Guide for China Company Incorporation in Malaysia

Introduction

Malaysian companies are subject to the Companies Act 2016. A foreign company cannot carry on business in Malaysia according to the Companies Act 2016 unless it is registered as a foreign company (under Division 1, Part V of the Companies Act). Secondly, a foreign company can engage in its business directly by forming an incorporated local subsidiary with the Companies Commission of Malaysia. A foreign company should be clear about the options available and choose its method in light of its industry, nature of business and objectives.

In this article we will concentrate on what a foreign enterprise expanding into business and establishing its market position can do in Malaysia.

China Foreign Company

The term “foreign company” is defined under the Companies Act 2016 as either of the following:

(a) an overseas company, corporation, society or association or other body incorporated outside Malaysia.

(b) an unincorporated society, association or other body which has its head office or principal place of business outside Malaysia and which is entitled under the law of the country in which it is formed to sue or be sued in that territory, namely a body in whose name property may be held by the secretary so duly appointed.

According to Section 561(3) of the Companies Act 2016, “carrying on business” within the scope of that section covers maintaining or opening a share transfer or share registration office, managing property situated in Malaysia as agent and legal personal representative for or in cooperation with events occurring in Malaysia.

For any Chinese companies or foreign entity interested in the company registration and formation in Malaysian market, we will be very happy to introduce you to FastLane Group for first-class company incorporation and company secretary services.

Registration of the China Foreign Company in Malaysia as a Branch Office

The foreign parent company must register itself as a foreign company in Malaysia with the Malaysia Companies Commission if it wishes to continue doing business. For example, a branch office is not considered to be a distinct legal entity and must engage in the same type of business as the foreign parent company.

The following steps are a summary of the procedure to register a foreign company in Malaysia with the Companies Commission of Malaysia:

• The proposed company name must be screened for availability through a name search at the Companies Commission of Malaysia. With a foreign company in Malaysia, the name shall be identical to that of the parent company registered in its home country.
• The name search application should then be sent to the Companies Commission of Malaysia. Within three months, copies of registration documents must be submitted. Registration documents include:
  • Particulars of each shareholder or, if any of these persons is a body corporate, particulars of the body corporate.
  • List the details of each individual from abroad used as a director for that company in Malaysia.
  • The names of its shareholders or members at the parent country which is a foreign land.
  • If there is share capital in the country of residence, provide information on class and number of shares in the foreign parent company.
  • If the foreign parent company has no share capital, it must limit its amount to what the member undertakes to contribute to its assets if winding up occurs in that country.
  • A memorandum of appointment or power of attorney indicating the specifics about who can act as its agent in Malaysia, along with a declaration by the representative that he agrees to such an appointment.
  • A certified copy of the certificate of incorporation or registration of the foreign parent company.
  • The foreign parent company’s memorandum and articles of association, or other instrument defining its constitution translated into Chinese, duly certified.
  • Copy of the application and reservation for availability of the company name.
  • A copy of the letter or email, which indicates that your company name has been reserved; and
  • Materials and other information the Registrar of Companies may ask for.
• There are registration fees payable towards each category of the authorised share capital of a foreign company in Malaysia, which are as follows:

After completing the registration processes required by the Companies Act 2016 and submitting the relevant registration papers, Malaysia’s Companies Commission will give a China foreign company in Malaysia a certificate of registration.

For Chinese companies or foreign entity interested registration of a branch office, we will be very happy to introduce you to FastLane Group for first-class company incorporation and company secretary services.

Establishing a China Representative Office in Malaysia

This is a non-trading company that enables China foreign parent companies engaged in the manufacturing and services industries to research business and market possibilities in Malaysia. The representative office is used by the China foreign parent company to find out whether Malaysia is suitable for this kind of business. A non-trading entity, a representative office may engage in research and development, business, promotional and liaison activities but no form of activity which will lead to direct trading.

When compared to the registration documents for a branch office, establishing a representative office is not limited to companies that have been incorporated under the Companies Act 2016 and need prior Government of Malaysia approval.

Industries and supporting documents are, depending on the sector involved to which of three agencies they must be submitted to complete their application in either (i) Malaysian Investment Development Authority (general save banking, financial and tourism services), (ii) Bank Negara Malaysia or (iii) Ministry of Tourism. The following are documents required to be submitted to the appropriate governing body:

• It also requires a duly completed application form showing the purpose of establishment, activities of proposed office, contribution to Malaysia from establishment of proposed office and estimated its cash flow as well as human resources arrangements.
• A certified translation of the China foreign parent firm’s certificate of incorporation.
• China Foreign parent company business profile (certified copy).
• China Foreign parent company – Certified copy of the latest annual report and audited accounts of two years.
• Copy of the expatriate’s passport duly authenticated; copies of educational certificates, resume and past employment letters or appointment testaments (if applicable).
• A certified copy of the applicant’s tenancy agreement for its business operations in Malaysia.
• A certified translation of the document describing in detail what duties the applicant will be responsible for and what activities and products are undertaken by the China foreign parent company.

For Chinese companies or foreign entity interested registration of a representative office, we will be very happy to introduce you to FastLane Group for first-class company incorporation and company secretary services.

Incorporation of a Local Subsidiary Company in Malaysia

The China foreign parent company’s newest child entity, as is well known in Malaysia among the various types of companies that exist-can be established here as a private limited company by shares (Don’t let the name scare you–the acronym for this type of firm is Sdn Bhd). Sendirian Berhad (Sdn Bhd) is a separate legal entity from the China foreign parent company and can engage in any kind of business activity. The Sendirian Berhad will then be established as a separate legal entity and bear financial liabilities from its own business operations.

Such a Sendirian Berhad can issue shares to individuals and bodies corporate. Despite the fact that 100 % foreign-owned companies can be set up under a Sendirian Berhad, China foreign parent companies should know that restrictions or quotas can still apply to the ownership structure-sometimes there is a need for local or Bumiputera capital in strategic industries such as oil and gas, telecommunications, water and electricity.

The requirements and procedure under the Companies Act 2016 to incorporate a Sendirian Berhad are as follows:

• Each Sendirian Berhad must have at least one shareholder and one local director.
• A Sendirian Berhad must have at least one local qualified company secretary who is either a member of a professional body, or licensed by the Companies Commission of Malaysia.
• The company name must be searched at the Companies Commission of Malaysia to confirm its availability;
• Companies must within 30 days of incorporation present the required documents and certificates to the Companies Commission of Malaysia. statement giving the particulars of everyone wishing to incorporate the company
  • The name of the proposed company as approved;
  • Proposed company status–private limited.
  • The nature of the proposed company’s business;
  • The proposed location of the registered office of the proposed company.
  • Particulars of all the shareholders of the proposed company and, if any person is a body corporate, particulars of the body corporate;
  • The specifics of each person who will serve as a director of the planned company.
  • Class of stock and number of shares for each shareholder;
  • A form from each director stating his consent as a director of the proposed company and that he is not disqualified under section 160 of the Companies Act 2016 for acting as a director.
  • Such other information and documents as the Registrar of Companies may demand.
• After the company has met all the conditions for incorporating (as stipulated under the Companies Act 2016), Sendirian Berhad should submit these documents to the Companies Commission of Malaysia, which will then issue it with a certificate of incorporation.

In particular, every company will be reminded to get in hand licences, permits or approval from the authorities that are necessary for operation.

For Chinese companies or foreign entity interested registration of a local subsidiary company, we will be very happy to introduce you to FastLane Group for first-class company incorporation and company secretary services.

Conclusion

The Malaysian Government has always been liberal on foreign direct investments, and its openness to such investment will never change. According to the relevant China foreign parent company’s business expansion strategy conditioned by the nature of its operations and industry in which it is operating, how a China foreign company wishes to appear to consumers should consider types of channels through which opportunities exist for being used.

There are quite a number of procedures and requirements involved in the registration of China foreign companies as branches, the opening of representative offices and the incorporation or liquidation of Sendirian Berhad. Furthermore, there are other kinds of regulations concerning equity interest specifications or sectors.

With these kinds of procedures, requirements and bans involved, we always counsel our clients-the parent companies abroad on how to enter into Malaysia with regard to corporate expansions and structuring. We can help you weigh these alternatives. If you are China company planning to enter Malaysia market, please contact us for a free consultation.