What is Sendirian Berhad (Sdn Bhd) Company in Malaysia?
In the vibrant landscape of Malaysian business opportunities, the Private Limited Company, or Sendirian Berhad (Sdn Bhd), stands as a prominent choice for entrepreneurs and investors, both local and foreign. This versatile business entity provides numerous advantages, from limited liability protection to a favorable tax regime.
However, understanding the intricacies of incorporating an Sdn Bhd in Malaysia is crucial for a seamless establishment. From the initial steps of company name reservation to the mandatory risk assessments, this article provides a comprehensive guide to the requirements and procedures involved in creating a Private Limited Company in Malaysia.
With these complexities in mind, follow RS 36 Solutions to delve into the intricacies of Malaysia’s accounting landscape to help you navigate this financial terrain effectively.
Sdn Bhd Meaning
Sdn Bhd, also known as a Private Limited Company, offers distinct advantages for foreign investors. This business structure allows foreigners to fully own their company, making it a preferred choice among international investors.
Sdn Bhd companies can have a shareholder count ranging from 2 to 50 individuals. However, they do not issue shares to the public, ensuring that it remains a closed entity, not seeking external investments.
Private limited companies, often utilized by small and medium enterprises, are particularly well-suited for newcomers in the business arena. Sdn Bhd companies hold a separate legal entity status, granting them the ability to acquire property, apply for bank loans, and incur debts in their own name.
This separation between the company and its owners safeguards personal assets, making them untouchable in the event of business liabilities. Shareholders are only accountable for the company’s debts in proportion to their respective investments.
While foreign investors can typically own 100% of their Sdn Bhd business, there are exceptions in certain sectors where full foreign ownership is restricted. These industries require at least 50% Malaysian ownership:
- Oil & Gas
- Education
- Tourism
- Agriculture
- Banking
How Is Sdn Bhd Different As Compared To Berhad And A Partnership?
Comparison between SDN BHD and BHD Companies in Malaysia
Aspect | SDN BHD (Private Limited Company) | BHD (Public Limited Company) |
---|---|---|
Suffix Signification | Extended suffix "Sendirian Berhad" (SDN BHD) | Suffix "Berhad" (BHD) or "Bhd" signifies a Public Limited Company (PLC) |
Number of Shareholders | One to fifty shareholders | Unlimited number of shareholders |
Company Size | Primarily small and medium-sized businesses (SMEs) | Typically larger in scale |
Financial Statement Accessibility | Not required to be made available to the public | Required to make financial statements public |
Access to Capital | Limited access compared to BHD companies | Greater access to capital through public equity and debt financing |
Articles of Association | Imposes more stringent requirements | Less restrictive requirements |
Private Limited Company (Sdn. Bhd.) in Malaysia
A Sendirian Berhad (Sdn Bhd) company in Malaysia represents a private limited business entity that can be established by both local and foreign entrepreneurs. In Malaysia, all businesses are mandated to register with the Companies Commission of Malaysia (SSM), which acts as the regulatory authority overseeing corporate operations in the country, and Sdn Bhd entities are no exception.
The Companies Commission of Malaysia (SSM) plays a pivotal role in governing all businesses operating in Malaysia, including Sdn Bhd companies. Therefore, registering with the Malaysian Companies Commission (SSM) is a prerequisite for any company to legally operate within Malaysia.
Malaysia has emerged as a prominent choice for company registration among foreign investors in Asia, offering an array of advantages as an investment destination, including a favorable tax regime and robust government support.
Following the transformation from the Company Act 1965 to the Company Act 2016, foreign investors now have the liberty to hold sole ownership of a company, serving as both director and shareholder, without the obligation to appoint a local nominee director. This liberty applies to most industries in the country, with strategic sectors reserved for national interest as exceptions. As a result, incorporating a private limited company (Sdn. Bhd.) stands as the most favorable structure for initiating a business in Malaysia.
Why Register a Sendirian Berhad Company (Sdn Bhd) in Malaysia?
When contemplating business ventures in Malaysia, there are several compelling reasons to consider registering a Sendirian Berhad (Sdn Bhd) company. Malaysia offers a strategic location, conveniently situated in close proximity to numerous major Asian markets. In fact, the World Bank ranked Malaysia as the 18th easiest country in the world to conduct business .
One of the key attractions for foreign entrepreneurs is the allowance of 100% foreign ownership for Sdn Bhd companies in Malaysia. Additionally, Malaysia places no restrictions on the repatriation of capital gains, dividends, royalties, and profits.
With double taxation treaty agreements in place with 68 countries, coupled with low start-up costs and reasonable premise rentals, Malaysia emerges as an enticing business hub for foreign investors in search of lucrative opportunities.
Sdn Bhd companies are highly favored among business entity options in Malaysia due to their status as separate legal entities from their owners. This distinction has earned them an excellent reputation, making it easier to secure loans.
Furthermore, Sdn Bhd companies in Malaysia offer business continuity, meaning they can operate without interruption unless there is a valid reason for ceasing operations. The separation of legal entity status ensures the protection of personal wealth for owners, a significant advantage. This separation also enables the transfer of ownership, contributing to the company’s continued existence.
Low-income tax risk exposure is another advantage associated with Sdn Bhd companies in Malaysia, making them a preferred choice for many entrepreneurs when incorporating businesses in the country. With appropriate tax planning, one can fully leverage the tax benefits that Malaysia has to offer when establishing an Sdn Bhd company.
Moreover, Sdn Bhd companies in Malaysia enjoy a favorable market perception as stable and transparent business entities, thanks to stringent reporting requirements.
Key Features of an Sdn Bhd in Malaysia
When considering an Sdn Bhd (Sendirian Berhad) company in Malaysia, it’s important to understand its key features, which make it an appealing choice for entrepreneurs:
Limitation of Liability
A fundamental feature of an Sdn Bhd is the concept of limited liability. This safeguard protects the personal wealth of the shareholders/owners. Shareholders are accountable for the company’s debts in proportion to their investments, ensuring their personal assets remain protected.
Perpetual Continuity and Separate Legal Entity Status
An Sdn Bhd company holds a distinct legal status from its shareholders/owners. This separation allows the company to operate independently of changes in its founders, directors, or shareholders. The company can persist and function unless dissolved, even in cases of founder, director, or shareholder deaths or retirements. It possesses the authority to buy and sell assets, enter into contracts, and file lawsuits.
Ownership Transferability
In Malaysia, shareholders of an Sdn Bhd have the freedom to sell or transfer shares to anyone of their choosing, provided the potential buyer can meet the financial requirements for the shares.
Easier Fundraising
Raising capital for an Sdn Bhd, whether through equity or loans, is relatively straightforward. The share model simplifies the process, allowing investors to participate as long as the valuation is agreed upon. Sdn Bhd’s established corporate structure also makes it easier to secure loans from banks, often at lower interest rates compared to other business formats. Banks may view Sdn Bhd loans as less risky than loans to other business structures.
Profit Distribution Flexibility
Shareholders/owners of an Sdn Bhd corporation have the flexibility to distribute the company’s profits according to their preferences. They can determine how salaries, director’s fees, bonuses, dividends, and other incentives are allocated, as well as how much money should be reinvested in the company. This flexibility empowers owners to adapt profit distribution to their specific needs and goals.
Advantages of a Private Limited Company (Sdn. Bhd.) in Malaysia
Disadvantages of Incorporating a Private Limited Company (Sdn. Bhd.) in Malaysia
Requirements to Establish a Private Limited Company (Sdn. Bhd.)
Requirements | Description |
---|---|
Director Appointment | Appoint at least one director with a valid residential address in Malaysia. |
Director Age | Directors must be a minimum of 18 years old. |
Paid-up Capital | Inject a minimum paid-up capital of MYR 1. |
Crucial Considerations for Entrepreneurs
Considerations | Details |
---|---|
Business Plan | Develop a comprehensive business plan outlining company activities, operational details, intended workforce, target market, potential suppliers, and rationale for operating in Malaysia. |
Registration and Compliance Costs | Registration fee via an appointed Company Secretary is around MYR 2,500. Annual compliance costs (covering Company Secretarial services, accounting, tax filing, etc.) range from MYR 4,500 to MYR 6,000. |
Business Licenses | Depending on the industry, specific licenses may be required (e.g., manufacturing license, general license for renting office space). |
Hiring Foreign Workers | Paid-up capital requirement varies for employing foreign expatriates, ranging from MYR 250,000 to MYR 500,000. Work visa or employment pass for foreign workers is essential. |
Key Positions | Fill third-party positions like Company Secretary, auditor, and tax agent. Distinction lies in paid-up capital requirements regardless of ownership. |
Tax Structure | Understand Malaysia’s territorial tax system, where residents and non-residents are taxed based on Malaysian-sourced income. |
Procedure for Incorporating a Private Limited Company (Sdn. Bhd.)
Incorporating a Private Limited Company (Sdn. Bhd.) in Malaysia involves the following procedure:
Preliminary Works
- Clients must complete the Know Your Client (KYC) process on our patented platform.
- Our team will verify the proposed company name’s availability within 24 hours.
Company Name Reservation
- Directors’ NRIC/Passports are required for the company name reservation application.
- The proposed name should have a definition, such as the nature of the business or relevant meanings.
- Examples include “ABC Ice Cream Sdn. Bhd.,” where “A” stands for Apple, “B” for Banana, and “C” for Cherry in the context of an ice cream business.
- “Oishii Sushi Sdn. Bhd.” uses “Oishii,” which means “delicious” in Japanese.
- “Ramu Pharma Sdn. Bhd.” takes its name from the director, Ramu, with a required consent letter.
- “Paul Hype Page Sdn. Bhd.” may require a consent letter due to its similarity to a sister company in Singapore.
- For trademarked names like “Petronas Sdn. Bhd.,” consent from the owner is essential.
- Include the nature of the business in the proposed name.
Signing of Incorporation Documents
- Once the proposed name is approved, the company has 30 days to complete the incorporation process.
- Our team will prepare the necessary documents, which will be generated through our platform for stakeholders to review and sign.
- All signatures can be done online, eliminating the need for physical presence, regardless of whether clients are local or foreign.
Risk Assessments
- After the signing process is completed, our team will proceed with risk assessments.
- This step is integral to ensuring risk and compliance assurance, verifying that all stakeholders within the company have a clean background.
The estimated timeline for these steps is as follows:
- Name reservation: 1 to 3 working days
- Company incorporation: 3 to 7 working days
All incorporation applications are electronically submitted to the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia, SSM) by our certified Company Secretary, facilitating a smooth and efficient process.
Annual Compliance for Private Limited Company (Sdn. Bhd.)
Compliance Obligations | Description |
---|---|
Annual Return | Submit annual return within 30 days from the anniversary of incorporation, with non-compliance subject to fines not exceeding MYR 5,000. |
Financial Statement | Lodge financial statements (audited or unaudited) within 6 months from the financial year end, with fines for non-compliance not exceeding MYR 5,000. |
Income Tax Return | Submit tax return within 7 months from the financial year end, detailing chargeable income and tax payable as per Malaysia’s tax regulations. |
Conclusion
In conclusion, the appeal of a Private Limited Company (Sdn Bhd) in Malaysia extends far beyond its borders, attracting entrepreneurs and investors with its enticing advantages. The process of establishing an Sdn Bhd entails a meticulous sequence of steps, from selecting an appropriate company name to conducting essential risk assessments.
By adhering to the regulatory and procedural framework laid out in this guide, business enthusiasts can embark on their journey to establish a Private Limited Company in the thriving landscape of Malaysia, ultimately unlocking a world of opportunities and advantages in the heart of Southeast Asia.
Frequently Asked Questions (FAQs)
What is a Private Limited Company (Sdn Bhd) in Malaysia?
A Private Limited Company in Malaysia is a business entity offering limited liability protection to its shareholders.
Can foreigners own a Private Limited Company in Malaysia?
Yes, foreigners can fully own an Sdn Bhd in Malaysia as long as they have a local residential address.
How many shareholders can an Sdn Bhd have?
An Sdn Bhd can have between 2 to 50 shareholders.
What are the key features of an Sdn Bhd?
Key features of an Sdn Bhd include limited liability, perpetual continuity, ownership transferability, and flexible profit distribution.
What are the advantages of incorporating an Sdn Bhd in Malaysia?
Advantages include separate legal entity status, 100% foreign ownership, corporate tax advantages, tax-exempt dividends, and flexibility in the holding company structure.
What are the disadvantages of incorporating an Sdn Bhd in Malaysia?
Disadvantages involve divided ownership, limitations on the number of shareholders, public access to financial records, mandatory annual audits, and restrictions on share transfers.
What are the requirements to establish an Sdn Bhd in Malaysia?
Requirements include at least one director with a Malaysian residential address, a minimum paid-up capital of MYR 1, and compliance with industry-specific regulations.
What is the procedure for incorporating an Sdn Bhd in Malaysia?
The procedure involves preliminary works, company name reservation, signing of incorporation documents, and risk assessments.
Is there a specific timeline for incorporating an Sdn Bhd?
The process typically takes 1 to 3 working days for name reservation and 3 to 7 working days for company incorporation.
What is the tax structure for Sdn Bhd companies in Malaysia?
Malaysia follows a territorial tax system, where residents and non-residents are taxed based on Malaysian-sourced income, and foreign-sourced income is generally not taxable.