What Is Company Incorporation? Definition, Advantages & Steps

Company incorporation refers to the procedure of establishing a company as its own legal entity, which distinguishes the company’s assets and revenue from that of its owners and investors. 

This legal entity is known as a “corporation”. The most important implication is that the company, regardless of size, is owned by shareholders and managed by a director, as opposed to a conventional sole proprietor. 

Malaysia permits the formation of corporations, which are typically identified as such by the use of phrases such as:

• Inc.
• Limited (Ltd.)
• Sendirian Berhad (Sdn. Bhd.)
• Berhad

Summary

If you are pressed for time, here are the basics you need to know about company incorporation in Malaysia:

• it establishes a business as a legal entity, distinguishing the company’s assets from that of its owners
• it shields the owner/founder’s personal assets from being seized to settle company debt
• it requires a set of documents called the company constitution containing key company information 
• a company may be digitally incorporated via Suruhanjaya Syarikat Malaysia’s MyCoID 2016 online portal
• there is a fee of RM1000 for companies limited by shares and RM 3000 for companies limited by guarantee
• the company is legally obligated to hire a Company Secretary within 30 days of incorporation
• the Company Secretary will advise them on matters related to the Companies Act 2016
• unfamiliarity from business owners can lead to a significant amount of wasted time
• MISHU would like to assist you with simplifying every step of the incorporation process

The #1 Reason For Company Incorporation in Malaysia

Further advantages of incorporation are presented below, but the key reason many entrepreneurs including SME owners incorporate their businesses is to protect their personal assets from liabilities incurred by the company.

Incorporation acts as a protective bubble of restricted liability that surrounds the company’s owners (shareholders) and directors. As a result, corporations can take risks necessary for growth without putting shareholders, members, and directors in danger of financial loss beyond their initial investments.

How The Incorporation of a Company In Malaysia Works

The specifics of a business’s formation and structure can vary by country. However, most corporations have several common characteristics, including:

• Being formally organised and brought into existence through incorporation
• Owning a series of legal documents listing key company details, known as the company constitution
• Having business assets kept separate from that of owners and investors

Company Constitution

When forming a corporation, a company constitution must be compiled and submitted, in which is disclosed the company’s:

• main objective  
• various addresses, 
• directors
• number of shares, and, if applicable 
• type of stock 
  
  

Directors and shareholders

The company director is entrusted with carrying out day-to-day operations in the company’s best interests. Smaller companies may have just one director, whereas larger ones frequently have a board of twelve or more. The directors are not liable for company debt unless there is fraud involved or specific tax rules apply. They are typically chosen once a year by shareholders.

A shareholder is any entity that owns at least one share of a company’s stock. Small businesses may have just one shareholder, while publicly listed companies may have thousands. Typically, shareholders are only liable for their own shares’ payment and have a right to partake in the company’s profits, paid out as dividends.

The Advantages of incorporation of a company in Malaysia

Compared to sole proprietorships or partnerships, corporations enjoy several distinct benefits: Flexibility and autonomy, perpetual succession, limited liability, separate property, corporate identity, transferable shares, and the opportunity to sue are among the advantages of company incorporation.

1. Perpetual Succession

The company can continue operating even in the event of an owner or member’s passing, bankruptcy, insanity, change in membership, exit from the firm, transfer of stock, etc, many of which would usually result in a sole proprietorship closing down.

Instead, the corporation retains the same rights, exemptions, estate, and belongings despite any changes in its membership. until it is permanently shut down.

2. Limited Liability

Members of a company are responsible for contributing to the liabilities of the firm in the event that the company is shut down for legal reasons but only to the extent of the member’s unpaid shares.

3. Separate Property

As a recognised legal body, the firm is the party in whom assets are vested, controlled, managed, and disposed of. As a result, a stakeholder of the company could face criminal charges for misappropriation of funds if company assets are used for personal gain.

4. Corporate Identity

With the clear legal separation of the company and owner’s assets, it is usually easier to secure financial backing from banks and private funders. Additionally, funds can be raised by selling off company shares, with the possibility of later buying them back at a mutually agreed-upon price.

5. Transferable Shares

Any member’s shares or other interests in a business must be a movable property that can be transferred. This results in money being invested in shares so that members can pay out their shares whenever they like. It also helps investors by giving them access to liquidity. So, anytime they want to, they can sell shares.

The process of company incorporation in Malaysia

According to the Companies Act 2016, all businesses conducting business in Malaysia must register with the Companies Commission Malaysia (CCM), better known as Suruhanjaya Syarikat Malaysia (SSM). 

The MyCoID 2016 online portal is where directors or promoters of a proposed company can digitally incorporate the business. However, they will still need to go through a one-time verification process in person at the nearest SSM counter. To save time and trouble, business owners typically hire a company secretarial service to do it for them.

Pre-incorporation

Before moving forward with incorporation, you must meet these requirements:

1. Company Name

You must get SSM’s consent for the proposed company name beforehand.

2. Director

Private limited companies require at least one director with a Malaysian principal address of residence, and who is not barred from serving as a director under the Companies Act 2016. For public limited companies, a minimum of two directors must be provided who are non-disqualified under the Companies Act 2016.

3. Shareholder

There must be at least one shareholder (either person or corporation), with a limit of 50 shareholders for limited private corporations. For public limited companies, a minimum of two shareholders are required.

4. Company Secretary

Every company must hire at least one Company Secretary within 30 days of incorporation. A company secretary is a party entrusted with enforcing company compliance with the Companies Act 2016, ensuring that decisions of directors are implemented and filing company annual returns.

5. Business Address

If a company’s primary place of business is different from its registered address, this address must be added. It is recommended to include your company address.

6. Registered Address

This part usually contains the address of the Company Secretary.

7. Share Capital

A minimum of RM1 in paid-up capital is required.

During the application, no documents need to be presented unless SSM has specifically requested them. However, all facts and statements made or submitted at this phase must be accurate. 

If an agent is hired to apply on the company’s behalf, scanned copies of the shareholders’ and directors’ identification, such as NRICs or passports for individuals, incorporation documents for body corporations, and other proof of documents, are typically requested for verification purposes.

The incorporation process

Step 1: Select Company Name For Direct Incorporation

Use our free name search tool to check the availability of a desired name.

If a name is available but you are unsure whether to continue with incorporation, you could pay RM50 to reserve a name for up to 30 days, with an additional RM50 fee for every subsequent 30-day extension.. 

Step 2: Fill Out Company “Super Form”

After a proposed company name has been authorised, the next step is to complete the “Super Form,” which asks for details about the business, including proposed company name, type of company and proposed line of business. 

Next, information about the directors, shareholders, and promoters of the proposed company are required, as well as a declaration from the directors or promoters that they are not undischarged bankrupt either in or outside of Malaysia, and have not been convicted of any offence either in or outside of Malaysia.

Step 3: Pay Incorporation Fee & Compliance Declaration

Once you have carefully reviewed the information you have provided and declared that all requirements under the Companies Act have been met, you can proceed to pay the required incorporation fee.

For businesses limited by shares, the incorporation charge is RM1,000; for those limited by guarantee, it is RM 3,000.

Provided there are no rejections or inquiries from CCM, the review procedure typically takes one to two business days, after which the incorporation is complete!

Post-incorporation

A registration notice will be provided to the company once it has been successfully incorporated and assigned a unique registration number as proof of incorporation.

Following incorporation, companies should prioritise securing further necessary documents, creating a company bank account, and adhering to all regulations as stipulated by the Companies Act 2016. Before starting your business, you are urged to consult the appropriate authorities and secure any further required licenses, permits, or approvals specific to your line of business. 

If you are seeking more information on company incorporation in Malaysia or the process of incorporation of a company for specific industries, we would be delighted to assist you. We also have a complete guide on how to register a company in Malaysia here. 

Contact us today.

Incorporate Now to Enjoy a RM60,000 Tax Rebate

Companies registered by December 31st, 2022 are eligible for an annual RM20,000 tax rebate for the next three years.

With just over a month left, it’s time to move quickly. 

Consider engaging MISHU to manage your incorporation process. Having handled hundreds of incorporations over the past several years, we have a thorough understanding of the process and requirements. Our team is dedicated to making unfamiliar paperwork and government procedures feel effortless. Additionally, receive a complimentary life insurance policy worth RM50K.

Contact us for more information on how to snag this once-in-a-lifetime opportunity for your business!