4 Types of Company Registration in Malaysia You Can Choose From

Anyone who wants to establish a company in Malaysia has to keep a number of things in mind to make sure they comply with all of the required legal obligations. The company registration process in Malaysia is effective, especially when you are familiar with the essential aspects of the process.

According to the Companies Act 2016, there are three main types of legal company entities that both local and foreign investors can operate in Malaysia.

However, the requirements of the companies vary, depending upon the residency of the shareholders and the type of company. The purpose of this article is to elaborate on the differences between the four main types of company registrations in Malaysia.

1. Company Limited by Shares

A company is limited by shares when the owner of the company is held legally responsible for the company debts. Such companies can be of both public or private nature.

a. Private Limited Company

A private limited company is useful for both local residents and especially foreigners because foreigners can only incorporate this type of company in Malaysia.

The shares of these companies are privately issued to the members or corporate bodies. According to Malaysian law, the minimum number of shareholders in a private limited company is one, and the maximum number is 50.

Moreover, a private limited company must have at least one director who has a residence in Malaysia. The owners of such companies do not have to publish the financial report of the business or hold an annual general meeting.

A private company can be converted into a public company by passing a special resolution in the Companies Commission of Malaysia.

b. Public Limited Company

There is no limit on the maximum number of shareholders in a public limited company. Unlike private companies, public limited companies must hold annual general meetings and prepare annual financial reports.

Generally, public companies have to follow higher quality and reporting standards set by the Companies Commission of Malaysia and the Securities Commission of Malaysia.

2. Company Limited By Guarantee (CLBG)

A CLBG is another type of public company in Malaysia. This type of company registration in Malaysia is typically used for non-profit organizations like charities, community projects, societies, and such organizations. 

It simply means that no profits are given to the members of such organizations.

Furthermore, the Companies Act makes it quite clear that the CLBGs are prohibited from having any kind of share capital. They have to implement a company constitution at the time of incorporation.

The company constitutions should include the nature of the company and other such essential information about the capacity, rights, and privileges of the company. Such companies typically require the help of audit and accounting firms in Malaysia.

A charity organization registered as CLBG cannot have more than 20 members registered with the Companies Commission of Malaysia.

3. Unlimited Company

Limited liability is not applicable to the members and shareholders of unlimited companies. As a result, the shareholders are personally responsible for any possible losses.

However, it is important to note that the incorporation of unlimited companies in Malaysia is quite rare. The startup and operating charges and legal procedure of the company are the same as any other company.

The owners can easily convert an unlimited company into a limited company with the help of the Companies Commission of Malaysia.

4. Foreign Company

Companies that are incorporated outside of Malaysia are registered as a foreign company in Malaysia. Such companies can depend on audit and accounting firms in Malaysia to get the required accounting and financial management services as per the law in Malaysia.

Foreign companies can be registered in Malaysia in the following two ways:

1. Registering as a local company with foreign shareholder ownership.
2. Incorporating the foreign company with the Companies Commission of Malaysia as an international branch.

A foreign company that is registered as an international branch will not be considered a separate legal entity in the Companies Act. In fact, it is treated as an extension of the parent company.

The Bottom Line

The above discussion makes it quite evident that business owners who want to establish a company in Malaysia have a variety of options to register their companies.

Statistics show that most of the SMEs in Malaysia are registered as public limited companies. However, the number of private limited companies is also increasing due to increasing foreign investment in Malaysia.

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