Malaysian Business Sector - Government

Generally, the distribution of legislative and executive powers is vested between Federal and State governments in Malaysia. Basically, federal government is responsible in external affairs, internal security, transportation, shipping, trade, education, medicine, commerce, labour and tourism.

Meanwhile, state government has authority over local government and services that include licensing of business, markets and fairs. Prior to setting up your own business in the country, planning is utmost important to succeed in business.

To begin with, you need to identify and determine the right business model that applies to your business or service. Malaysia provides various models and framework to suit investors’ master plan. Among some of the business models available are sole trader/proprietor, regional distribution centre (RDC), international procurement centre (IPC), partnership, unincorporated association, operational headquarter (OHQ), representative/regional office as well as company (which is separated into public or private limited).

Private and public companies are the most popular structure in the country. Owners must first apply and register with Companies Commission of Malaysia (CCM). To match the business models available with your business plan, you need to understand how each model operates and runs.

Private companies confine the rights to sign over its shares and the number of members is limited to 50 only. Besides that, based on the memorandum and articles, invitations to deposit money or subscribe to shares are not available to the public.

On the other hand, public companies can offer shares to the public provided the company has registered and applied a prospectus with Securities Commission. Say for example, a private company wants to change and convert into a public company, owners must ensure that the company runs based on the requirements stated in the Companies Act.

A foreign company that wishes to expand the business opportunities by opening up a branch in Malaysia is known as ‘branch of a foreign company’. These companies are required to register as a foreign company with CCM before determining a location in Malaysia.

For foreign investors who would like to venture into trade or manufacturing sectors, their office is known as representative or regional office. A representative office in the country is meant to handle investment prospects in manufacturing sector and also to establish bilateral trade relations with other business partners. But bear in mind that a representative office is not allowed to carry transaction and earn revenue from the business.

Meanwhile, regional office of a foreign company serves as a platform for affiliates and agents to coordinate and interact with other offices located in Southeast Asia or Asia Pacific region.

An operational headquarter (OHQ) or also commonly known as locally incorporated company can be foreign-owned or Malaysian-owned. OHQ is free from 10 years tax exemption.

International procurement centre (IPC) is similar to OHQ as both are locally incorporated company. The centre is responsible to carry out procurement and sales of raw materials to buyers. Finally, regional distribution centre (RDC) that consists of different consolidation centres manufacture finished products before distributing it to dealers, agents and other relevant companies. RDC is also responsible in packaging and labeling the finished goods.

Moving on, foreign investors should find out more information before establishing a business in Malaysia. Generally, Ministry of International Trade and Industry (MITI) is responsible in handling foreign investment in line with the objectives to encourage and protect Malaysian interest in international trade sector.

To spur and boost development of industrial activities in international arena, MITI has established Malaysian Industrial development Authority (MIDA) to facilitate and coordinate industrial activities and foreign investments in the country.

Foreign investors shall look through the foreign investment committee guidelines before establishing a company or merging with other businesses in Malaysia. One of the most important guidelines stated in FIC is to allocate a minimum of 30 percent shares to Bumiputeras.

Companies Commission of Malaysia (SSM)

The Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia, SSM) began its operation on April 16, 2002. It is a statutory body to register businesses and offer relevant information to the public.

To register a new business with SSM, identify whether your business is a partnership or sole proprietor. A partnership refers to business with 2 owners and not more than 20 partners while sole proprietor is a business with only one owner.

After identifying your business model type, you need to acquire an application form from SSM and fill up your personal name. At this stage, business name is not necessary for approval from SSM yet. Next up, within 30 days, owner must obtain a registration form of new business and submit it back to SSM after filling up required information such as name, address and nature of business, date of commencement, owners of business and partnership agreement if applicable.

When you submit the application form to SSM, prepare registration fee based on your business models. Owners can submit the form directly to the nearest SSM office or snail mail it.