capital they’ve subscribed to.
• But in this case, the public will have access to financial affairs of the
company.
• In event of death or changes among shareholders and/or directors of the
company, it need not be winded up (striked-off).
• Every limited company has to appoint: (1) Auditors to verify & report
financial affairs, records, accounts and statements; (2) Must have at least a
company secretary for AGM, board & shareholders’ meetings.

Foreign Companies

Foreigners (non-Malaysian residents) are allowed to register a private limited company in


Malaysia, so long as TWO (2) of the company’s directors are permanent (principal place of
residence) residents in Malaysia.
Foreign companies are companies ALREADY incorporated (formed) outside of Malaysia but set
up its business premises and operations in Malaysia. There are two ways to go about being a
‘foreign company’ in Malaysia:
1. Register a branch in Malaysia, or;
2. Incorporate a local company (see “Requirements” below)
Requirements
The registration process and documents to be filled in (with payable fees) are as common:
1. A certified copy of the certificate of incorporation OR registration from its
country of registration.
2. A certified copy of the company’s memorandum and articles of association,
charter, statute defining its constitution.
3. A list of all directors in the company (foreign and local) and list of their
powers.
4. A memorandum of appointment or power of attorney under the seal of the
foreign company wanting to incorporate in Malaysia to authorize a Malaysian
resident to accept on behalf of the company its service of processed and
noticed required to be served on the company.
5. A statutory declaration made by the agent of a company (you can get an
authorized local Malaysian company secretary here)
6. Registration fees.
Foreign Company’s Local Agent
Companies in Malaysia are governed under Malaysia’s Companies Act of 1965. The agent’s
duties and responsibilities include ensuring the company is performing all corrective acts and
requirements stated by the Companies Commission of Malaysia (or referred to as CCM and/or
SSM).

Limited Liability Partnership (LLP)

The Limited Liability Partnership (LLP) business entity was proposed in 2003, but have yet to be
fully implemented by the Companies Commission of Malaysia (”CCM” in English or “SSM” in
Malay).
Want to find out more about LLP? Read the official document here.
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Sole Proprietorships law in Malaysia

Published on 3/5/2009, 11:45 PM by Jamie Sc

Tags: Malaysia Sole Proprietorships

Let’s begin by defining what a sole proprietorship is, it is basically a type of business in
Malaysia and that particular business is owned by a person. The sole proprietorship is
considered to be the simplest form of the business organization that has minimal legal
requirements.

Who are eligible to register for the sole proprietor business?


For sole proprietor businesses only Malaysian citizen and permanent residents can set up
this kind of business.

What are the benefits of sole proprietorship?


Since that is your own business you will have a lot of satisfaction in working for yourself not
to mention that you are your own boss. The sole proprietorship can be started fairly easy
this is because this type of business requires minimal capital requirements. The owner of
this form of business will receive of all the profits and they will have the power to exercise
their entrepreneurial skills to the fullest. Their accounts do not need to disclose the details
of their accounts and their business affairs can be kept private. There is also the fact that
you can make your own decisions and run the business as you like and you will also have a
more personal relationship with your customers.

What are the disadvantages of sole proprietorship?


As the only owner of the business you will then have the bear the unlimited liability of any
of the losses that have been incurred by the business. One thing that you may need to
consider is that as a person your expertise will be limited, so for example you may only be
skillful in one or two key areas of the business. This means that if you want to be a
successful owner then you would have to obtain all the necessary skills that are required to
run your business. Expanding your business may take quite some time as sometimes you
may not have the adequate funds to do so. This is because the sole proprietor’s main source
of funds will usually come from their own savings and even if the credit that is obtained
from the suppliers will only be on a short-term basis. Also you should expect yourself to
work long hours and have fewer holidays while you are running your business and if for any
unfortunate reasons if the owner dies the firm shall also cease the operations of the
business.

What names can I include for the business?


For your business you can either use your name as stated in your National Registration
Identification Certificate, for example Chee See Lim and so on or you can even use trade
names such as 123 Enterprise or 123 Import-Export Agencyfor the business. If you are in
West Malaysia and you register your business using your name then you do not need to
apply for a business name approval. However if you still want to have a business name then
you must apply for approval using the “Application of Business Name Form” before you
begin the process of registering your business.
If you are in Sabah, you will not need to apply for the business name approval whether it is
your name or the business name, the only thing that you will need to apply for during the
registration. You should also take note that certain names cannot be registered as business
names, for example you cannot register the names of any person that is not the owner of
the business and the names of those that have been registered by others are also not
allowed.
Names that have connections with the government agencies or departments, country and
state are also not allowed to be registered. So the business names should not contain the
words such as “Diraja”, “Nasional”, “Koperasi”, “Royal”, “National”, and “Chartered”. Names
that use words that have been interpreted as being registered under any other law such as
Companies Act, Societies or body corporate by the “Royal Charter” or that of any local
authority should not be registered.
The Registrar of Business, Municipal Council and Dewan Bandaraya has the right to reject
the application of the names which in their opinions are misleading by nature, scope or
importance of the business that has been carried on under such a name.

How to begin a sole proprietorship?


The application procedure to apply for the sole proprietorship is a simple one; as soon as
the business commences business you must then register the business. It is an offence if
you do not register your business so you must register as soon as possible.
However the application procedure in West Malaysia is slightly different as compared to that
from the state of Sabah, East Malaysia. As with all formal applications you must use ball
point pens when you are filling in the forms.
If you are registering your business on West Malaysia then you will need “Form A” from the
Registrar of Business or ROB. Once you have obtained it then you will need to fill up the
form accordingly. After that “Form A” must then be verified by the associates of the
business and the signature must then be attested by either a member of the parliament, a
judge, advocates or solicitors, Justice of the Peace (J.P), a member of the Dewan
Undaganan Negeri, village headman or a Commissioner for Oaths. Then you must attach a
copy of the NRIC on the “Form A”.
The registration fee for the sole proprietorship business is RM25 per annum if they are using
their personal name and if you are using a business name then it is RM50. There will be an
additional fee of RM1 for each of the branch that has been registered and RM5 for a copy of
the registered business information. Once you have settled that, a “Certificate of
Registration” will then be issued to the successful application. The “Certificate of
Registration” must then be displayed at the business premise.
If you are setting up a business in Sabah, East Malaysia, you will then need to obtain a copy
of the “Application for a Trading License Form (Section 5)” from the Municipal Council, the
Dewan Bandaraya or the Majlis Perbandaran. The copy of the form will cost RM1, you will
then need to fill in the form and enclose a copy of your NRIC, the tenancy agreement and
the receipt of the property assessment paid up to the date. The signature on the form does
not need to be attested, however the attached documents except for the receipt of the
property assessment must be a certified true copy by a judge, magistrate, advocates or
solicitors, Justice of the Peace (J.P) or the Commissioner for Oaths. The registration fee for
the sole proprietorship is RM25 per annum and the RM5 is the processing fee for both the
name as well as the business name. Upon successful application you will then be issued a
“Trading License” or “Form B” and this license must be displayed at the business premise.

How long is the trading license valid for?


In West Malaysia the “Certificate of Registration” is valid for one year from the date that
was registered and it can be renewed on an annual basis. The renewal fee is RM25 and
there will be an additional fee of RM1 for each of the branch. In Sabah the “Trading License”
is valid until the 31st of December of each year from the date that you have registered your
business. This means that new applicants will normally be charged a pro rata registration
fee that is based on the date of the application and the renewal will cost RM25.

Where can I renew my license or the certificate?


The “Certificate of Registration” can be renewed at any of the Registrar of Business, the
post office, any of the branches or either by mail by presenting the Business Registration
Number upon the renewal payment. While in the state of Sabah the “Trading License” can
be renewed at the Majlis Perbandaran, the Municipal Council, or the Dewan Bandaraya by
submitting the “Form P.L.B(1)” together with the renewal payment as well as the “Trading
License”. You will also be able to renew your license or the certificate at the earliest of three
(3) months before the expiration date. However you should also take note that the renewal
of business registration is an offence and you can be compounded for it.

What should I do if there are any changes to the business ownership or the particulars of
the business?
Business owners should take note that it is an offence if they fail to change any of the
business particulars and can be compounded for it. For businesses in West Malaysia, you
should obtain the “Form B” for the Changes of Business Particular Form. There are four (4)
types of the “Form B” – “B1” is the form that is sued for the changes in the principal
address of the business, “B2” is used for the changes in the particular types of the business,
“B3” is the form for the changes in the particulars of the branches and finally there is “B4”
that is used for the changes in the particulars of the partner. The registration fee for the
“Form B” is RM5 for each of the submission and there will also be an extra charge of RM1
for each of the branch. Another RM5 will be charge if you request for a copy of the
information regarding the registered business. This of course if different from the procedure
in Sabah, here you will need to proceed to the Municipal Council or the Dewan Bandaraya.
There you will need to obtain the “Notice of Change in Particulars” of the “Form C”. This will
cost you RM2 for the processing fee.

What should I do if I decide to close my business?


If you have already decided that you want to close down your business then you should
notify the Dewan Bandaraya or the Municipal Council in writing. For the businesses that
have been registered with the Registrar of Business or ROB, you will need to fill in the
Notification of Disclosure of Business “Form C” with 14 days from the date of the
termination. The registration for “Form C” is free. You should take note that failure to inform
the Registrar of Business or Municipal Council or the Dewan Bandaraya that your business
has ceased operation is an offence. If the business was terminated due to the death of the
owner, than a personal representative or the heir will need to notify the organization
concerned or file in the “Form C” within 30 days from the date of the death.

I am currently operating a business in Penang, is it still possible for me to register my


business in Selangor?
Unfortunately you will not be able to do so and that is the disadvantage of Sole
Proprietorship. If you still want to register your business than you must apply for a new
registration at the nearest office of the Registrar of Business or the Municipal Council or the
Dewan Bandaraya.

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Partnerships law in Malaysia

Published on 3/5/2009, 11:47 PM by Jamie Sc

Tags: Malaysia Partnerships Law

Let’s begin by defining what a partnership is; it is basically a type of business organization
in Malaysia. The business can exist when there is at least two persons that have agreed to
carry on a business with the common interest of making a profit. The legalities that are
required to set up a partnership are minimal and it is almost similar to that of the sole
proprietorship. As such a partnership cannot exist as a separate legal entity.
A partnership will most likely spring up between friends; however it is still advisable that
you draw up a Partnership agreement by a solicitor in order to avoid any problems in the
future. In the agreement it should state the responsibilities that each of the partners are
responsible for and also on what grounds as well as how the partnership may be
terminated. If there are disputes that arise in the dealings between the partners, the
agreement should also include the procedures on how to deal with that particular problem.
In fact a Partnership Agreements should become a necessity; this is because it is better to
anticipate a situation and the problems that may arise from that.

Who is eligible to register for the partnership?

Only Malaysian citizens and permanents residents can only register a business as a
partnership.

What are the advantages of a partnership business?

Partnerships are easy to set up; this is because when you go into a partnership you will
have a wider capital base compared to that of a sole proprietorship as the partners will pool
their capitals and work together in the business that they have set up. A partnership would
be an excellent arrangement especially if you are operating a business that requires
different sets of skills to run the business. This is where each of the partners can contribute
to the business whether it is their knowledge, skills or the contacts that they have. With
such help you may be able to overcome some of the obstacles much easier as compared to
facing it alone as a sole proprietor.

What are the disadvantages of a partnership?

If you entered a business as a partnership then there will be some risks, for example you
will be liable for the debts of the partnership even if it was caused by the actions of the
other partner. With unlimited liability each of the partners will then be liable to use their
own private resources to meet the partnership’s debt. At a more personal level, you may
face the risk of not being able to work together and no one will be able to guarantee that
disagreements will not occur in the course of the partnership. The partnership will end if any
one of the partners resigns or dies.

What names can I include for the business?

For your business you can either use your name as stated in your National Registration
Identification Certificate, for example Chee See Lim and so on or you can even use trade
names such as 123 Enterprise or 123 Import-Export Agencyfor the business. If you are in
West Malaysia and you register your business using your name then you do not need to
apply for a business name approval. However if you still want to have a business name then
you must apply for approval using the “Application of Business Name Form” before you
begin the process of registering your business.
If you are in Sabah, you will not need to apply for the business name approval whether it is
your name or the business name, the only thing that you will need to apply for during the
registration. You should also take note that certain names cannot be registered as business
names, for example you cannot register the names of any person that is not the owner of
the business and the names of those that have been registered by others are also not
allowed.
Names that have connections with the government agencies or departments, country and
state are also not allowed to be registered. So the business names should not contain the
words such as “Diraja”, “Nasional”, “Koperasi”, “Royal”, “National”, and “Chartered”. Names
that use words that have been interpreted as being registered under any other law such as
Companies Act, Societies or body corporate by the “Royal Charter” or that of any local
authority should not be registered.
The Registrar of Business, Municipal Council and Dewan Bandaraya has the right to reject
the application of the names which in their opinions are misleading by nature, scope or
importance of the business that has been carried on under such a name.

How do I start a partnership?

The application procedure to apply for the sole proprietorship is a simple one; as soon as
the business commences business you must then register the business. It is an offence if
you do not register your business so you must register as soon as possible.
However the application procedure in West Malaysia is slightly different as compared to that
from the state of Sabah, East Malaysia. As with all formal applications you must use ball
point pens when you are filling in the forms.
If you are registering your business on West Malaysia then you will need “Form A” from the
Registrar of Business or ROB. Once you have obtained it then you will need to fill up the
form accordingly. After that “Form A” must then be verified by the associates of the
business and the signature must then be attested by either a member of the parliament, a
judge, advocates or solicitors, Justice of the Peace (J.P), a member of the Dewan
Undaganan Negeri, village headman or a Commissioner for Oaths. Then you must attach a
copy of the NRIC on the “Form A”.
The registration fee for the partnership business is RM50. There will be an additional fee of
RM1 for each of the branch that has been registered and RM5 for a copy of the registered
business information. Once you have settled that, a “Certificate of Registration” will then be
issued to the successful application. The “Certificate of Registration” must then be displayed
at the business premise.
If you are setting up a business in Sabah, East Malaysia, you will then need to obtain a copy
of the “Application for a Trading License Form (Section 5)” from the Municipal Council, the
Dewan Bandaraya or the Majlis Perbandaran. The copy of the form will cost RM1, you will
then need to fill in the form and enclose a copy of your NRIC, the tenancy agreement and
the receipt of the property assessment paid up to the date. The signature on the form does
not need to be attested, however the attached documents except for the receipt of the
property assessment must be a certified true copy by a judge, magistrate, advocates or
solicitors, Justice of the Peace (J.P) or the Commissioner for Oaths. The registration fee for
the sole proprietorship is RM25 per annum and the RM5 is the processing fee for both the
name as well as the business name. Upon successful application you will then be issued a
“Trading License” or “Form B” and this license must be displayed at the business premise.

How long can I use a certificate of registration or trading license?


In West Malaysia the “Certificate of Registration” is valid for one year from the date that
was registered and it can be renewed on an annual basis. The renewal fee is RM25 and
there will be an additional fee of RM1 for each of the branch. In Sabah the “Trading License”
is valid until the 31st of December of each year from the date that you have registered your
business. This means that new applicants will normally be charged a pro rata registration
fee that is based on the date of the application and the renewal will cost RM25.

Where can I renew my license or the certificate?


The “Certificate of Registration” can be renewed at any of the Registrar of Business, the
post office, any of the branches or either by mail by presenting the Business Registration
Number upon the renewal payment. While in the state of Sabah the “Trading License” can
be renewed at the Majlis Perbandaran, the Municipal Council, or the Dewan Bandaraya by
submitting the “Form P.L.B(1)” together with the renewal payment as well as the “Trading
License”. You will also be able to renew your license or the certificate at the earliest of three
(3) months before the expiration date. However you should also take note that the renewal
of business registration is an offence and you can be compounded for it.

What should I do if there are any changes to the business ownership or the particulars of
the business?
Business owners should take note that it is an offence if they fail to change any of the
business particulars and can be compounded for it. For businesses in West Malaysia, you
should obtain the “Form B” for the Changes of Business Particular Form. There are four (4)
types of the “Form B” – “B1” is the form that is sued for the changes in the principal
address of the business, “B2” is used for the changes in the particular types of the business,
“B3” is the form for the changes in the particulars of the branches and finally there is “B4”
that is used for the changes in the particulars of the partner. The registration fee for the
“Form B” is RM5 for each of the submission and there will also be an extra charge of RM1
for each of the branch. Another RM5 will be charge if you request for a copy of the
information regarding the registered business. This of course if different from the procedure
in Sabah, here you will need to proceed to the Municipal Council or the Dewan Bandaraya.
There you will need to obtain the “Notice of Change in Particulars” of the “Form C”. This will
cost you RM2 for the processing fee.

What should I do if I decide to close my business?


If you have already decided that you want to close down your business then you should
notify the Dewan Bandaraya or the Municipal Council in writing. For the businesses that
have been registered with the Registrar of Business or ROB, you will need to fill in the
Notification of Disclosure of Business “Form C” with 14 days from the date of the
termination. The registration for “Form C” is free. You should take note that failure to inform
the Registrar of Business or Municipal Council or the Dewan Bandaraya that your business
has ceased operation is an offence.

What is the procedure is one of the partners passed away?


If you are faced with this unfortunate situation then you would need to immediately inform
the Registrar of Business or ROB. You will face being compounded if you are late in
reporting the matter to the organization. You should also need to remember to bring along
the Death Certificate of the deceased. You will not need to cease the operations of your
business and the Registrar of Business or the ROB will make the necessary adjustments in
updating the records. If you are in Sabah, you will need to submit “Form C” and attach a
copy of the Death Certificate of the deceased to the Municipal Council or the Dewan
Badaraya. You will then be requested to sign the Statutory of Declaration where a new
“Trading License” will be issues and the particulars will also be updated.

I am currently operating a business in Penang, is it still possible for me to register my


business in Selangor?
Unfortunately you will not be able to do so and that is the disadvantage of the partnership.
If you still want to register your business than you must apply for a new registration at the
nearest office of the Registrar of Business or the Municipal Council or the Dewan Bandaraya.

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