The provisions of The Companies Act 1965 allow the establishment of 3 types of companies:

• a company limited by shares, which can be private or public.
• a company limited by guarantee, where the members guarantee to meet the liability of up to a nominated amount if the company is wound up.
• an unlimited company, where there is no limit to the members' liability.

Most foreign businesses in Malaysia operate as private companies limited by shares.

Incorporation of a company requires an application to be submitted to the Registrar of Companies (ROC); supported by the following:

• Memorandum and Articles of Association
• Statutory declaration of compliance with the Companies Act 1965
• Certificate of identity
• Consent to act as director
• Statutory declaration by directors
  

Registration fees are on a scale from RM1,000 for authorised capital below RM100,000 to RM70,000 for capital above RM100 million.

Offshore Company
An Offshore Company (or an Offshore Foreign Company) is only permitted to carry on business in, from or through the Labuan International Offshore Financial Centre. The setting up of an offshore company comes under the provisions of the Offshore Companies Act 1990.

Some features of an Offshore Company are:

• Beneficial ownership does not have to be disclosed
• The standard authorised capital is US$10,000; divided into 10,000 shares of US$1
• The minimum issued capital is one share, which may by fully or partly paid
• Registered shares of par value, preference shares, redeemable shares and shares with no voting rights are all permitted
• Bearer shares are not permitted
• There must be a registered office and agent in Labuan
• There is a minimum of 1 director and 1 secretary which can be corporate
• There is a minimum of 1 shareholder
• An annual return must be filed
• A set of accounting records must be kept in Labuan

Offshore Companies engaged in trading pay 3% on net audited profits or the sum of RM20,000. Trading companies that opt to pay tax of RM20,0000 annually do not have to file financial statements, or employ an auditor. A trading company which pays 3% of audited net profits must appoint an auditor and file audited financial statements.

The registration fee payable by an Offshore Company is RM1,000 to RM5,000 depending on its authorised capital; an Offshore Foreign Company pays RM6,000. In addition, ongoing annual fees of RM2,000 and RM5,000 are payable by an Offshore Company and an Offshore Foreign Company respectively.

For further information and application, please contact :

Labuan Offshore Financial Services Authority (LOFSA)
Tel: 6087 - 408188
Fax: 6087 - 413328
URL: www.treasury.gov.my
E-mail: communications@lofsa.gov.my

Sole Proprietorships and Partnerships
All sole proprietorships and partnerships must be registered with the Registrar of Business (ROB) under the Registration of Business Ordinance 1965. A registration fee and an annual renewal fee is payable.

Operational Headquarters (OHQ)
Malaysia offers attractive financial and other incentives to foreign businesses that set up an 'Approved Operational Headquarters Company' in the country. Among these are tax concessions on income, interest and royalties as well as easier and more flexible terms for expatriate posts, credit facilities and investments in foreign securities.

An OHQ is a company incorporated in Malaysia, whether local or foreign owned, which conducts its business within the country for the purpose of providing qualifying services to its offices or its related companies outside Malaysia.

Qualifying services provided by OHQs to its offices or related companies outside Malaysia includes:

• Management and administration
• Treasury and fund management
• Corporate financial advisory services
• Research and development work carried out in Malaysia
• Training and personnel management

Companies that have a sizeable network of companies outside Malaysia, are well established in terms of assets and employees with a substantial number of qualified technical and other personnel can apply for approved OHQ status.

Applications for OHQ status should be submitted to:

Ministry of Finance, Tax Analysis Division
Tel: 603 - 2582000
Fax: 603 - 2548632
URL: www.treasury.gov.my

International Procurement Centres (IPCs)
IPCs are locally incorporated companies, whether local or foreign owned, which carry on business in Malaysia to undertake procurement and sales of raw materials, components and finished products for related or unrelated companies in Malaysia or abroad. For these IPCs, the country's ideal location offers immediate access to a market of over 500 million people in the ASEAN Free Trade Area (AFTA).

It also offers world-class physical and communications infrastructure, a skilled labour force, competitive rentals for prime office space, a very good quality of life and widespread use of English. All of these have helped make a real difference in terms of business turnover and a strong regional presence.

Some of the world's leading companies which have set up IPCs in Malaysia are:

Sony
JVC
NEC
Matsushita
Kenwood
Panasonic
Toshiba
B Braun Medical Industries
Clarion Gateway
Ikea Handel
Ericcson Mobile Communications
Robert Bosch
TDK
Canon Opto
Xircom Operations
Acer Technologies
Hitachi Consumer Products

The establishment of an IPC is essential for companies that find it advantageous to engage in sales and procurement of raw materials, components as well as finished products with strategic partners here in Malaysia.

An IPC has to be incorporated locally under the Companies Act 1965, with a minimum paid up capital of RM500,000 and a minimum operating expenditure of RM1.5 million. IPCs are required to have annual turnovers in excess of RM50 million and need to use Malaysian ports and airports.

The incentives for IPCs are:

• Expatriate posts are approved based on requirements of the IPC
• An IPC can open one or more foreign currency accounts with any licensed commercial bank to retain their export proceeds without any limit imposed.
• The company can enter into foreign exchange forward contracts with any licensed commercial bank to sell forward export proceeds, based on projected sales.
• An IPC is allowed 100% equity holding by the promoter
• The company can bring in raw materials, component or finished products with customs duty exemption into Free Industrial Zones, Licensed Manufacturing Warehouses, Free Commercial Zones and Bonded Warehouses for repackaging, cargo consolidation and integration before distribution to the final consumers.

For further details and application procedures, contact:
Ministry of International Trade and Industry, Industries Division
Tel: 603 - 62016022
Fax: 603 - 62012341
URL: www.miti.gov.my

Representative Office
Many foreign manufacturing and trading companies find that for a greater global presence some activities may be best carried out in locations closest to business focus areas. The country welcomes the setting up of Representative Offices to carry out the following activities:

• Planning and coordination of business activities
• Market research and feasibility studies
• Research and product development
• Coordination of a company's affiliates, subsidiaries and agents
• Trading activities which will not result directly in actual commercial transactions
• Identifying sources of raw materials, components or other industrial projects

A representative office must be funded from sources outside Malaysia, and is not allowed to engage in trading (including import and export) business activities. Activities such as the leasing of warehousing facilities, signing business contracts, provision of services for a fee or even undertaking the daily management of any of a corporation's subsidiary or affiliates should be done at company level, by incorporating a local company under the Companies Act 1965.

For further details and application procedures, contact:
Ministry of International Trade and Industry, Industries Division
Tel: 603 - 62016022
Fax: 603 - 62012341
URL: www.miti.gov.my