In Bahasa Malaysia, a private limited company is called a ‘Sendirian Berhad’, hence the abbreviation ‘Sdn Bhd’ suffixed to its name. If you are a foreigner, this is the only type of company you can incorporate in Malaysia. Foreigners are not allowed to incorporate public companies limited by shares or companies limited by guarantee, which are also public companies by nature. As the name suggests, the shares of such companies are privately issued to individuals and/or corporate bodies, and the minimum number of shareholders required in a private limited company is 1, and the maximum number allowed is 50. The minimum number of directors required is 1 director, who is ordinarily residing in Malaysia with a principal place of residence in Malaysia. There is no need to publicly report the financials of the company, nor is there a need to hold an annual general meeting. Some advanced ways of using private limited companies include incorporating such companies for the purpose of joint ventures and to facilitate holding and subsidiary company arrangements/ relationships. Exempt private companies (as defined under the Companies Act 2016) which are owned by less than 20 individuals are not required to lodge its financial statements with Suruhanjaya Syarikat Malaysia (“SSM”) if it obtains a certificate declaring its status as an exempt private company. It is, however, still under the obligation to produce annual financial statements for its own record and internal circulation. A private company may convert to a public company, and vice versa, by passing a special resolution and lodging a notice of conversion with SSM.

In Bahasa Malaysia, a public limited company is called a ‘Berhad’, hence the abbreviation ‘Bhd’ suffixed to its name. Public limited companies may or may not be listed on the stock exchange but are usually listed to obtain the full benefits of being a public company, for e.g. to accept equity investment in its shares from the public. There is no cap to the maximum number of shareholders in a public limited company, and it is obligatory of public limited companies to hold annual general meetings and make annual reports on their financials. Due to its public nature, public limited companies are subject to higher reporting standards and listing rules by Suruhanjaya Syarikat Malaysia (“SSM”) and the Securities Commission of Malaysia. The minimum number of directors required is two (2) directors ordinarily residing in Malaysia with a principal place of residence in Malaysia. Examples of public limited companies include major banks, telco companies, construction companies, property development companies etc. and these companies could opt to be listed on the stock exchange, if qualified.

As mentioned above, a CLBG is a public company, and by default has the term ‘Berhad’ or abbreviation ‘Bhd’ suffixed to its name. CLBGs can, however, apply for the suffix to be omitted from its name. CLBGs are widely used for not-for-profit companies such as charities, community projects, clubs, societies and other similar bodies. No profits or dividends are distributed to the members of the company. CLBGs are prohibited from having a share capital under the Companies Act 2016, and unlike other types of companies, CLBGs are required to adopt a company constitution at the time the company is incorporated, which shall state, inter alia, that the company is a company limited by guarantee, the objects of the company, the capacity, rights, powers and privileges of the company, and the number of members with which the company proposed to be incorporated. In case you are unaware, any charity organisation you formed which involves more than twenty (20) people are required to be registered with the Suruhanjaya Syarikat Malaysia (“SSM”) too, as unincorporated associations are prohibited under the Companies Act 2016. Examples of CLBGs include organisations carrying names with the terms Foundation (Yayasan), Institute (Institut), Academy (Akademi), Corporation (Badan), Alliance (Gabungan), Fund (Tabung), Centre (Pusat) etc.

Foreign companies, as the name suggests, are companies (or other corporate bodies) incorporated outside of Malaysia, and can be incorporated or registered in Malaysia in one of two ways: (1) incorporating as a local company (i.e. Sdn Bhd) (with foreign shareholder ownership) with the Suruhanjaya Syarikat Malaysia (“SSM”); or (2) registering the foreign company with SSM as a foreign branch (i.e. branch office). Unlike a local company, a foreign company registered as a foreign branch office will not be a separate legal entity under the Companies Act 2016, as they are merely an extension of the parent company, and are as such not incorporated as a new entity. It can also be costly to set up a foreign branch as the SSM registration fees are high, ranging from a minimum of RM 5,000 up to RM70,000 depending on the share capital of the foreign company. Branch offices are mostly used by foreign companies wishing to adopt short term operations in Malaysia. Otherwise, it would almost always be better to incorporate a local subsidiary company instead. iComSec provides company incorporation and business advisory. If you are unsure which types of companies are suitable for your business, contact us for free consultation.