How Do Foreign Companies Establish Their Presence In Malaysia?
As more foreign companies emerge in Malaysia, find out how these rapidly growing companies establish their presence and how you can too!
There are 3 ways in which a foreign company can establish its presence in Malaysia.
1. By incorporating a foreign owned local company (i.e. Sdn Bhd) in Malaysia.
Foreign companies can establish their presence in Malaysia and conduct business regularly by incorporating a local private company limited by shares with the Companies Commission of Malaysia (“CCM”) in accordance with Companies Act 2016 (the “Companies Act”). Such incorporation can be done online through the MyCoID 2016 portal just as how one would incorporate a local company.
Such companies can have 100% foreign ownership, and can be wholly owned by the Foreign Company as its sole shareholder, as long as it complies with all requirements of the Companies Act, including the requirement of at least one (1) local director ordinarily residing in Malaysia and having a principal place of residence in Malaysia. The CCM incorporation fee is RM1,000. The advantages of incorporating a foreign owned local company includes the establishment of a separate legal entity from the foreign company, and no restriction on the company name used and the types of business conducted by the local company. Foreign companies intending to have a long-term presence in Malaysia should consider this option.
2. By registering a branch office in Malaysia (note: this is not a Sdn Bhd).
Foreign companies could also register their company in Malaysia as a foreign branch with CCM to conduct a similar business in Malaysia. Foreign companies should note that setting up a branch office is not equivalent to incorporating a new company and is merely an extension of the head branch of the foreign company. This also means that the head branch of the foreign company will be fully responsible for any liabilities incurred by the branch office.
There is a two-step process involved:
- Step 1 – Name Search and Application to Reserve a Name via MyCoID 2016
Foreign companies would firstly have to conduct a Name Search online through the MyCoID 2016 portal and make an application to CCM to reserve a company name to be registered in Malaysia. The foreign company name should be the same as the name registered in its country of origin.
Reserving a name would cost a prescribed fee of RM50.00 for every 30 days a name is reserved. Take advantage of our free name search.
- Step 2 – Making an application over the nearest SSM counter
Next, within the validity period of the reserved name, foreign companies would then need to fill up an application form under Section 562(1) of the Companies Act and submit it physically (i.e. offline filing) to CCM over their nearest counter, together with all documentation and information required, including a certified copy of the certificate of incorporation or registration of the foreign company and its Memorandum and Articles of Association (or any other instrument defining its constitution). Note that for local company, you can already do the whole application online via MyCOID 2016.
It is important to note that one of the requirements for setting up a branch office is that a foreign company would need to engage an agent (under a memorandum of appointment or power of attorney) who is a resident in Malaysia to act on its behalf in its dealings in Malaysia, and the agent would need to confirm his/her consent for such appointment as part of the application.
Registration Fee payable to SSM:
|Share Capital of the Foreign Company (in RM)||Fee (RM)|
|≤ RM1 million||5,000|
|> RM1 million but ≤ RM10 million||20,000|
|> RM10 million but ≤ RM50 million||40,000|
|> RM50 million but ≤ RM100 million||60,000|
|> RM100 million||70,000|
Foreign companies not intending to have a long-term presence in Malaysia could consider this option. Otherwise, it is always advisable to form a local company instead.
For more information, please see CCM’s guidelines by clicking here.
3. By registering a Representative/Regional Office in Malaysia (note: this is not a Sdn Bhd)
Alternatively, if a foreign company has no intention (or not yet, at least) to conduct business or commercial transactions in Malaysia but intends to set up an office in Malaysia for any other purpose, foreign companies can make an application to register a Representative/ Regional Office with the Malaysian Investment Development Authority (MIDA). There is no need to register the Representative/Regional Office with CCM, and the turnaround time for making such an application is 4-6 weeks provided that all documentation and information provided by the foreign company is complete. There is no registration fee involved.
Foreign companies should note that the purpose of such offices serves as a temporary establishment to assess business viability prior to incorporating a permanent business entity in Malaysia, and that by setting up a Representative/Regional Office, foreign companies are not allowed to do business in Malaysia out of such offices. Permitted activities that can be conducted include gathering and analysis of business information or prospects, identifying sources of raw materials, components or industrial products, undertaking research and product developments, acting as a coordination centre, and any other activity which does not directly result in any commercial transactions.
For more information, please see MIDA’s guidelines by clicking here.
The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.
Credit: Website Designer Malaysia by Rozzario Digital Agency