With the liberalisation in equity policy, foreign investors generally could hold 100% equity in majority industries except for strategic sectors of national interest.

For manufacturing sector, please refer Equity Policy in the Manufacturing Sector

For Services sector, please refer Liberalisation of the Services Sector in Malaysia

Despite that, there are specific sector regulations issued by the relevant governmental departments which impose stringent policies such as higher paid up capital requirements. For example, paid up capital requirement for a local owned trading company is RM2 whilst foreign owned trading company (foreign ownership more than 51%) is RM 1 million.

If 100% foreign participation is not allowed, the foreign investor(s) could consider to joint venture with a local partner. Joint venture with a local partner (who own more than 51% shares) could also help to lower the business entry requirements such as exemption from WRT license and thus reduces the associated costs..

There are various forms of doing business in Malaysia – Sole Proprietorship, Traditional Partnership, Limited Liability Partnership (Limited Liability Partnership (LLP) set up), Local Company or Foreign Company (Malaysia Company Registration Guide). However, foreigners cannot set up a sole proprietorship or partnership in Malaysia unless they have Permanent Residency (PR) in Malaysia.

The type of business entity you choose will also affect compliance requirements, tax structure etc. Please refer to Comparison of Different Business Entities (Sole Proprietorship VS Limited Liability Partnership (LLP) VS General Partnership VS Corporation) and Options for Setting Up a Foreign Company in Malaysia (Options for Setting Up a Foreign Company 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 company’s shares (Article 14 of the Companies Act);
(ii)At least one local director (Article 122);
(iii) The company secretary may be：

• A member of a professional body prescribed by the Ministry of Domestic Trade, Cooperatives and Consumption; or
• Individuals authorized by the Companies Commission of Malaysia (SSM)

(iv) The minimum paid-up capital is RM1.

An expatriate will be considered as a local director if he/she has his/her principal or only residence in Malaysia, i.e. he/she is a holder of a Malaysian Work Permit or Permanent Residence Permit.

Rising Global Consultants Sdn. Bhd
‘s nominee director service can help expatriates fulfill these requirements.

Each industry has specific regulations issued by the relevant government department, which include possible restrictions on the percentage of foreign equity in a company, higher paid-up capital requirements, and regulatory approvals (i.e., special approvals, business licenses, permits, or registrations) that must be obtained prior to commencing operations.

Before incorporating your company, consider all the requirements, especially the paid-up capital requirement. Incorporating a company with a minimum paid-up capital of RM2 is a quicker and relatively cheaper process, but you may not be able to operate your business if the company does not meet the requirements for license application and/or expatriates are unable to obtain employment passes to work in Malaysia.

Business licenses can be categorized into 3 different groups, viz:

• General License
• Special License for Industry
• Event Special License

The most common license required for foreign companies is the WRT license.

The WRT license is applicable to Malaysian distribution trade services with foreign participation (i.e. 51% and above foreign equity), including wholesalers, retailers, franchisors, direct sellers, suppliers who sell goods in the domestic market, as well as 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 to apply for a WRT license is RM1,000,000 and the company must have a complete business premises i.e. with a valid lease agreement, telephone line, etc.

Owning a company in Malaysia does not mean that foreign investors/directors can stay in Malaysia for a long period of time, they still need to apply for a work pass or Malaysia-My Second Home (MM2H) program.

The cost of setting up a foreign company depends very much on the business activities undertaken, shareholding structure, work permit requirements etc.

Please email the following information so that we can better understand your company’s requirements and provide you with relevant advice and a cost-effective quotation.

• Proposed business activity and projected annual revenue
• Proposed authorized and paid-up capital of the company
• Proposed shareholding structure, i.e. number of shareholders, nationality of shareholders and shareholding ratio
• Proposed board structure, i.e. number of directors, nationality of directors
• Proposed business license required for the company
• Projected human resource requirements in Malaysia – number of employees (local/foreign)
• Employment passes required for foreign directors