There are 6 types of company registration that can be done with SSM by entrepreneurs, each with advantages and disadvantages according to your business' needs.
This is it! It is time to quit the 9 to 5 office job and turn the business proposal that you have been working hard on for the past few months into a reality. As required by the Companies Commission of Malaysia (SSM), your company has to be registered in order to run the business as a separate legal entity. According to Companies Act 2016, a company can be limited by shares, limited by guarantee, or unlimited, and further categorized as a private or public company. It is crucial to understand the nature of each company registration type to determine which one suits your business’ needs.
Sdn Bhd company is a private company limited by shares which is the most common company registration type in Malaysia. In light of the Companies Act 2016, only 1 director and 1 shareholder is required to form a Sdn Bhd company, instead of 2 directors. Thus, you can register a Sdn Bhd company without other business partners, acting as the sole director and sole shareholder for the company. However, there can be only up to 50 shareholders in a Sdn Bhd company, without the right to offer shares to the public.
Malaysian or non-Malaysian residents who want to run SME businesses
A Company Limited by Guarantee is a public company without share capital for non-profit purposes. It means that there is no shareholder, only members who act as guarantors to run the operation. You and other members do not contribute capital to the startup but are responsible to pay the debt if it closed down according to the amount of guarantee as promised. Hence it has no right to own or release property rights and also is unable to use the profits for purposes other than those stated as objectives in the constitution.
All company registration types limit the liability of its shareholders towards the company, except for a Sdn company which can either be a private or public company. You can register a Sdn company to form a mutual fund that holds assets for investment purposes, rather than to carry out businesses. Since it has unlimited liability among its shareholders, it is similar to Partnership with flexibility in the ownership of shares where shareholders are free to sell their shares back to the company.
Similar to a Sdn Bhd company, a Bhd company is a company limited by shares with a few differences - it can offer shares to the public without a limit on the number of shareholders, requires at least 2 directors and is governed by Bursa Malaysia Securities Berhad and the Security Commission of Malaysia. This type of company registration can be time-consuming and expensive due to strict compliance to follow. However, funding for the company would be easier to come by since it is publicly listed on the market.
Entrepreneurs with large business models
Companies owned by non-Malaysians who have established businesses in other countries and would like to set up a company branch in Malaysia for operation or customer service purposes falls under this category. It allows foreigners to run businesses in Malaysia without a director that resides in the country. Foreign companies have limited options in incorporating a company, except in Labuan which has different laws governing the company registration.
Foreigners who want to start a business in Malaysia
Unlike other company registration types, a PLT company is governed under the Limited Liability Partnerships Act 2012 which was newly introduced in Malaysia in 2012. It is a combination of Sdn Bhd company and partnership with some differences such as there must be at least 2 partners with no maximum number of partners you can have in the business. The registration on a PLT company should be done on the MyLLP portal which is different from other company registration.
Entrepreneurs in a partnership who carry out professional practices (accountancy, law, company secretary, etc.), in joint ventures, or venture capitals.
Deciding the most suitable company registration type gives entrepreneurs an upper hand in getting started with businesses legally in Malaysia. However, bear in mind that even though you may enjoy more financial security when running businesses as a company, all companies registered are required to fulfil obligations, such as getting a company secretary (for Foreign Company it would be an Agent while for PLT company, it would be a Compliance Officer), lodging annual returns, and filing taxes. Hence, it is crucial to understand all the rights and obligations of each company registration type in advance to make the most out of the process.
Disclaimer: Information provided in this article is for general reference only. Please seek advice from company secretary, lawyer or other professionals according to your business's needs.