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Can foreigners participate 100% in business activities?
With the liberalization of equity policies, foreign investors can generally hold 100% of the shares in most industries, except for strategic industries related to national interests.
Manufacturers please refer to the Equity Policy for Manufacturing .
For service providers, please refer to Liberalisation of Services in Malaysia .
Nevertheless, the relevant government departments have formulated specific industry regulations and implemented strict policies, such as higher paid-up capital requirements. For example, the paid-up capital requirement for a trading company owned by locals is RM2, while the paid-up capital requirement for a trading company owned by foreigners (foreign equity exceeding 51%) is RM1 million.
If foreign investors are not allowed to participate 100% in the proposed business activities, they can consider opening a joint venture with local investors, with the local partner holding more than 51%. This can help reduce the requirements for setting up a company, such as not having to apply for a wholesale and retail trade (WRT) license, thereby reducing costs.
Which business entity is most suitable?
There are many forms of doing business in Malaysia – sole proprietorship, traditional partnership, limited liability partnership, local company or foreign company. However, foreigners cannot set up a sole proprietorship or partnership in Malaysia unless they have Malaysian permanent residency (PR).
The type of business entity you choose will also affect compliance requirements, tax structure, etc. See a comparison of different business entities and options for foreign company setup in Malaysia .
Under the Companies Act 1965, the basic requirements for foreigners to open a company in Malaysia are the same as for Malaysians:
(i) there is at least one subscriber for the shares in the company (Section 14 of the Companies Act);
(ii) at least one local director (Section 122);
(iii) The Company Secretary may be:
A member of a professional body prescribed by the Ministry of Domestic Trade, Cooperatives and Consumerism; or
An individual authorised by the Companies Commission of Malaysia (SSM)
(iv) The minimum paid-up capital is RM1.
A foreign person will be considered a local director if he or she has his or her principal or only residence in Malaysia, i.e. holds a Malaysian work pass or permanent residence permit.
Our accounting firm’s nominee director services can help expatriates meet these requirements.
Each industry has specific regulations issued by relevant government departments, which may include restrictions on the company's foreign equity ratio, higher paid-in capital requirements, and the need to obtain regulatory approval (i.e. special approval, business license , permit or registration) before commencing operations.
Before registering a company, please consider all the requirements, especially the paid-up capital requirements. The process of incorporating a company with a minimum paid-up capital of RM2 is quicker and relatively cheaper, but you may not be able to operate your business if the company does not meet the licensing requirements and/or if foreigners are unable to obtain employment passes to work in Malaysia.
Business licenses can be divided into 3 different groups, namely:
General License
Industry specific licenses
Special license for activities
The most common license required by a foreign company is the WRT license.
The WRT license is applicable to distributive trade services in Malaysia with foreign participation (i.e. foreign equity is 51% and above), including wholesalers, retailers, franchisees, direct sellers, suppliers who sell goods in the domestic market, and commission agents or other representatives such as representatives of international trading companies.
The above industries must apply for a WRT license before applying for a professional work permit. The minimum paid-up capital requirement for applying for a WRT license is RM1 million, and the company must have a complete business premises, that is, a valid lease agreement, telephone lines, etc.
Owning a company in Malaysia does not mean that foreign investors/directors can stay in Malaysia permanently. They still need to apply for a work pass or Malaysia My Second Home (MM2H) program.
The cost of setting up a foreign-invested company depends largely on the business activities, equity structure, work permit requirements, etc.
Please email the following information to info@gmc2u.com so that we can better understand your company's requirements and provide you with relevant consultation and cost-effective quotation.
Proposed business activity and estimated annual revenue
Authorised and paid-up capital of the proposed company
Proposed shareholding structure, i.e. number of shareholders, nationalities of shareholders and shareholding ratio
Proposed board structure, i.e. number of directors, nationalities of directors
Recommended business licenses required by the company
Estimated human resource demand in Malaysia – number of employees (local/foreign)
Employment Pass Required for Foreign Directors