Guide to Foreign Company Registration in Malaysia

If you’re an existing foreign company planning to establish a presence in Malaysia, understanding the legal structures and compliance requirements is critical for a smooth setup.

This guide covers the essentials for registering a foreign company in Malaysia, including relevant business structures and step by step process..

Types of Legal Entities Suitable for Foreign Companies in Malaysia

When setting up your operations in Malaysia, choosing the right company structure is crucial. The structure you select will depend on various factors such as your business objectives, investment size, intended activities, and operational needs. 

Below are the most common types of business structures available to foreign companies:

1. Private Limited Company (Sdn Bhd)

The Sdn Bhd is the most popular entity for foreign companies due to its flexibility and ability to operate as a wholly-owned subsidiary. You don’t need a local partner unless specified by industry regulations.

Since it’s a private limited company, shareholders’ liability is limited to their share contributions, ensuring protection against company debts.

2. Branch Office

A Branch office is an extension of a foreign parent company and allows you to engage in commercial activities under the same name as the parent company. However, it comes with some important limitations:

• Connected to Parent Company: A branch office is not a separate legal entity from its parent company. As such, the parent company assumes full responsibility for any legal obligations, debts, and liabilities the branch office incurs.
• Permitted Activities: Commercial activities such as trading, manufacturing, and distribution but cannot perform activities beyond what is allowed by the parent company’s scope of business.

3. Representative Office (RO)

A Representative Office is a temporary business entity that acts as a liaison for your foreign company in Malaysia. These offices typically handle non-commercial activities like market research, networking, and information gathering. Key features include:

• Non-Commercial: Representative offices do not engage in profit-generating activities and are prohibited from directly trading or selling products.
• Market Exploration: This structure is ideal for companies looking to explore the Malaysian market before making a more substantial investment.

Though limited in scope, a representative office allows you to assess potential business opportunities in Malaysia without committing significant resources upfront.

4. Labuan Company

Labuan companies in Malaysia operate under the Labuan International Business and Financial Centre (IBFC) framework, offering lower tax benefits and flexibility. These are generally preferred for offshore operations, such as financial services, trading, or holding assets.

Foreign companies can fully own labuan entities. However, these companies must operate from Labuan and require approval to conduct business with Malaysian residents. In addition to that, If a labuan company earns more than 20% of its net profits from Malaysian sources, it will be subject to Malaysian corporate tax rates and lose its Labuan tax benefits.

Legal Requirements for Foreign Company Registration in Malaysia

The legal requirements for foreign company registration in Malaysia depend on the type of business structure. These requirements ensure compliance with local regulations and smooth operations.

1. Corporate Officers

• Resident Director: Foreign-owned Sdn. Bhd. companies must appoint at least one Malaysian resident director to oversee operations. Branch and representative offices don’t require a resident director but must appoint a Malaysian resident agent to act on their behalf.
• Shareholder Requirements: Must have at least Shareholders can be both local or foreign individuals and legal entities. Branch and rep offices require incorporation documents for the parent company.
• Qualified Local Secretary: Every company must appoint a qualified company secretary, who is a local resident and licensed by the Companies Commission of Malaysia (SSM). The secretary ensures compliance with regulatory and corporate governance requirements.

2. Minimum Capital Requirements for Foreign Companies

The minimum capital requirements for registering a foreign company in Malaysia depend on your preferred business structure and sector:

• Subsidiary (Sdn. Bhd.)– Foreign subsidiaries must meet higher paid-up capital thresholds compared to local companies (minimum RM 1). For example:
  • Advisory and Consultancy Services: RM 500,000 minimum.
  • Import, Export, Restaurant, and Financial Services: Typically RM 1 million or more.
  • Restricted Sectors: Industries like banking, telecommunications, and education also require higher capital thresholds or specific shareholding structures.
• Branch Office– Branch offices do not have local paid-up capital requirements. Instead, the parent company must allocate sufficient funds to cover the branch’s operations, based on its business activities and scope.
• Representative Office– Representative offices also require no paid-up capital since they cannot engage in revenue-generating activities. However, the foreign parent company must cover all operational expenses and demonstrate financial support when registering with the Malaysian Investment Development Authority (MIDA).

How to Register a Foreign Company in Malaysia

Setting up a foreign company in Malaysia involves several crucial steps that require careful coordination with local authorities. Emerhub incorporation experts from Emerhub can help you manage this entire process on your behalf, including handling all official communications with the relevant authorities:

1. Choose a Business Structure for Your Foreign Company

Our experts will help you select a business structure that best aligns with your operational needs and goals. The most common structures for foreign companies in Malaysia are Private Limited Companies (Sdn Bhd), Branch Offices, and Representative Offices, each with their own set of advantages and regulatory requirements as mentioned above.

2. Registration with the SSM

We will assist in cross-checking name availability and initiate the name reservation process. Once your business name is approved (normally within 30 days), our experts can also prepare and submit the mandatory documents to the Companies Commission of Malaysia (SSM) in your stead. These include:

• A completed company registration form (Form 24, Form 49)
• Certified copy of the foreign company’s certificate of incorporation
• Certified copy of Articles of Association
• Copies of passports for directors and shareholders
• Proof of address for directors and shareholders
• Copy of the tenancy agreement or proof of office address
• Details of the appointed local director and company secretary

Once approved, the SSM will issue the business registration certificate. The registration process typically takes 2 to 4 weeks, depending on the accuracy and completeness of your documentation.

3. Obtain Necessary Operational Licenses

After incorporation, you will need to secure additional licenses and permits to start business operations. These include both mandatory licenses such as Signboard, Business License, etc as well as activity specific licenses. 

Some common activity specific licenses include manufacturing license, product registrations from NPRA and other relevant authorities etc.

Our experts will advise you on the required licenses and permits depending on your planned business activities in Malaysia.

4. Ensure Ongoing Compliance

After your company is established, maintaining compliance with Malaysian regulations is critical. This includes the following:

• Annual Returns: Submit audited financial statements annually to SSM.
• Tax Filings: Corporate tax rate is 24%, with exemptions for certain industries.
• Employment Regulations: Comply with local labor laws, including statutory contributions and employment contracts.

Emerhub’s expert team helps you establish your company in Malaysia by managing your company registration, obtaining all necessary licenses, and monitoring your ongoing compliance with local laws. 

Need assistance setting up a foreign company in Malaysia? Fill out the form below to get in touch with our experts!