How to start a business in Malaysia as foreigner

The challenges one goes through while starting and expanding a business in foreign country are nothing but byzantine. In order to succeed in the market in Malaysia, your company will have to take a realistic approach and you will have to leave your preconceived notions of how business should be done at home.

Despite a few growth reports, Malaysia’s economy has not been steady as of recent. Many foreign companies are thriving in this country, but they have only been able to achieve this success by having patience, cultural understanding, and perseverance.

The pro-business policies and strategic financial planning of the Malaysian Government has turned Malaysia into a business friendly economy and the investors’ prime destination. The World Bank’s “Ease of Doing Business 2016” report ranked Malaysia the18thbest place to conduct business among 190 countries globally. This report also highlighted that the starting of a business in Malaysia only requires 3 procedures, 4 days and costs 6.2% of income per capita in fees.

Although Malaysia is on the map of liberalization and many of its industries and sectors are set to welcome foreigners, there are few industries and positions reserved for the local only including sole proprietor, enterprise, or LLP companies. However, there are still ways to register that allow for foreign ownership, like the following:

Sdn Bhd Company (or Private Limited Company)

Sdn Bhd (Sendirian Berhad) is a viable registration option for most businesses. Some of the bright sides of private limited companies are:

• Shareholders are not liable for company debts beyond their share capital.
• Shares are easily transferable
• No restrictions on the increase of share capital.

On the other hand, you have to compromise many aspects like:

• 50% Malaysian ownership is required in order to set this up. Those industries include education, oil & gas, banking, tourism, and agriculture.
• If your business falls outside of that list, you will be eligible to be a 100% foreign owned Sdn Bhd. But still there is some pre-requisites to meet up.
• For advisory and consultancy businesses, that means having a minimum paid-up capital of RM500000.
• For import, export, restaurant, or trading businesses, it is having a paid-up capital of RM1000000.
• The company is required to have a minimum of two directors and two shareholders, and it can be difficult to get approval without any local Malaysian participants.

Labuan International Company (LIC)

The simplest filing option, Labuan International Company (LIC), is common among import, export, trading, and consultant businesses, but isn’t limited to those industries. Set-up as a LIC involves less hassle, with businesses only requiring one director and one shareholder, positions that can both be filled by one person.

Filing as a LIC comes with a multitude of benefits, including:

• Business can be 100% foreign owned, without requiring a Malaysian Partner.
• Simple business structure.
• A low Paid-Up Capital requirement.
• Quick turnaround for registration, as little as two weeks.
• Ease of setting up Visas for your family, including parents.
• No trade licenses are required.

Process for registering

The process for incorporating is actually fairly simple, assuming your business qualifies as one of the two entity types listed above. The steps for registration are as follows:

Name search and apply to SSM

Firstly, you have to make sure whether your company’s proposed name is available for registration or not. For this purpose, a trademark search must be undertaken. You must complete and submit Form 13A of the CA (Request for Availability of Name) to SSM (Surumanjaya Syarikat Malaysia) then pay a RM30 fee per name submitted. If your name is approved, it will be reserved for three months following the date of its approval.

Submission of registration documents

Registration documents must be submitted to the SSM within the three-month period following naming approval. If the documents are not sent within this time period, a new Application of Name Search has to be submitted. Registration documents include:

1. Memorandum and Article of Association
2. Form 48A, Statuary Declaration By A Director Or Promoter Before Appointment
3. Form 6, Declaration of Compliance
4. Original copy of Form 13A
5. A copy of the letter from SSM approving the company name
6. A copy of the ID of each director and secretary.

When all requirements have been met and the application is approved, your company will be issued a Certificate of Incorporation by SSM. While these steps most closely mirror the application process for a SDN BHD, the process for LLC isn’t much different. The only change for Labuan companies is that the liability of each of its members must be listed as “unlimited” in the Memorandum of Association.

Once your company has been incorporated, then it is very feasible to start a business in Malaysia by hiring local staff. In the meantime, you may start the process of applying for work permit. Applying for Malaysian work permit is not a difficult process anymore as an online application system (ESD) has been introduced by immigration department.