— Business Entity Types

Types of Business Entities in Malaysia

ENTITY TYPE
KEY FEATURES
FOREIGN OWNERSHIP
Sole Proprietorship
Run by an individual and registered with the SSM under the Registration of Businesses Act 1956
Not available. Limited to Malaysian citizens or permanent residents
Partnership
Formed by 2 to 20 partners, who bear joint liability
Not available. Limited to Malaysian citizens or permanent residents
Limited Liability Partnership
LLP
At least 2 partners, and a compliance officer ordinarily resident in Malaysia must be designated
Non-professional LLPs may be held by foreign investors, though they are rarely used for foreign investment in practice
Private Limited Company
Sdn. Bhd.
A separate legal entity; shareholders’ liability is limited to their shares
Available. The most common choice for foreign investors
Public Limited Company
Bhd.
At least 2 directors; may offer shares to the public
Available. Suited to listing or public fundraising
Branch of a Foreign Company
Branch
A branch of a foreign company registered in Malaysia; not a separate legal entity, and a local agent must be appointed
Available
Representative / Regional Office
Requires government approval; may not carry out commercial activities
Available

— Common Choices for Foreign Investors

The Two Most Common Choices for Foreign Investors

(1) Representative Office

A representative office is neither a company nor a separate trading entity. It is mainly used for early-stage market research, gathering investment and business information, feasibility studies, liaison and coordination, and promoting the parent company. A regional office, by contrast, coordinates affiliated companies across Southeast Asia and the Asia-Pacific.

A representative office may not engage in trading, import and export, or any form of commercial activity; it may not sign contracts on behalf of the parent company or collect service fees, and it may not take part in the day-to-day management of any Malaysian subsidiary. Establishment requires MIDA approval, and an extension must be applied for before the approval period expires; the specific period and conditions are subject to MIDA’s latest guidelines.

Best suited to: companies that only want to study the market first and are not yet generating revenue.

(2) Private Limited Company (Sdn. Bhd.)

This is the choice of the vast majority of Chinese companies. It is a separate legal entity that can carry on business, enter into contracts, open bank accounts, employ staff and apply for industry licences, while its shareholders’ liability is limited to the shares they have subscribed for. The Companies Act 2016 is the main governing legislation, and the company is regulated by the Companies Commission of Malaysia (SSM).

— Sdn. Bhd. Structure

Structure of a Private Limited Company

RM1

Minimum Capital

Paid-up capital basis

1–50

Shareholders

Individuals or corporate entities

≥1

Director

At least 1 resident in Malaysia

≥1

Company Secretary

Natural person resident in Malaysia

Share Capital

A company can be registered with minimum capital of just RM1, and capital is on a paid-up basis.

Banks apply certain capital requirements when opening a corporate account. Clients therefore usually register with a few thousand ringgit of capital and increase it later as their industry or business requires.

Please note: industry-specific licences often carry their own capital or size requirements, which must be met separately. For example, a Manufacturing Licence (ML) is not tied to a minimum paid-up capital; the licensing obligation is triggered once shareholders’ funds reach RM2.5 million or more, or the company has 75 or more full-time employees (meeting either one is enough). MD Status requires paid-up capital of no less than RM1,000, and licences such as WRT and CIDB each have their own thresholds.

Shareholders

 
At least 1 shareholder and at most 50;
 
The Companies Act does not restrict shareholders to natural persons or legal entities. A Chinese parent company may be the sole shareholder (100% ownership), which is entirely permissible in law;
 
However, when applying for industry licences later, many industries restrict or set requirements on foreign shareholding or shareholder background, so these should be confirmed before incorporation.

Directors

 
At least 1 director; a board of several directors is also possible;
 
Directors must be natural persons aged 18 or above;
 
At least 1 director must have a Malaysian address (a mandatory requirement under the Companies Act 2016);
 
Directors may be foreign nationals, provided the resident-director requirement above is met.

Company Secretary and Registered Address

 
At least 1 company secretary must be appointed, who must be a natural person resident in Malaysia and hold the prescribed qualifications or an SSM licence;
 
The company must have a registered office address in Malaysia, used to receive official documents and keep statutory records.

Ultimate Beneficial Owner (UBO)

The Companies Act 2016 requires every company to establish and maintain a register of beneficial owners and to file the information with the SSM. The ultimate beneficial owner disclosed after looking through the ownership chain must be a natural person. A person is a UBO if any one of the following conditions is met:

 
Directly or indirectly holds more than 20% of the company’s shares or voting rights;
 
Has the right to directly or indirectly appoint or remove a majority of the directors;
 
Actually exercises significant influence or control over the company’s management and operations;
 
Holds ultimate control over any of the above rights through an agreement or other arrangement.

Impact on Chinese-owned companies: the actual controller of the Chinese parent company (such as the founder, a major shareholder or the ultimate controller) should be declared to the SSM as a UBO if any of the conditions above is met, even if that person does not appear directly in the Malaysian company’s shareholding structure. Failure to declare, or an inaccurate declaration, may result in fines and legal liability.

— China vs Malaysia Governance

China vs Malaysia: Core Governance Concepts

Chinese companies should note in particular that Malaysia has no “legal representative” system.

COMPARISON
CHINA: LEGAL REPRESENTATIVE
MALAYSIA: DIRECTOR
Number
Only one person, the sole external representative
At least 1; may form a board of directors
Source of Authority
Conferred by law and held automatically, with no authorisation required
Granted by board resolution or the company’s constitution
Registration
Must be registered with the market regulation (industry and commerce) authority
Director details must be filed with the SSM
Qualifications
No uniform age or nationality requirement
Natural person aged 18 or above; at least 1 resident in Malaysia
Liability
Legal responsibility attaches to both the “nominal” and the “actual” role
Directors must discharge their statutory duties and bear the corresponding legal risks and personal liability

Key point: in Malaysia, the authority to run the company and sign documents on its behalf comes from board resolutions and the company’s constitution, not from a single fixed “legal representative”. A Chinese parent company should therefore plan its authorisation arrangements in advance, such as who may sign contracts, open bank accounts and apply for licences, and confirm them in written board resolutions to avoid blind spots in internal control.

Note also that a nominee director is not exempt from liability: whether or not a director actually takes part in running the business, they may bear statutory responsibility, and a parent company should understand this fully when appointing directors.

As for shareholders, the basic definition is similar in both countries: a shareholder is a party that holds equity in the company and is entitled to dividends and voting rights.

— Setup Steps

Basic Steps to Get Started

01
Define the business scope, and confirm whether an industry licence is required and whether that industry has foreign shareholding or capital requirements;
02
Choose the entity type (usually an Sdn. Bhd.; a representative office is an option if you only wish to explore the market);
03
Determine the shareholding structure, the directors (including a resident director), the company secretary and the registered address, and set up the beneficial ownership register and file the UBO declaration with the SSM;
04
Reserve the company name and register with the SSM, obtain the certificate of incorporation, and complete tax registration and other statutory registrations;
05
Open a bank account, and prepare the capital in line with the bank’s requirements;
06
Apply for the industry licences and permits that your business requires;
07
After incorporation, meet ongoing compliance obligations such as annual filings and audits on time.

— How We Help

How We Can Assist

Yingke Malaysia can help you choose an entity type suited to your business needs; plan the shareholding, director and company secretary structure; handle company name search and SSM registration; assist with preparing the UBO register and declaration; coordinate bank account opening; and, depending on your industry, flag the licences and capital requirements you will need to address next.

※This page is for general reference only and does not constitute legal, tax, financial or investment advice. Malaysia’s company laws, SSM requirements, industry entry rules, foreign shareholding restrictions, bank account-opening requirements and related government policies may change from time to time; please refer to the latest provisions of the Companies Act 2016 and those issued by the SSM, MIDA, the relevant authorities and banks. Every business’s circumstances differ. Before establishing an entity, please verify the latest requirements with the competent authorities and consult an adviser. Yingke Malaysia accepts no responsibility for decisions made in reliance on this page or for any loss arising from it.