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Incorporation of Companies

Limited Companies (Sdn. Bhd. and Bhd.) that registered in Malaysia are governed by the Malaysian Companies Act, 2016 (“the Act”). This new Act came into force on 31 January 2017. Hence, effectively, all companies will now have to operate under a new framework.
The Companies Act, 2016 has modernized the corporate legal setup in Malaysia in line with international standards, by providing more flexibility in managing the affairs of companies.
  • Introduction of single member or director
  • Publication Gallery
A company may now be incorporated by or have only one member and that single member can also be the sole director of a private company. Public companies may also be held by single member but it’s required by the Act to have at least two resident directors. Unless otherwise provided in the Constitution, Companies are not required to have a common seal and share certificate.
  • Option to adopt Constitution
  • Ease the burden of holding physical meetings
Except for a company limited by guarantee, a company may now decide to or not to have a constitution. As a result, “Object Clause” has become insignificant and a company is conferred with full capacity of a natural person.
If a company has a constitution, the company, its directors and shareholders are bound by the rights, powers, duties and obligations set out in the Act except to the extent that such provisions are modified by the constitution and the modifications are permitted under the Act.
The Act allows a shareholders’ resolution of a private company to be passed either by a written resolution or at a meeting of the shareholders. Nevertheless, a resolution of the shareholders of a public company must be passed at a physical meeting.
Besides this, AGM is now mandatory only for public companies. Private companies to hold AGM only if it is required under its constitution.
There are 2 types of Company Formation:
  • New Incorporation
  • Shelf Company
Under the Act, a private company is required to have the following characteristics :-
  • It is a company limited by shares
  • It has not more than 50 shareholders
  • It restricts the transfer of its shares
  • It is prohibited from inviting the public to subscribe its shares or debentures
  • It cannot allot shares or debentures with a view of offering them to the public
  • It cannot invite the public to deposit money with the company

Why A Limited Company?

One of the major advantages of a limited company is that the shareholders are not liable for the company’s debts beyond the amount of share capital they have subscribed, provided there has been no deceit, fault or other malpractice. Besides that, it is easy to transfer the ownership, either wholly or partially, through the selling of all or part of its total shares, or through the issue of new shares to additional investors. There is not required to wind up the company in the event of deaths or changes amongst the shareholders or directors.
  1. The personal liability of the shareholder could not affect the company’s asset.
  2. Limited liability. The risks of running a business would not affect the private property and wealth of the shareholder (separate legal entity).
  3. The legal document of a company protects the rights of the shareholder or investor, which means easier capitalization.
  4. Perpetual succession, unless the company is liquidated. The company existence is not affected by any happening to the shareholders.
  5. A priority of consideration would be given by the Immigration Department to the foreigner when applying visa in Malaysia (upon fulfilment of the prescribed requirements).
  6. Running business with a limited company can increase the confident and present a better image to the clients, bankers and suppliers of the company, hence helping the development of business. It adds credibility to your business as more serious and reputable business ventures are formed.

Taxing Benefits

  1. The business expenses are completely deductible as the expenses of the company.
  2. Capital allowances are given for occupying assets of the company, hence minimizing the tax of the company.