Incorporated vs Unincorporated Joint Ventures In Malaysia: A Guide

In Malaysia, business collaborations are often set up as incorporated or unincorporated joint ventures (JVs), with the choice between the two affecting liabilities, registration, governance, as well as exit arrangements. 

Below we break down both in detail to help you decide which is right for your collaboration. 

Overall comparison 

As a rule, choose an unincorporated JV if the collaboration is project-specific, time-limited, and does not require licences, a bank account, or employees in the JV’s name. 

Choose an incorporated JV if the venture is intended to be ongoing, needs to hold licences or assets, involves foreign equity, or where the parties want limited liability protection. 

If you are still in the early stages and not ready to commit to either structure, a Memorandum of Understanding (MOU) can document the parties’ intentions and key commercial terms while they work towards a final agreement. 

Unincorporated joint venture (contractual JV) 

In an unincorporated JV, no new legal entity is created. The parties enter into a contract, typically called a Joint Venture Agreement (JVA) that sets out how they will work together, share costs, and divide profits or output. 

Each party remains a separate legal entity and deals with its own tax, liabilities, and assets. 

The JV itself cannot own property, open a bank account, or enter contracts in its own name. Everything must be done through one of the parties, or jointly. 

This structure is typically used for: 

• one-off or time-limited projects, 
• a contract with a third party where each contributes specific capabilities, 
• arrangements where parties want to keep the deal off the corporate register, and 
• early-stage collaborations where incorporation is premature 

Incorporated joint venture (company-based JV) 

In an incorporated JV, the parties form a new Sdn Bhd together. Both (or all) parties become shareholders of the JV company. The company is a separate legal entity. It can own assets, enter contracts, employ staff, hold licences, open bank accounts, and take on liabilities in its own name. 

The JV is also governed by a Joint Venture Agreement (JVA), which also functions as a shareholders’ agreement alongside the company’s constitution and the Companies Act 2016. 

This structure is typically used for: 

• long-term business collaborations intended to operate as a going concern 
• ventures requiring licences, permits, or regulatory approvals in the JV’s own name 
• arrangements where parties want limited liability protection from the JV’s activities 
• foreigners partnering with a Malaysian to meet local equity requirements, and 
• ventures requiring their own employees, premises, and bank accounts. 

In Malaysia, you may also hear the term Special Purpose Vehicle (SPV) used in the context of a JV. An SPV is an incorporated JV company set up for a specific project or purpose, often wound down once that project is complete. The structure is the same as any other incorporated JV (a Sdn Bhd) and is governed by the same JVA framework. 

SSM registration requirement

An incorporated JV must be registered with the Companies Commission of Malaysia (SSM) as a new Sdn Bhd. The incorporation process is handled by a licensed Company Secretary, who registers the company, prepares statutory documents, and maintains the company’s registers on an ongoing basis. 

An unincorporated JV does not need to be registered with SSM, because no new company is being formed, and the JVA is a private contract between the parties. 

Joint venture vs partnership 

In a partnership, the partners carry on business together under the Partnership Act 1961, with personal liability and no separate legal entity. A JV is more structured: in an incorporated JV, the parties have limited liability through the Sdn Bhd. In an unincorporated JV, the liability position depends on how the JVA is drafted. See ELP’s guide to Joint Venture vs Partnership Agreements for more on the distinction. 

If you are considering a longer-term collaboration without incorporating a new company, it is worth confirming whether the arrangement would legally constitute a partnership. ELP’s guide to partnership agreements in Malaysia covers the key terms. 

Joint venture vs collaboration agreement 

A collaboration agreement is a looser commercial arrangement where parties agree to cooperate on a specific matter, such as referring clients to each other, co-developing a product, or sharing resources, without the full governance structure of a JVA. 

It is appropriate for arrangements that do not involve shared profit and loss, equity contributions, or significant shared liabilities. If the arrangement grows into something more substantive, a JVA (and possibly an incorporated structure) should be considered. 

JV bank account opening 

An incorporated JV company can open its own corporate bank account in the usual way. 

As an unincorporated JV has no legal identity, banks will not open an account for it. In practice, one party holds the project funds. This creates questions around who controls the money and what happens on exit, which is why the JVA needs to address this clearly. 

Shareholding structure for incorporated JVs

Each party’s stake is reflected by their shareholding percentage in the Sdn Bhd. The equity split does not have to be equal. A 60/40, 70/30, or 51/49 split is common, particularly where one party is contributing more capital or where foreign equity caps apply in a particular sector. 

The shareholding also determines voting rights, dividend entitlement, and the ability to trigger reserved matters under the Joint Venture Agreement. Getting the equity split and governance terms right from the outset is critical.  

Disputes between JV partners over control and profit-sharing are among the most common commercial disputes ELP sees. 

Joint venture tax treatment 

Unincorporated JV: each party is taxed individually on its share of income from the JV. There is no separate tax entity. 

Incorporated JV: the company is taxed as a separate entity under Malaysian corporate tax law. Profits distributed as dividends are subject to a different tax treatment. 

The tax implications, particularly for cross-border JVs involving foreign parties, can be significant and should be reviewed with a qualified tax adviser. Our cosec partner MISHU has a useful overview on the tax treatment of foreign joint ventures in Malaysia. 

Do you need a Joint Venture Agreement? 

Yes, for both structures a written Joint Venture Agreement is the document that governs how the parties work together, namely:

• each party’s contributions (capital, IP, services, equipment) 
• equity split and voting rights (for incorporated JVs) 
• how day-to-day decisions are made 
• reserved matters requiring unanimous consent 
• profit distribution and how losses are borne 
• confidentiality and non-compete obligations 
• what happens if a party wants to exit, and 
• how disputes are resolved and what law governs the agreement 

Without it, the parties fall back on general contract law and (for incorporated JVs) default provisions of the Companies Act 2016, which rarely reflect what the parties actually intended

Let ELP support your Malaysian joint venture 

We advise parties setting up both incorporated and unincorporated joint ventures in Malaysia, advising on the right structure, drafting agreements, and reviewing existing documentation. If you are planning a joint venture and want to understand the legal side before committing, book a consultation with us.