A Guide To Company Registration In Malaysia For Foreigners

For foreigners looking to set up a business in Malaysia, a private limited company known as a Sendirian Berhad or Sdn Bhd is the most common route.  

Incorporating the business entity itself can be done in a few days – it is the legal decisions around it that take significantly longer, including: 

• how you structure your shareholding 
• whether you need a local partner 
• what goes into your Shareholders’ Agreement, and  
• what licences your business needs  

These determine whether the company actually works down the road, and our guide covers the legal side of forming a Sdn Bhd as a foreigner – what the law requires, what decisions you need to get right, and when to get a lawyer involved. 

Defining a Sdn Bhd 

A Sdn Bhd is a private limited company under the Companies Act 2016. It is a separate legal entity from its owners, which means: 

• the company can own property, enter contracts, and sue or be sued in its own name, 
• the shareholders’ liability is limited to what they have paid (or agreed to pay) for their shares, and 
• the company continues to exist even if its shareholders or directors change

A Sdn Bhd can have between 1 and 50 shareholders. It is the default vehicle for most foreign investors setting up in Malaysia, whether you are running a trading business, a tech startup, a consultancy, or a food and beverage outlet. 

Can foreigners own 100% of a Sdn Bhd?

Yes! In most sectors, a Sdn Bhd can be 100% foreign-owned. There is no general requirement under the Companies Act 2016 for a local shareholder. 

However, certain sectors still restrict foreign ownership or require a minimum local (including Bumiputera) shareholding, including: 

• large-scale wholesale and retail trade 
• professional services (engineering and architecture) 
• financial services (banking, insurance) 
• telecommunications 
• healthcare 
• oil & gas, and 
• education 

If your business falls into one of these sectors, you may need a Malaysian partner. The equity split, decision-making rights, and exit terms should be set out in a Shareholders’ Agreement. 

Legal requirements to form a Sdn Bhd 

Under the Companies Act 2016, a Sdn Bhd must have: 

1. At least one director who ordinarily resides in Malaysia. This means they have a principal place of residence here. A foreigner on a valid Employment Pass can qualify. 
2. At least one shareholder. This can be an individual or a corporate entity, and can be 100% foreign in most sectors. 
3. A licensed Company Secretary. This is a statutory requirement, the company secretary handles SSM filings, maintains statutory registers, and advises on compliance. 
4. A registered office address in Malaysia. This is the official address for statutory correspondence. It does not have to be your business premises. 

For a detailed walkthrough of the registration process and filing steps, our cosec partner has a comprehensive guide on company registration in Malaysia for foreigners. 

Paid-up capital requirements

There is no minimum paid-up capital requirement under the Companies Act 2016 to incorporate a Sdn Bhd. You can technically start with RM1. But in practice, paid-up capital matters a lot more than the law suggests, because several downstream requirements are tied to it: 

1. Employment Pass eligibility. If you or your foreign staff need an Employment Pass to work in Malaysia, Immigration requires a minimum paid-up capital based on the foreign shareholding level in the company: 
   • 100% Malaysian‑owned: RM250,000 
   • Joint venture with ≥ 30% foreign equity: RM350,000 
   • 100% foreign‑owned: RM500,000 
2. WRT / USS licence. Trade / services businesses with ≥ 51% foreign equity need a minimum paid-up capital of RM1 million. 
3. Other sector-specific licences. Manufacturing, construction, and certain services have their own capital licensing conditions. 
4. Credibility. Banks, landlords, and commercial partners often look at paid-up capital as a basic indicator of a business. 

Your paid-up capital should be based on what your business will need for licensing and operations, which a lawyer and Company Secretary can help work out. 

Shareholding structure 

If you are the sole shareholder, the structure is simple.  

But if there are two or more shareholders, the shareholding structure deserves careful thought before incorporation. Before anything is filed, you and your partners should be aligned on the fundamentals:  

• who holds how many shares and what that means for voting control,  
• whether shares can be transferred freely or only with the other shareholders’ consent 
• what happens if someone wants to exit 
• how profits are distributed, and
• who has authority over major decisions like taking on debt, issuing new shares, or selling the company

These terms should be set out in a Shareholders’ Agreement. Without one, you fall back on the default rules in the Companies Act 2016 and the company’s constitution (if you adopt one), which may not reflect what you and your partners actually agreed.  

In practice, disagreements between shareholders tend to surface within the first two years, and by then it is much harder to negotiate terms than it would have been at the start. 

If you are bringing in an investor at the same time as incorporation, the investment terms (valuation, conditions, investor rights) are typically captured in an Investment Agreement alongside the Shareholders’ Agreement. 

Nominee arrangements 

Some foreigners use a Malaysian nominee shareholder to hold shares on their behalf. This is legal, but it carries real risk if not properly documented. 

A nominee arrangement should always be backed by a written declaration of trust and (where applicable) a share transfer form held in escrow. Without these, proving that you are the real owner of the shares becomes difficult if the relationship breaks down. 

Post-incorporation compliance steps 

Incorporating the company is just the starting point. Before you can start operating, there are several practical steps that run in parallel with the legal setup. 

1. Appointing a Company Secretary, an officer responsible for keeping the company in compliance with the Companies Act 2016. 
2. Opening a corporate bank account with a resolution drafted by your Company Secretary – as a foreign-owned company can take longer than expected as banks may have more stringent due diligence steps. 
3. Applying for relevant business licences, such as a WRT licence for trading, an MITI manufacturing licence, local council approvals, or a combination.  
4. Registering with the Inland Revenue Board (LHDN) for corporate tax. Although this happens automatically upon incorporation, best practice is always to verify your Tax Identification Number (TIN) has been created. 
5. Applying for Employment Passes (EPs) if you or your foreign staff will be relocating to work as full-time employees in Malaysia. 

Once you begin hiring, each employee should have a written employment contract that complies with the Employment Act 1955.  

And on an ongoing basis, the company must file annual returns, maintain statutory registers, and lodge financial statements with SSM, your company secretary handles most of this. 

Do you need a lawyer to incorporate? 

For a straightforward incorporation with a single foreign shareholder, a Company Secretary may be enough as they handle name searches, SSM filing, preparation of statutory documents, and post-incorporation compliance. 

But you should involve a lawyer when: 

• there are two or more shareholders and you need a Shareholders’ Agreement, 
• a local or foreign investor is coming in and you need investment documentation, 
• you need to set up nominee arrangements with proper legal protection, 
• you are acquiring an existing company rather than starting fresh (in which case, see our guide on M&A in Malaysia), or 
• your business involves regulated activities that need license applications reviewed

In short, for anything involving multiple parties, investment, or licensing complexity, you will likely benefit from having a lawyer well-versed in foreign business setups and cross-border investments into Malaysia. 

Let ELP support your cross-border venture 

We regularly work with foreign entrepreneurs and investors setting up in Malaysia, handling the legal structuring and coordinating with Company Secretaries and tax advisors. If you are planning to set up a foreign-owned Sdn Bhd and want to make sure the legal structure is right from day one, book a consultation with us.