Company Law

Formation Of a Company

  

BASIC INFORMATION ABOUT COMPANY LAW IN MALAYSIA

A company must have a minimum of two directors, being natural persons of full age and having their principal or only place of residence in Malaysia and not under bankruptcy .Directors need not be shareholders of the company. A director has onerous duties under the Companies Act as in common law. The duties of directors stipulated in the Companies Act are not exhaustive and generally directors are imposed with statutory duties, duty of care and fiduciary duties. In addition, directors are also governed by a Code of Ethics.

(1) Every company shall have at least two directors, who each has his principal or only place of residence within Malaysia.

(2) No person other than a natural person of full age shall be a director of a company.

(3) The first directors of a company shall be named in the memorandum or articles of the company.

(4) Any provision in the memorandum or articles of a company which was in force immediately before the commencement of this Act and which operated to constitute a corporation as a director of the company shall be read and construed as if it authorized that corporation to appoint a natural person to be a director of that company.

(5) On the commencement of this Act any corporation which holds office as a director of a company shall cease to hold office and the vacancy may be filled as a casual vacancy in accordance with the articles of the company.

(6) Notwithstanding anything contained in this Act or in the memorandum or articles of a company or in any agreement with a company, a director of a company shall not resign or vacate his office if, by his resignation or vacation from office, the number of directors of the company is reduced below the minimum number required by subsection (1) and any purported resignation or vacation of office in contravention of this section shall be deemed to be invalid.

COMPANY FORMATION

1. Who can become a director of a Private Limited Company/ Sdn Bhd?

• A person must be of age 18 years and above.

• A person must not be an Undischarged Bankrupt.

2.Who can become a company secretary of a Private Limited Company/

   Sdn Bhd?

• A member of MIA (Malaysia Institute of Accountants)

• License Secretary of SSM (Suruhanjaya Syarikat Malaysia)

• Member of MAICSA (Malaysian Institute of Chartered Secretaries and Administrators)

• Lawyer in Malaysia 

3. Information required for incorporation are as follows:

• I/C or Passport Number

• Full name as per I/C or passport

• Residential address in Malaysia

• Propose 'COMPANY NAME'

• Nature of the business of the company 

4. What is the Charges for Formation of a company

• RM 1,688 Net 

Types of Business Entities

1. Sole Proprietorship 
2. Partnership business entity
3. Limited Company (SDN. BHD. or Sendirian Berhad or BHD or Berhad)

Sole Proprietor (or Sole Trader)

Like many other countries out there, the Sole Proprietorship business entity in Malaysia is owned solely by one individual, as his/her liability is unlimited.

Partnerships

The “Partnership” business entity is a joint-entity holder with two or more persons to carry out a legal business in Malaysia. The Companies Commission of Malaysia requires that partnership entities MUST comprise of at least two (2) members and a maximum twenty (20) members.

Limited Company (SDN BHD or BHD)

Sendirian Berhad (SDN BHD) is a private limited company, where it prohibits any invitation to the public to subscribe to any of its shares, deposit money with the company for investment or subscription. Minimum members in a private limited company is TWO (2) and maximum is FIFTY (50).

Berhad (BHD) is a public limited company where its shares can be offered to the public for fixed periods and any other forms of subscription. The minimum amount of members’ (shareholders) are TWO (2) and maximum of unlimited amount of members.

There are three (3) types of limited companies in Malaysia:

1. Limited by Shares
2. Limited by Guarantee
3. Unlimited company with/without share capital

Companies Limited by Shares

Liability of members’ contribution to this company is limited to the amount specified on their unpaid shares. Should the company becomes insolvent or goes into liquidation, members are not obligated to pay off the company’s debts if and unless any one of the members gives a personal guarantee.

Companies Limited by Guarantee

In a limited company’s Memorandum and Articles of Association, members’ liability is limited to the amount they ‘guarantee’ or undertake during winding up – In which the amount is specified in the Memorandum, agreed and signed by all members.

Unlimited Companies

Unlimited companies are no different from sole proprietorship and partnership business entities. One of the only difference is that they have a special articles of association and are free to return capital to its members’.