How is planning a Virtual AGM different from Physical AGM?

Virtual AGM

How is planning a Virtual AGM different from Physical AGM?

Planning a Virtual AGM in Malaysia?

Virtual Annual General Meetings (AGMs) provide greater flexibility and engagement opportunities for all of your company’s shareholders regardless of their location.

However, there are many practical elements to consider when planning a virtual AGM. These include your company’s readiness to go digital, how to do a live Q&A, how polling will occur, which virtual meeting platform to use and more.

But, before you even get to the detailed planning stage, it is essential to review your company’s constitution to check if virtual AGMs are permitted and the AGM regulatory requirements to ensure that your company can meet its statutory obligations.

Below is a guide to everything you need to know about running a virtual AGM in Malaysia.

01 An overview of the current AGM requirements in Malaysia

Virtual, fully virtual and hybrid AGM limitations

Companies can only run virtual, fully virtual or hybrid AGMs if their constitution or trust deed allows them to.

AGM meeting inclusions

As per section 340 of the Companies Act 2016 (“CA”), publicly listed companies must discuss the following at their AGM:

  • audited financial statements and the reports of the directors and auditors;
  • the election of directors in place of those retiring;
  • the appointment and the fixing of the fee of directors; and
  • any resolution or any other business included on the meeting notice or as per the company’s constitution.

Timing of AGMs

The Guidance and FAQs on the Conduct of General Meetings for Listed Issuers (“Guidance Note”) issued by the Securities Commission Malaysia (SC) on 18 April 2020 and revised 16 July 2021 states:

Under section 340(2) of Companies Act 2016, a company shall conduct its annual general meeting (AGM)–

(a) within six months of the company’s financial year; and
(b) not more than 15 months after the last preceding annual general meeting.

In relation to listed real estate investment trusts (REITs), paragraph 13.18(a) of the Guidelines on Listed Real Estate Investment Trusts (Guidelines on Listed REITs) requires a management company to hold an annual general meeting–

(a) within four months of the REIT’s financial year end; and
(b) not more than 15 months after the last preceding annual general meeting.

Notice of AGM

The CA states that all shareholders must be sent a notice in writing about the AGM at least 21 days before it is being held. In addition, publicly listed companies must:

  • advertise the notice of AGM no later than 21 days before it occurs in at least one nationally circulated daily newspaper in Bahasa Malaysia or English;
  • send the notice of AGM in writing to each stock exchange where the company is listed; and
  • make an announcement to Bursa Malaysia Securities Berhad 21 days before the AGM is held.

AGM venue and member participation

The main AGM venue must be in Malaysia and with the chairperson present at this venue according to section 327 of the CA. Further, the venue must allow members to be able to participate and exercise their rights to speak and vote at the AGM using any technology or method.

Meeting quorum

To achieve quorum, there must be at least two members personally participating in the meeting or by proxy, pursuant to sub-section 328(2) of the CA.

Voting scrutineer

At least one scrutineer must be appointed to validate the votes cast at an AGM whether on-site or remotely.

02 How COVID-19 has impacted these AGM requirements

In response to COVID-19, the Malaysian Government have implemented a number of physical distancing and other safety precautions measures, including:

  • a movement control order (MCO);
  • a conditional movement control order (CMCO);
  • a recovery movement control order (RMCO);
  • an enhanced movement control order (EMCO); and
  • standard operating procedures (SOPs).

Companies have started to conduct virtual AGMs to mitigate risks associated with Covid-19 and comply with Guidance Note on AGM requirements issued by the Securities Commission of Malaysia (“SC”).

What are the definitions for Physical and Virtual AGM?

SC’s Guidance Note defines them as:

Physical AGM

“Conducted at a physical meeting venue(s) only, without any online participation.”

Physical AGMs are only an option during an RMCO, with the number of people allowed to physically attend subject to venue size and ability to comply with SOPs.

Fully Virtual AGM

“Conducted online where all meeting participants including the Chairperson of the meeting, board members, senior management and shareholders participate in the meeting online.”

Fully Virtual AGMs are a recommended option during any of the Movement Control Orders. They are the only AGMs allowable under an EMCO.

Virtual AGM

“Conducted online from a broadcast venue, where only essential individuals are physically present to conduct the virtual general meeting. All shareholders in a virtual general meeting participate in the meeting online.”

Virtual AGMs are a recommended option during an MCO, CMCO or RMCO. If held during an MCO, a maximum of 8 essential people are allowable at the broadcast venue. This increases to 20 people during a CMCO, and during an RMCO the number of people allowable is subject to venue size and ability to comply with SOPs.

03 What are the advantages and disadvantages of each AGM type?

Advantages

Disadvantages

Physical


  • Helps alleviate shareholder concerns about transparency: Some shareholders have the perception that physical AGMs allow for more transparent and robust discussions on company performance.

  • Access equity: caters to those who lack skills/equipment to participate remotely.


  • Additional costs: eg. venue hire, travel, catering, security, door gift and audiovisual support costs.

  • Limited accessibility: difficult for all shareholders to attend if they do not live within proximity of the venue.

  • Inflexible: physical AGMs are not able to be held when force majeure events occur such as pandemics or natural disasters.

Fully Virtual and Virtual


  • Lower costs if your company has a large shareholder base: companies can avoid the expenses associated with large physical venue hire and travel costs. While there is an initial upfront investment required for virtual AGM technology, companies save more in the long term.

  • Highly accessible: most shareholders can easily participate remotely.

  • Highly flexible: AGMs can proceed even during force majeure events such as pandemics or natural disasters.


  • Transparency concerns: perception held by some shareholders that Fully Virtual and Virtual AGMs may result in less transparent and robust discussions on company performance. However, reputable virtual AGM providers will offer a live Q&A function to help dispel these concerns.

  • Access equity issues: some shareholders may lack the equipment and skills to participate remotely.

  • Risk of technology failure: meetings may have to be adjourned until technology issues are resolved. An excellent meeting services provider will hold ‘dry-runs’ to minimise the risk of any technical issues.

Digital AGM tools are no longer just ‘nice to have’, but essential

Data from the SC’s Corporate Government Monitor 2020 (CG Monitor) indicates that younger people prefer to participate in AGMs using remote participation and voting facilities (RPV). In all age groups (except the 71 years and older category), vast majority of shareholders stated that they would like to have the option of remote AGM participation.

In short, AGM participation in the future will be firmly rooted in digital technology. This means that it is important for companies to start making the transition now to running virtual AGMs.

Need help running your next Virtual AGM?

Our team of share registry experts here at BoardRoom are poised to support your business to deliver the best Virtual AGM possible. We have extensive experience in executing AGMs, scrutineering and also using an independent, thoroughly integrated and purpose-built e-polling platform, Lumi. Through our unique platform, your company can hold live Q&A discussions and authenticate shareholders in real-time at your next virtual AGM.

Speak to one of our share registry experts today to find out why we are the leading provider of shareholder support solutions in the Asia Pacific region.

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How to Register a Company in Malaysia

how to register a company in Malaysia

How to Register a Company in Malaysia

How to Register a Company in Malaysia

Thinking of registering a business in Malaysia? The country’s liberal government policies and strong economic outlook make it easy to see why Malaysia ranks twelfth on the World Bank’s Ease of Doing Business scale (2020). As a result, it is a desirable choice for investors.

Only a short 45-minute flight from Singapore, Malaysia offers lower start-up costs, greater tax incentives and more extensive government support. However, the process of setting up a new office in Malaysia can appear complex for foreign business owners.

This guide takes you step-by-step through how to open a company in Malaysia. And, most importantly, it shows you how to meet compliance requirements for a successful business venture.

Malaysian market profile

Malaysia is considered one of Southeast Asia’s most dynamic business environments. Its liberal market policies promote trade and economic development, while many government incentives encourage ongoing growth.
Some key characteristics of the Malaysian Market include:

  • Average monthly office rental pricing: Grade A office space in Kuala Lumpur’s new central district averages RM 10.49 per square foot (2021)
  • Average fixed broadband internet download speed: 103.28 megabits per second (August 2021)
  • Average mobile internet download speed: 29.14 megabits per second (August 2021)
  • Gross Domestic Product US$ bn: 336.664 (2020)
  • Population: 32.6 million (2020)
  • Official languages: Malay, English
how to check if a company is legal in Malaysia

The benefits of setting up a company in Malaysia

Malaysia’s multicultural, multilingual society provides a skilled workforce with relatively low wage costs, which appeals to many overseas companies. The transport and telecommunications infrastructures both also operate efficiently, while the growing economy and accessible location make Malaysia a preferred choice.

Other benefits to registering a company in Malaysia include:

  • Low corporate tax: For resident companies in Malaysia with under RM50 million in sales, the tax rate is only 17% on your first RM600,000. Once you earn over this limit, the rate increases to 24% for non-resident companies. To check your estimated tax rates, speak to one of our Malaysian tax specialists.
  • Skilled and educated workers: Malaysia has a highly skilled workforce, over 70% of whom speak English. Malaysian locals are friendly, hospitable and eager to learn, which increases both productivity levels and customer service.
  • Liberal government policies: The Malaysian government’s approach to foreign investment is proactive, welcoming new trade with a variety of industry-specific incentives. The lack of restrictions on repatriating capital, royalties, dividends or profits also encourages many multinational companies to call Malaysia home.
  • Effective infrastructure: With five international airports and two international shipping ports, Malaysia is one of Asia’s busiest international hubs. Over the next few years, the Malaysian government will also invest more money into upgrading ports and building new rail links. As a result, the country will provide an efficient, high-tech transport system that enables seamless business operations.

How to establish a company in Malaysia

01 Step 1 - Choose a company type

  • Private Limited Company (Sdn Bhd): The only option for foreign investors is a Private Limited Company. This company type is a separate legal entity, enabling it to bind contracts, purchase assets and act as its own legal entity in court.

Private Limited Companies in Malaysia can be owned by locals or foreigners, as long as at least one director has a residential address in Malaysia (see step 3). However, unlike Public Limited Companies, Private Limited Companies can only have up to fifty shareholders, and cannot offer shares to the public. To learn more, contact our specialist team.

  • Public Limited Company (Berhad): Most large-scale enterprises in Malaysia are Public Limited Companies, which allows them to sell shares and generate further investment. Listing the company as public also enhances the corporate image and profile, potentially inviting new business opportunities and further expansion.

However, Public Limited Companies need to adhere to strict compliance requirements, including holding annual general meetings and audits. Additionally, to own a Public Limited Company in Malaysia, you need to be a Malaysian citizen.

  • Sole Proprietorship and Partnership: This entity type is also only available to Malaysian citizens. It’s ideal for local small business owners with either a sole proprietorship or up to 20 partners.
  • Limited Liability Partnership (LLP): This entity type combines the properties of a Private Limited Company and a conventional partnership. A Limited Liability Partnership is a separate legal entity from its owners, which provides additional protection for the partners’ personal assets and wealth.

Please note that to help rebuild local trade during the COVID-19 pandemic, the Malaysian government has restricted foreigners from initiating some business types. These types may include supermarkets, convenience stores, hairdressers, retail shops and more. Contact our specialist team for the most up-to-date information on foreign business restrictions.

02 Step 2 – Give your company a name

The name of your business can fall under two different categories:

Your company name must meet the following conditions:

  • No negative connotations or undesirable names: A business name cannot breach the constitution or law, or contain any elements that are negative, vulgar, obscene or offensive.
  • Correct spelling: The company name must use correct language and spelling. If the name contains a word that is not from Bahasa Malaysia or English, or that is fictitious, you must provide the meaning and/or origin of the word.
  • No generic names: Your business name must have its own identity, and must not be too common. Avoid using only generic words like ‘Marketing Resources’.
  • Not already registered: You cannot use a business name that has already been registered or in safekeeping. This includes changing symbols, letters or words that carry the same meaning.

View the complete list of guidelines for business name registration online, and find out if your business name is available in Malaysia.

how to register an enterprise company in Malaysia

03 Step 3 – Set up your company structure

Next, determine your company structure, ensuring you meet the following requirements for a Private Limited Company (Sdn Bhd):

  • Director: your company will need at least one director who meets all of the following criteria:
    • Must be a natural person (individual) and at least 18 years of age;
    • Must be of sound mind;
    • Must ordinarily reside in Malaysia, with a principal place of residence there;
    • Must not be an undischarged bankrupt under the Insolvency Act 1967; and
    • Must not be disqualified under the Companies Act 2016.

To satisfy your local director requirements in Malaysia, we can provide a nominee director service.

  • Shareholder: you must also have at least one shareholder, who can be either a foreigner, a local or a corporate entity.
  • Company secretary: you must appoint a qualified natural person living in Malaysia as your company secretary.

We provide expert company secretarial services to ensure your company meets all of its statutory obligations in Malaysia.

  • Share capital: you must issue a minimum share capital of:
    • RM1,000 for locally owned companies; or
    • RM500,000 for foreign-owned companies.
  • Registered address: your registered office must be a physical address in Malaysia. If your business does not have local office space, professional service firms like BoardRoom can provide a registered office location.

04 Step 4 – Submit your company registration application

To submit your company application, the owner or partner who submits it must be a Malaysian Citizen or Permanent Resident of Malaysia, aged 18 years or over. Only the owner or partner/s can apply to register a new business.

To help you navigate the process of registering your business in Malaysia, we have a comprehensive company setup and incorporation service with local experts.

05 Step 5 – Apply for other permits and business licences (if relevant)

Depending on your specific business operations, you may also need to apply for additional permits and business licences. Find out which permits and business licenses you could require after you register your company in Malaysia.

How to successfully open a business in Malaysia

Registering your business in Malaysia may be easier than you think.

Our specialist BoardRoom team can provide expert advice and assistance whether you’re looking for information on:

  • how to register an enterprise in Malaysia;
  • how to meet compliance requirements;
  • how to check whether a company is legal in Malaysia; or
  • how to evaluate a company for acquisition.

Other services we can provide include company set up and incorporation, corporate secretarial services, accounting and bookkeeping, payroll and more.

Speak to one of our specialists today to find out how to register your business in Malaysia.

Note: if you’re interested in more business opportunities in Southeast Asia, we can help. Explore our guide on how to start a business in Singapore, learn about the benefits of incorporating online there, or learn how to start a business in Hong Kong.

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Business Expansion into Malaysia — Yay or Nay?

Business Expansion Malaysia

Business Expansion into Malaysia — Yay or Nay?

4 Reasons why incorporating in Malaysia could be a wise decision

Over the last ten years, Malaysia has become a destination of choice for business expansion. The World Bank ranked Malaysia at a respectable 55th place out of 157 countries, across the globe, as the easiest place to do business. While the government continues to play its part in facilitating greater ease, there are geological factors that help boost Malaysia’s chances as your next business expansion destination. The country is strategically located in the Asia Pacific Rim, at the centre with numerous other ASEAN nations surrounding it. This means businesses in Malaysia can take advantage and gain easy access to a substantial 667 million regional population1, which together, boast a combined GDP of over US$3.3 trillion1.

If you are thinking of expanding your business into Malaysia, here is FOUR reasons why it would prove to be a wise choice.

01 It’s Quick, Easy and Low-Cost to Incorporate

Comparatively, Malaysia is possibly one of the easiest places for businesses to incorporate. Malaysia’s effort to reform —policy enhancements and procedural improvements — over the past few years have increased efficiencies and reduced the waiting time involved with registration and permit application processes. Registration of a new business takes between 5-10 days and employment permits for expatriates will be processed within 5 working days.

Operationally and financially Malaysia builds a strong case for itself. It boasts one of the lowest start-up costs compared to the other Asia Pacific countries. This is largely driven by its low property rental rates and generally low minimum wage.

Knight Frank currently estimates supply of office space in Kuala Lumpur (KL) city is 58.26 million sq ft, followed by KL fringe with 29.43 million sq ft and Selangor with 23.91 million sq ft. This brings the total to 111.60 million sq ft2 with affordable average office rental rate at RM5.55 psf2.

In addition to low office rental rates, businesses can operate economically because of Malaysia’s relatively low minimum wage, which sits at RM1,200 (US$286) per month.

incorporating in Malaysia

02 You’ll Avoid Double Taxation

In most countries, double taxation usually occurs when any taxpayer of a specific country engages in international business transactions. However, this is not the case for businesses in Malaysia. The country is a part of DTAs (Double Taxation Agreements) involving counties located in every continent of the world. This allows Malaysia to create an attractive tax environment where a greater international flow of investment, trade and financial activities, and technical knowledge are facilitated and exchanged.

These DTAs, outline the treatment of income or profits earned outside of Malaysia by Malaysian businesses and within Malaysia by foreign-owned businesses. On that note, businesses in Malaysia are protected against the possibility of a singular income being subject to two countries’ tax simultaneously. The double taxation agreement also provides taxpayers with certainty about their tax treatment. In the event of an absent DTA, businesses are still eligible for tax relief through the foreign tax credit.

03 The Locals are Ready to Buy

When shortlisting a country for your business expansion plans, qualifying your list of countries based on their economic strength is an excellent place to start. A country’s GDP is the best measure to assess its’ overall economic strength because it is closely connected with the country’s average consumer purchasing power. Malaysia’s GDP is expected to reach US$359 Billion by the end of 20213 with a healthy growth rate of 3.0% – 4.0%.4

Malaysia’s strong GDP is attributed to the government’s effort to remain robust in the agriculture, construction, manufacturing, mining, and services industries. One of the main objectives of its Budget 2022 is to strengthen economic recovery and improve business resiliency as the world move into the Covid-19 epidemic stage. With such a thriving market, Malaysians’ incomes are increasing and depending on your type of business, you can expect a growing number of consumers becoming or already are in the position to purchase low to middle market products and services readily.

04 The Local Government Supports You

Malaysia has been growing economically in tandem with global trends. In line with the Industrial Revolution 4.0 (IR4.0) adoption, it has introduced its own National 4IR Policy – a broad, overarching national policy that drives coherence in transforming the socioeconomic development of the country through ethical use of 4IR technologies.

While there are limited restrictions on foreign ownerships in certain strategic sectors, the Malaysian government encourages inflow of foreign investments. This is apparent in the incremental liberalization of equity conditions by various government agencies and the broad range of attractive incentives to entice new foreign investments and promote local start-ups. These incentives range from generous tax exemptions and allowance to grants.

Depending on your business, you might even be eligible for specific grants and incentives aimed at supporting innovation or projects that contribute strategically to the country’s economy and industries. Having a good knowledge of these incentives and how they may apply to you will allow you to maximise your business potential and put you on the fast track to success. Here are 5 grants that might be helpful as you incorporate in Malaysia.

  1. Cradle Investment Programme 300 (CIP300)
  2. MaGIC Global Accelerator Programme (MaGICGAP)
  3. Technology Acquisition Fund (TAF)
  4. Domestic Investment Strategic Fund
  5. Women Exporters Development Programme (WEDP)

The Malaysian government also has a dedicated agency – the Malaysian Investment Development Authority (“MIDA”) to help facilitate your new venture into the country.

business expansion support

Conclusion

So, if you were wondering if you should incorporate in Malaysia, here is our advice; you should. Whilst it is a relatively simple process — requiring only basic knowledge of application processes and local regulations — you should always consult a team of dedicated experts. Experts can assist you in leveraging Malaysia’s incentives and opportunities to their fullest extent while allowing you to have peace of mind, knowing that your company will remain compliant with the local regulation. By doing so, you can ensure the best possible outcome for your business planning and investment strategy.

Here is where BoardRoom can help.

BoardRoom is the market leader in Malaysia for Corporate Services as we command the majority of the market. Our affiliation with local regulators and government agencies such as the Malaysian Investment Development Authority (MIDA), local stock exchange Bursa Malaysia, Companies Commission of Malaysia, InvestKL, Malaysia Digital Economy Corporation (MDEC), etc. allows us to advise on the latest regulatory requirements and incentives accurately and swiftly put your business on a fuss-free journey towards success.

Are you planning to incorporate in Malaysia? Perhaps we could be of some help. Contact our Corporate Secretarial experts today!

Source
  1. www.statista.com
  2. Knight Frank Kuala Lumpur and Selangor Office Monitor 2Q2021. The Edge Malaysia, 7 October 2021
  3. www.tradingeconomics.com
  4. Press Release by the Ministry of Finance, Malaysia on 12 November 2021

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Malaysia Budget 2022 – Tax highlights including extensions on current incentives and new reliefs

Malaysia Budget 2022

Malaysia Budget 2022 – Tax highlights including extensions on current incentives and new reliefs

On 29th October 2021, Malaysia’s 2022 Budget, themed “Keluarga Malaysia, Makmur Sejahtera”, was tabled by Finance Minister Tengku Datuk Seri Utama Zafrul bin Tengku Abdul with a wide range of tax incentives offered to both individuals and corporates. The expansionary budget is aimed to act as a catalyst to boost economic recovery and close the gap on the country’s fiscal deficit.

If you have any questions relating to any of the information contained in this report, please email our tax advisors via info.my@boardroomlimited.com or call us at +60 3 7890 4500.

Individual Tax Relief

Individual Tax Relief

New Corporate Tax Incentive

New Corporate Tax Incentive

New Sales & Service Tax Exemptions

Sales and Service Tax Exemptions

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The Benefits of Outsourcing for ‘The Next Normal’

benefits of outsourcing

The Benefits of Outsourcing for ‘The Next Normal’

The Benefits of Outsourcing for ‘The Next Normal’

The Malaysian economy recently rebounded from its lowest point in twenty years during the second quarter of 2020. However, growth forecasts for the remainder of this financial year are not looking as favourable.

In mid-August, the central bank downgraded its growth forecasts for 2021. Now, as COVID-19 vaccinations are increasing and the country gradually reopens, businesses in Malaysia are looking for ways to adapt to ‘the next normal’.

Embracing digital transformation is one way that forward-thinking SMEs have already adapted. As well as boosting business continuity, this has allowed them to enjoy the significant benefits offered by outsourcing non-core functions.

Let’s take a deeper look into how digital transformation and outsourcing have become major players in the economic recovery drive from COVID-19.

Pandemic resilience through digital transformation and outsourcing

COVID-19 has been a game-changer for digital transformation in Malaysia. A small business survey by global professional accounting organisation CPA Australia found that 40% of surveyed small businesses in Malaysia increased their focus to online sales in 2020. Of those small businesses that invested in technology in 2020, 42.4% of them said it made their business more profitable.

For global companies, the digital transformation has happened in the space of just months during the pandemic. According to Twilio CEO, Jeff Lawson, some large multinational corporations have fast-tracked their digital transformation by an average of six years.

digital transformation Malaysia

The increased speed of digital transformation has meant that more companies have been able to appreciate the benefits of outsourcing. This has been particularly important for maintaining business continuity during the pandemic.

For example, pre-COVID, some companies had payroll systems requiring on-site staff to process payroll. But when the Movement Control Order (MCO) was in place, payroll staff couldn’t get to their offices to perform their duties. The solution for many of these companies was to outsource payroll to an expert provider using a cloud-based HRMS, to ensure their employees were paid on time, even in the middle of a pandemic.

While the pandemic has fast-tracked digital transformation, it will remain an important driver of business growth for the foreseeable future. SMEs may find it difficult to keep up with the rapid pace of technological change, but this is where outsourcing can be truly valuable. By outsourcing their non-core business functions to a specialist outsourcing company, SMEs can:

  • save money from not having to implement and maintain expensive technology;
  • have greater business continuity when the unexpected happens; and
  • increase operational efficiency by allowing staff to focus on core strategic business drivers.

How your company could benefit from outsourcing

Here are the top three ways your company could benefit from outsourcing:

01 Save money

Outsourcing business processes to a professional services provider like BoardRoom improves your business continuity so that your teams have the support they need to keep the business operating during unforeseen events. You’ll save money by minimising costly downtime.

In addition, outsourcing reduces key person risk. This means your company can save by avoiding the business interruption costs that can occur when senior team members are not available.

What’s more, your company will benefit from getting access to the latest technology without having to spend money on finding, implementing and maintaining big-ticket technology solutions.

02 Save time

One of the key advantages of outsourcing is that your company can regain precious time and use it to focus on what matters – growth and profitability. For example, when you outsource payroll, your in-house HR team can focus on achieving more strategic objectives, such as increasing employee engagement and productivity. With the time saved by outsourcing, your company can then reallocate staff towards core business activities.

03 Gain expert advice

Outsourcing to a professional corporate services provider gives your company access to a pool of business knowledge specialists without:

  • the salary overheads;
  • constant training costs; or
  • the expense of having your in-house team spend vast amounts of time trying to stay on top of changing regulations.
business process outsourcing

Focus on strategic planning to stay competitive

While the Malaysian economy is forecast to gradually recover from Q4 in 2021 and into 2022, businesses need to focus on strategic planning to stay competitive. A good place to start is understanding the current financial health of your company.

Outsourcing your accounting function can help to clarify your company’s financial health status. A complete picture of your company’s finances enables you to make more informed decisions as the economy begins to recover.

Our team of professional chartered accountants at BoardRoom can help by painting a clearer picture of your company’s current cash flow and seasonality. They have the expertise to critically analyse your receivables and collections, so you can more effectively assess organisational performance. With this information, you can then make the best strategic decisions to stay competitive while adapting to ‘the next normal’.

Futureproof your business by outsourcing to a trusted corporate services provider

Outsourcing can help your company stay resilient in the face of uncertain and challenging market conditions.

As one of the leading professional services outsourcing companies in the Asia Pacific region, BoardRoom offers a variety of integrated, value-add corporate services, including:

By consolidating all your back-office functions into one vendor, you gain greater efficiencies and business productivity.

Speak to our team of experts today about how we can help to futureproof your business.

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A guide to the payroll process and compliance in Malaysia

payroll process and compliance regulations

A guide to the payroll process and compliance in Malaysia

Guide: The payroll process and compliance regulations in Malaysia

With Malaysia’s strategic location, market competitiveness, skilled multilingual talent pool and world-class technology capabilities, it’s easy to see why so many companies choose to establish operations there.

If your company is considering expanding into Malaysia, one of the keys to success is to understand the payroll process and compliance regulations from the outset. The last thing you want is for your newly established operation to attract the wrong kind of attention from government auditors.

That’s why we’ve prepared a helpful guide to the payroll process and compliance regulations your company needs to know when starting out in Malaysia.

Payroll process and compliance essentials in Malaysia

Before we examine some common payroll compliance challenges in Malaysia, it’s useful to understand the essentials of the payroll process and the main compliance considerations. Let’s start with a primer on the fundamentals of payroll in Malaysia.

Working conditions and wages
  • Working hours: Malaysia has an eight-hour workday with an average working week of no longer than 48 hours, and (most commonly) one day off per week. Government protection provisions prevent women from working in the industrial or agricultural sectors between the hours of 10pm and 5am. Women must also have at least 11 consecutive hours off work between each shift.
  • Pay cycles: salaries in Malaysia are typically paid monthly.
  • Minimum wages: Nationally, the minimum wage is RM1,100, except for areas under 56 city and municipal councils where the minimum wage is RM1,200. Our team of payroll experts here at BoardRoom can advise you on the relevant government guidelines that apply to your employees.
  • Overtime, rest day and holiday pay rates: Employees covered by the Employment Act 1955 (“EA 1955”) should be paid overtime at 1.5 times their hourly pay rate. Rest days are paid at two times, and public holidays at three times the hourly pay rate. However, the EA 1955 only applies to:
    • employees whose monthly salary does not exceed RM2,000;
    • employees within the private sector;
    • employees working in Peninsular Malaysia or the Federal Territory of Labuan; and
    • employees (irrespective of salary) involved in manual labour, operating or driving transport vehicles and domestic servants.

For non EA 1955 employees, employers can stipulate relevant provisions relating to overtime rates within their employment contracts.

Income tax
  • Withholding tax: Malaysia has a monthly tax deduction (MTD) system requiring employers to deduct withholding tax at source. Each month, employers must then send this tax to the Inland Revenue Board (IRB) of Malaysia on behalf of their employees.
  • Income tax rates: the maximum income tax rate in Malaysia is 30%, which applies to those with incomes greater than MYR 2,000,000 or ‘non-residents’. Employees who work between 60–182 days per year in Malaysia are considered ‘non-residents’, irrespective of their actual citizenship status.
  • Tax clearing and tax filing: employees must complete their tax clearing and filing at year-end before April. The financial year in Malaysia runs from 1 January to 31 December.
international payroll processing companies
Holidays and leave
  • Paid public holidays: Employees are entitled to be paid for 11 gazetted public holidays per year. Of these 11 days, five must be:

1. Hari Kebangsaan or National Day;
2. Birthday of Yang di-Pertuan Agong;
3. Birthday of the Ruler or Yang di-Pertua Negeri or Federal Territory day (varies per state);
4. Labour Day; and
5. Malaysia Day (16 September).

The remaining six paid public holidays are chosen at the discretion of the employer from the following list and these must be communicated to employees either via written notice or as stated in their employment contracts:

  • Birthday of the Prophet Muhammad (s.a.w);
  • Chinese New Year (2 days, except 1 day in the states of Terengganu and Kelantan);
  • Vesak Day;
  • Hari Raya Puasa (2 days);
  • Hari Raya Haji (1 day, except 2 days in the states of Terengganu and Kelantan);
  • Deepavali;
  • Christmas Day; and
  • Awal Muharam.

However, the government can declare additional ad hoc, paid public holidays throughout the year. If these days are declared at short notice, employers can nominate a replacement day.

In addition, there are a number of state based holidays observed around the country. However, employers are not required to pay employees for these holidays unless they have selected them to be included in their list of paid public holidays for their employees.

  • Compulsory annual leave entitlements: employees are typically entitled to between 8-16 days of paid annual leave, depending on their length of service with the company.
  • Compulsory sick leave entitlements: Employees are entitled to between 14-22 days of paid sick leave, depending on their length of service with the company.
  • Compulsory maternity leave entitlements: New mothers are entitled to 60 consecutive days of paid leave for each of their first five children.
  • Optional leave entitlements: employees can also apply for the following optional leave types, which are typically unpaid and subject to employer approval:
    • compassionate/bereavement leave;
    • marriage leave; and
    • study leave.
  • Paternity leave: most employers also offer 1-3 days of paid paternity leave, but this is not a statutory requirement.
Social security and statutory contributions
  • Employees’ Provident Fund (EPF): employers and most employees (Malaysian citizens or permanent residents only) must contribute to the EPF retirement benefits scheme. The EPF contribution rate for employees varies depending on their monthly salary, whereas the employer contribution is 12%.
  • Social Security Organisation (SOCSO): employers must contribute to Malaysia’s mandatory social insurance schemes, which are administered by SOCSO. There are two schemes:
    • The Employment Injury Insurance Scheme (EIIS) provides cover for employees who experience work-related injuries or diseases. The EIIS applies to all Malaysian citizens, permanent residents, and foreign workers (excluding domestic servants).
    • The Invalidity Pension Schemes (IPS) provides cover for employees who experience invalidity or die from causes unrelated to their work.

Employers must make a monthly contribution to SOCSO on behalf of each eligible employee.

  • Employment Insurance Scheme (EIS): employers are required to make monthly contributions for each employee. The EIS provides financial assistance to workers who have lost their job while they seek new employment.
  • Human Resources Development Fund (HRDF) Levy: this is a compulsory levy paid by employers with 10 or more employees (Malaysian citizens only) working in the manufacturing, services, mining and quarrying sectors. The levy rate is 1% of each eligible employee’s monthly wage. It allows companies registered with the HRDF to receive financial assistance when they participate in specific training and upskilling programs delivered by HRDF training providers.
  • Other contributions>: some employees may also be required to make student loan repayments to the National Higher Education Fund Corporation, or make donations known as Zakat to fulfil their religious obligations.
payroll Malaysia

Common payroll compliance issues to be aware of in Malaysia

Payroll errors can result in your company needing to pay expensive fines. They can also cause reputational damage and employee dissatisfaction. To help you avoid unpleasant situations, here are some common payroll compliance issues to be aware of in Malaysia:

  • Late MTD payments: the Inland Revenue Board (IRB) imposes penalties if employers fail to pay monthly employee income tax withholdings by the 15th of each month.
  • Failing to include perquisites, benefits-in-kind or equity incentives in compensation reporting: sometimes these benefits are not paid through payroll, which means they can be easily overlooked in compensation reporting.
  • Incorrect classification of employees: Foreign workers, non-residents and secondees are often classified incorrectly during payroll data system entry. As a result, your company might underpay these employees and deduct the wrong income tax amounts.
  • Failing to stay up-to-date with regulation changes impacting payroll: In Malaysia, there are four regulatory bodies that influence payroll processing rules which makes it more of a challenge staying up-to-date with payroll requirements.
  • Overlooking cultural norms: It’s common in Malaysian payroll processing to include ‘13th-month pay’ – a single annual payment on top of an employee’s total annual wage. This payment isn’t mandatory and would not be considered non-compliance if you did not adhere to it, but it is the cultural norm that could impact employee satisfaction.
payroll processing companies

Want expert help in processing your company’s payroll in Malaysia?

Our team of payroll experts can guide you through the complexities of the payroll process in Malaysia to help make your business expansion more successful. We can set up your company’s payroll so that you get it right the first time, every time.

It doesn’t matter whether you are a large multinational corporation or a fast-growing SME. Outsourcing to an international payroll processing company like BoardRoom ensures your company has an efficient, accurate and compliant payroll process right from the start.

Speak to our team of specialists today about how outsourcing payroll can give you more time to focus on what really matters: your company’s growth and profitability.

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10 advantages of outsourcing your payroll services

advantages of outsourcing payroll services

10 advantages of outsourcing your payroll services

10 advantages of outsourcing your payroll services

Outsourcing is the key to making your payroll process seamless. It means everyone gets paid the right amount at the right time, every time.

All too often HR professionals find themselves spending far too much time processing pay runs at the expense of dedicating time to strategy and higher-value tasks.

Payroll is a time-intensive process – not just because you need to complete the necessary process tasks, but also because you need to ensure compliance with tax and legislative requirements.

The key advantage of outsourcing payroll services is that you can get back your time to focus on what really matters: the strategic business drivers that grow your company and culture.

Here are the top ten benefits your company stands to gain by outsourcing your payroll.

01 Save time

Outsourcing payroll is the low-hanging fruit for increasing company efficiency. Instead of spending hours every pay cycle on payroll processing, an administratively heavy task, HR teams can focus on achieving more strategic objectives, like increasing employee engagement to boost organisational productivity.

02 Reduce costs

Saving time also saves you money, which can come in the form of a lower wage bill. For example, as companies scale, they can save money by outsourcing payroll instead of spending it on expanding in-house HR teams purely  to manage a growing payroll. You may also see savings to your business from not needing to maintain cloud security for your payroll software or manage paperwork.

how to outsource payroll

03 Minimise compliance and regulatory risks

Regulatory changes that affect payroll happen at break-neck speeds, which can make staying compliant a challenging, time-consuming process. In Malaysia, four regulatory bodies develop payroll processing rules. They each issue notifications when a change to the law is made and your company needs to ensure that these changes are accurately translated into payroll formulas.

It is easy to make mistakes when updating payroll formulas, especially if they involve IF, AND, OR logical functions. If the formula is wrong, payroll is calculated incorrectly which can cause problems like under or over paying wages and tax. Chances are, you may not even realise that an error has occurred until after receiving an expensive non-compliance fine.

Outsourcing your payroll to a specialist service provider, like our team of experts here at BoardRoom, can minimise your exposure to these compliance and regulatory risks because we take care of it all for you, including updating payroll formulas correctly.

04 Gain access to specialised, local knowledge

Having a dedicated team of professionals with local knowledge of Malaysia’s labour laws is essential for your company. It means your business can take advantage of the team’s years of payroll experience without being exposed to the strict protocols and multi-level cross-checking that they’re subject to.

This is especially beneficial for companies that operate in different states or across multiple countries because an external partner will work with you to ensure compliance in each area, freeing up your in-house HR team.

05 Build payroll continuity

Some companies operate payroll systems that require staff to be on-site in order to process payroll. If the unexpected happens, as an example; your payroll staff can’t get to the office to perform their duties, or a key member of your team responsible for payroll approval resigns, how will your employees get paid? Outsourcing payroll to an expert provider guarantees payroll continuity so that your employees are paid on time, every time.

06 Enhance data security and protection

Data security is crucial for payroll processing because of the incredibly sensitive information involved such as employees’ personal data and compensation details. In Malaysia, HR departments must adhere to local laws such as the Personal Data Protection Act 2010 (“PDPA”).

If your company has limited time and budget resources, it can be challenging to maintain an appropriate level of data security and protection in-house. For one, in-house teams need to keep pace with ever-evolving cybersecurity threats. Secondly, your company is more exposed to payroll fraud when payroll is processed in-house. Third, in-house teams may not have the appropriate protocols to ensure that data is backed up regularly.

Quality payroll outsourcing providers store their data on highly secure cloud-based servers using state-of-the-art encryption. They perform regular backups to ensure that data is protected. Data protection and security are top priorities for us at BoardRoom, which is why our data centres have achieved ISO27001, and our cloud hosting has SOC 2 certification.

outsource-your-payroll

07 Reduce stress

Getting your employees paid accurately and on time is critical to the success of your company. And as every HR professional knows, there is no room for error when it comes to payroll. However, managing payroll effectively can be challenging for in-house teams when they are trying to keep up with local regulatory compliance while simultaneously managing the needs of a growing workforce. This is especially true if your company operates in  multiple countries across the APAC Region.

Our team of payroll experts here at BoardRoom will take care of payroll management for you, ensuring that pay runs are efficient, accurate and compliant. Our team has worked across multiple industries, countries and situations, so you can rest assured knowing that your payroll is in the best of hands. Ultimately, this means less stress for your HR teams.

08 Increase flexibility

Another advantage of outsourcing payroll services is that you can stay flexible in rapidly changing business environments. Outsourcing allows you to quickly scale your payroll service requirements as needed, instead of having to recruit, onboard, train and retain additional in-house staff.

09 Gain access to a pool of payroll knowledge experts

As the saying goes, ‘two heads are better than one’. Outsourcing to a professional payroll service provider gives your company access to a pool of payroll knowledge specialists without the expense of retaining them in-house. Our team of experienced payroll experts have managed payroll for businesses of all sizes, types and industries across the APAC Region. Take advantage of their vast experience and knowledge to really build your business so you can take it to the next level.

10 Integrate knowledge with value-add services

The best payroll outsourcing vendors are not only experts in all things payroll, but also offer a variety of integrated, value-add corporate services, including:

By consolidating all your back office functions into one vendor you stand to gain greater efficiencies and business productivity.

Outsourcing makes payroll easy

Spend less time sorting out pay runs and more time on your company’s growth and profitability by outsourcing your payroll function to our team of BoardRoom payroll experts.

Whether you are a large multinational corporation or a fast-growing SME, our team makes processing your payroll in Malaysia and across the APAC region easy.

So if you want efficient, accurate, compliant payroll processing, speak to our payroll specialists today about how to outsource your company’s payroll function.

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What is an Employee Share Plan? (ESAS vs ESPP)

Employee Share Plans in Malaysia

What is an Employee Share Plan? (ESAS vs ESPP)

How Employee Share Plans work in Malaysia

Essentially, an Employee Share Plan is a remuneration package that can reward employees of both privately held, and publicly listed, companies in Malaysia with either:

  • the company’s ordinary shares; or
  • the option to buy these shares in the future at a subsidised rate.

Employee Share Plans are an effective way to attract and motivate your employees while providing an incentive for them to contribute to long-term company performance. These plans can help you to retain and reward your talent whilst managing company cash flow or working capital.

You can use several Employee Share Plan types to provide cash-free remuneration to staff, including:

  • Employee Share Option Schemes (ESOSs);
  • Performance Share Plans (PSPs);
  • Restricted Share Plans (RSPs); and
  • Employee Share Purchase Plans (ESPPs).

Our guide to each type below can help you to decide on the best option for your company.

Employee Share Option Schemes (ESOSs)

An ESOS gives employees the contractual right to buy company shares at an exercise price in future. Reason being, the greater the share price, the greater the gain from exercising their options. Typically, you will assign a preferential, pre-determined price or benchmarked value to the share options.

An ESOS case study example

Nora Yeoh, the Chief Operating Officer of Jack Manufacturing Company, has received a share option offer to acquire 50,000 company shares. The offer price (also known as the exercise price) per share is RM20.00. There can be a moratorium period which Nora will not be able to exercise the options, this is called a vesting period. Once the moratorium has been lifted, Nora’s options are now vested and Nora can pay an exercise cost to acquire the shares within a specified period of time.

There could also be a performance criteria that Nora will have to fulfil before the options vest.

Assuming that the share options vest and Nora still works at the company on 1 April 2020, she can choose to exercise her share options. If she does this, she will pay RM20.00 per share to receive 50,000 shares in the company.

Malaysia Employee share option schemes

Share Award Schemes (SASs)

A Share Award Scheme (SAS) is very similar to an ESOS. The key difference is that employees are rewarded with actual share ownership from the outset, instead of only receiving the option to buy future shares.

As with an ESOS, there could also be certain criteria or performance metrics that the employee will have to fulfil. 

To prevent share dilution, companies often only allot 15% of their current outstanding ordinary shares at any time to use in an SAS.

As outlined in the table below, there are two types of SAS:

  • Performance Share Plans (PSPs); or
  • Restricted Share Plans (RSPs).
Type of SASPlan DurationVesting PeriodPerformance MetricParticipantTarget Companies
PSP3-5 YearsEnd of Plan (with Annual Evaluation)– Total Shareholder Return

– Return on Equity

– Return on Sales

– Market Ranking

– Directors

– Non-Executive Directors

– Senior Managers

– Heads of Department

 

– Listed and Private Companies
RSP3 YearsAnnually– EBITDA

– Economic Value Added

– Manager 

Performance Share Plans (PSPs)

Performance Share Plans are typically aimed at a company’s senior management team. They provide incentives to focus on delivering long-term company performance that creates shareholder value. To help achieve longer-term company objectives, PSPs tend to have longer plan durations (often 3-5 years), and the shares vest at the end of a PSP.

Some companies have a claw-back policy that requires the individual to return a certain number (if not all) of their rewarded shares if their performance is dissatisfactory.

A PSP case study example

After joining the Jack Manufacturing Company Performance Share Plan (PSP), Sarah Perry was allotted 1,000,000 shares on 1 April 2020. At each annual performance evaluation, Sarah receives a score that is independent of her score in previous years.

At the end of her three-year period, Sarah receives 900,000 ordinary shares, based on the average of all of her scores. She can choose to keep or sell these shares. However, she knows that keeping them allows her to enjoy voting rights and makes her eligible to receive dividend payments.

Sarah’s PSP results appear in the table below:

Evaluation Date (Annually)2 April 20212 April 20222 April 2023
Score Card95%110%65%
Average Score across 3 years(95% + 110% + 65%) / 3 = 90%
Total Awarded1,000,000 x 90% = 900,000 Ordinary Shares

Restricted Share Plans (RSP)

Restricted Share Plans work similarly to PSPs, but over a shorter term.  The key difference is that shares in an RSP vest annually, which means these plans tend to better suit companies with short-term objectives. 

An RSP case study example

After joining the Jack Manufacturing Company Restricted Share Plan (RSP), Peter Li was allotted 1,000,000 shares on 1 April 2020. The RSP plan has a three-year duration and two vesting periods.

The first vesting date is 2 April 2022. On this date, 50% of Peter’s allotted shares will vest based on his performance from 2 April 2020 until 1 April 2022.

The second vesting date is on 2 April 2023. On this date, the remaining 50% of Peter’s allotted shares will vest, depending on his performance from 2 April 2020 till 1 April 2023.

During the first vesting period, Peter only manages to reach 95% of his pre-set target. The Remuneration Committee (RC) therefore decides to vest only 450,000 shares. They could place the remaining 50,000 shares back in the company’s treasury account, or evaluate it again towards the second vesting period.

For simplicity, let’s assume for this example that they place Peter’s unvested 50,000 shares back into Jack Manufacturing Company’s treasury account.

During the second vesting period, Peter performs well and manages to reach his target. The RC therefore decides to reward him with 500,000 shares.

At the end of the three-year period, Peter has received a total of 950,000 ordinary shares. Like Sarah, he can choose to keep or sell the shares.

Peter’s PSP results appear in the following table:

Vesting Period2 April 20222 April 2023
Performance Metrics95%100%
Vested450,000500,000
Unvested50,0000
Total Awarded450,000 + 500,00 = 950,000
Employee Shared Plan in Malaysia

Employee Share Purchase Plan (ESPP)

You can offer this type of Employee Share Plan to all company employees. Effectively, it means your company subsidises employees to buy ordinary shares in the company.

In an ESPP, you automatically deduct a portion of the employee’s gross income every month and place it in a separate company account for a minimum one-year period. 

At the end of the year, the employee can either:

  • choose to use those funds to purchase ordinary shares; or
  • have the money transferred back to their personal account.

As an extra incentive for employee participation, you can also offer a good interest rate on the set-aside funds. This means that the employee benefits even if they don’t choose to buy your company’s ordinary shares. 

Other effective participation incentives include:

  • subsidising a certain amount (such as 25%) of the total cost of any shares that an employee purchases; and
  • share purchase matching, in which your company uses its own funds to buy x number of ordinary shares for every x number of ordinary shares the employee buys.

We can help you to identify which ESP is best for your company

In theory, you can use any of the Employee Share Plans in this article to provide cash-free remuneration to staff. However, you still need to consider the complexities and administrative costs of each option.

In our experience, coming up with a single Employee Share Plan that will work for everyone is not possible. That’s why we have designed a specialised digital Employee Share Plan system that is completely flexible.

Our experts can provide you with a purpose-built solution for your needs that will increase efficiencies and reduce costs, while still complying with current and future reporting requirements.

Looking for a trusted Employee Share Plan firm in Malaysia?

We have designed an all-encompassing Employee Share Plan solution that combines the experience of our expert team with a powerful digital platform, EmployeeServe.

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Digital vs Electronic Signatures in Malaysia: a Guide

Electronic vs Digital Signatures in Malaysia

Digital vs Electronic Signatures in Malaysia: a Guide

When a face-to-face meeting is impossible, paperless signatures are a practical option for your business in Malaysia. They are fast, convenient and environmentally friendly.

However, you need to carefully consider the legal implications of using digital or electronic signatures over the traditional ‘wet-ink’ variety. While the terms ‘electronic’ and ‘digital’ are often used interchangeably to refer to paperless signatures, each one is a separate legal concept under Malaysian law.

In this article, we cover the differences between electronic and digital signatures in Malaysia, and explain when they are legally binding, and where you can use them.

What you need to know about electronic signatures in Malaysia

An electronic signature is defined by the Electronic Commerce Act 2000 (“ECA”) as:

 “any letter, character, number, sound or any other symbol or any combination thereof created in an electronic form adopted by a person as a signature.”

Electronic Signature in Malaysia
Are electronic signatures legally binding in Malaysia?

The ECA legally recognises electronic signatures used in commercial transactions either:

  • to fulfill legal requirements; or
  • to facilitate commercial transactions through electronic means.

In Malaysia, electronic signatures are typically used for simple contracts and agreements (such as the ones outlined below) where the risk of legal disputes around document validity is low.

Electronic signatures are legally binding under Malaysian law, where they fulfil the ECA requirements, being:

  1. that the signature is attached to, or logically associated with, an electronic message;
  2. the signer and their approval of the related information can be adequately identified; and
  3. the signature is as reliable as is appropriate, given the purpose and circumstances for which the signature is required.

To be considered ‘reliable’, electronic signatures must also fulfill these ECA requirements:

  1. the means of creating the electronic signature is linked to, and under the control of, that person only;
  2. any alteration made to the electronic signature after signing is detectable; and
  3. any alteration made to that document after signing is detectable.

Some grey areas surround these requirements as they have largely been untested in Malaysia Courts. However, we recommend that companies adopt internal guidelines relating to the use of electronic signatures that outline the approvals process, digital security measures, electronic record keeping policies and compliance and internal audit team procedures. These guidelines can be used to provide evidence that the ECA requirements have been met. Companies may consult their lawyers or corporate secretarial agents for assistance in this regard.

Common electronic signature applications in Malaysia

Common electronic signature applications

There’s a reasonably broad scope when it comes to applying electronic signatures in Malaysia to execute documents. For example, case law suggests that even a text message can be considered a legally binding electronic signature under the ECA.

More typically, electronic signatures are commonly used in:

  • HR documents: Employment contracts, benefits paperwork and new employee onboarding processes;
  • Commercial agreementsbetween corporate entities: Non-disclosure agreements, procurement documents and sales agreements;
  • Commercial real estatedocuments: Lease agreements, and sales and purchase contracts; and
  • Minutes and resolutions:(subject to the company’s constitution).

When deciding whether to use an electronic signature in Malaysia, it is important to note that while electronically signed documents are legally enforceable, wet-ink signatures may still be required for stamping and some filing and registration procedures. Some financial institutions may also require wet-ink signatures.

Where you can’t use electronic signatures

In Malaysia, electronic signatures are not allowed in:

  • Power of Attorney documents as per section 2 (2) of the ECA;
  • Wills, codicils and trusts as per section 2 (2) of ECA;
  • Negotiable instruments, bills of exchange, and promissory notes as per section 2 (2) of the ECA;
  • Any instrument dealing with properties under the Malaysian National Land Code; and
  • Statutory Declarations under the Statutory Declarations Act 1960.

The documents listed above cannot be executed via e-signature or digital signature because they require notarisation or attestation before a public notary or commissioner of oaths. As such, wet-ink signatures are required for these documents.

What you need to know about digital signatures in Malaysia

Digital signatures are considered a subset of electronic signatures in Malaysia and are governed by the Digital Signatures Act 1997 (“DSA“).

A digital signature is defined by the DSA as:

“a transformation of a message using an asymmetric cryptosystem such that a person having the initial message and the signer’s public key can accurately determine:

a. whether the transformation was created using the private key that corresponds to the signer’s public key; and
b. whether the message had been altered since the transformation was made.”

Digital Signature in Malaysia

Electronic signature software providers like DocuSign and HelloSign use certificate-based digital IDs to authenticate each signer’s identity, providing a higher level of security and assurance. Each digital signature is bound to the document via encryption to provide proof of signing, and is validated by licensed certification authorities.

In Malaysia, it is the role of licensed certification authorities to act as a trusted third party in verifying the identity of both the signer and the recipient of electronically signed documents.

Think about it this way, a digital signature requires a process, whereas an electronic signature can be implied – such as in the case of a text message.

Are digital signatures legally binding in Malaysia?

A digital signature that meets the DSA’s validity requirements is as legally binding in Malaysia as a handwritten signature, an affixed thumbprint or any other mark.

When the law requires a seal to be affixed to a document, a digital signature must be used.

Where you can’t use digital signatures

In Malaysia, like electronic signatures, digital signatures are also are not allowed in:

  • Power of Attorney documents as per section 2 (2) of the ECA;
  • Wills, codicils and trusts as per section 2 (2) of ECA;
  • Negotiable instruments, bills of exchange, and promissory notes as per section 2 (2) of the ECA;
  • Any instrument dealing with properties under the Malaysian National Land Code; and
  • Statutory Declarations under the Statutory Declarations Act 1960.
Digital signatures must be validated by select authorities in Malaysia

Currently, there are no foreign certification authorities recognised in Malaysia. Digital signatures can only be validated with one of the following licensed certification authorities:

  • Post Digicert Sdn Bhd;
  • MSC Trustgate Sdn Bhd;
  • Telekom Applied Business Sdn Bhd;
  • Rafcomm Technologies Sdn Bhd;

Optimise your business with digitisation

A smart way to optimise your business processes is to use electronic and digital signatures, particularly when face-to-face meetings are not practical or possible. But – as we covered in this article – you need to fulfill specific legislative requirements in Malaysia to ensure that paperless signatures are legally binding.

Get in touch with our experts today to learn more about how they can help you implement innovative technological solutions to empower your business. 

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Closing Down a Company in Malaysia? Here’s what you need to know

Closing a company in Malaysia

Closing Down a Company in Malaysia? Here’s what you need to know

Change is something that you negotiate every day as a business leader.

It doesn’t matter whether you’re navigating changes in technology, shifting customer preferences or ongoing economic instability, or dealing with a mandatory regulatory update. In every case, the end-goal remains the same: staying competitive.

And irrespective of your company size and success, sometimes the best way to stay competitive is to implement a well-thought-out exit strategy.

Several options are available if your exit strategy involves closing down a company in Malaysia. Below is our guide to three tried-and-tested methods so you can identify the best option for your business.

01 Striking off a company

A simple, cost-effective method to close down an Sdn Bhd or private limited company is to request that the Companies Commission of Malaysia (“CCM”) strike it off from the register pursuant to Section 550 of the Companies Act 2016 (the “Act”).

To be considered for strike-off, your company must:

  • not carry on business/operations (and must not intend to do so);
  • have no assets or liabilities, including any outstanding charges in the Register of Charges;
  • have no outstanding penalties or compounds relating to the Act;
  • have no outstanding tax or other liabilities, and have no debts to any government department or agency;
  • not have made any return of capital to shareholders (including dividends);
  • ensure your information is up-to-date with the Registrar;
  • not be involved in any impending legal proceedings; and
  • not be a holding company or a “Guarantor Corporation”.

Your company needs to meet all of these requirements before you submit your application to the CCM.

A clear advantage of the company strike-off method is the speed of the process: in our experience, it typically only takes one year. This is relatively quick compared to other options for closing down a company in Malaysia.

However, this method does have a couple of potential pitfalls. These include:

  • the CCM having the final say in the strike-off decision;
  • anyone who suffers grievances from the strike-off having an open legal avenue to reinstate the company within seven (7) years; and
  • after a company is struck off the Register, the company will dissolve and cease to exist. The company will no longer be able to conduct any form of business or transactions. However, the liability of every director, officer or shareholder of the company will continue and may be enforced as if the company had not been dissolved. In other words, even if a company is struck off, any past misconduct or breaches of law that relate to a director, officer or shareholder of the company will still be enforceable against them.

In summary, the striking off mechanism provides many advantages to business owners who do not wish to go through the more lengthy and tedious process of winding up a company.

Want to lower your chances of getting caught by these pitfalls? Our experienced corporate secretarial experts in Malaysia combine expertise and local know-how to give you peace of mind. Let them handle all of the compliance and administrative requirements of the strike-off process on your behalf, so that you can stay focused on the bigger business picture.

02 Winding up a company by a Members’ Voluntary Liquidation

Winding up a company – also known as going into liquidation – is longer and more complex than simply striking off a company. So at first glance, it can look less appealing than a strike-off.         

However, in some circumstances, winding up a company may be more appropriate for your business.

For example, your shareholders might want to benefit from the proceeds gained by the company after selling off the assets. But – as we mentioned in the previous section – if your shareholders receive any capital from the company, the company won’t be eligible to apply for strike-off.

In this case, a company wind-up might be your best option.

Generally, the voluntary options for winding up a company in Malaysia are either:

  • a members’ voluntary liquidation (“MVL”); or
  • a creditors’ voluntary liquidation (“CVL”).

While you need to appoint a liquidator for both options, in an MVL (where the company must be financially solvent), the surplus of the company will distribute to members upon the settlement of the debts and expenses. By contrast, in a CVL (where the company is not financially solvent), the proceeds realised from selling off the assets will be paid to the creditors.

To start an MVL:

  • the company must be solvent; and
  • the Board of Directors must adopt a Declaration of Solvency and form an opinion that the company can settle all debts within twelve (12) months from the commencement date of liquidation.

After adopting this Declaration, you will need to convene a members’ meeting, which has two important functions:

  1. to seek shareholder approval to voluntarily liquidate the company; and
  2. to appoint the liquidator.

At this point, you will need to open a bank account specifically for the liquidation process.

From here, the liquidator will notify all relevant parties that the MVL process has started. These parties include the:

  • Board;
  • Company Secretary;
  • auditors;
  • tax agents;
  • Employees’ Provident Fund (“EPF”);
  • Inland Revenue Board (“IRB”);
  • Social Security Organisation (“SOCSO”);
  • Royal Customs of Malaysia (“RCM”); and
  • Human Resource Development Fund Malaysia (“HRDF”)

Then, during the liquidation process, the liquidator must prepare and submit “Liquidator’s accounts” to the CCM and the Official Receiver every six (6) months.

If the liquidation process takes more than a year, an annual meeting of members will be held to report on the winding-up processes undertaken to date. An MVL typically takes between 1-2 years to complete, depending on how long it takes to obtain tax clearance from the IRB.

However, after receiving tax clearance, the liquidator shall prepare the final account and convene a final meeting to finalise the liquidation process.

If you believe an MVL is the right option for your company, save time and skip the complexity by using our professional liquidation services. Our team of corporate secretarial experts in Malaysia will help you to dissolve your company quickly and effectively.

03 Closing a foreign company’s branch office in Malaysia

This option is only available if you have established your business in Malaysia as a foreign company (known locally as a “branch office”).

You can close your foreign company’s branch by lodging Form 578 (1) – Notice by Foreign Company of Cessation of Business with the CCM within seven (7) days from ceasing of its operation. Upon the expiration of twelve (12) months after lodging of the said form, CCM will remove the branch office name from the register.

If this option applies to your business, we can help you settle any outstanding branch office operational matters such as:

  • employee payroll
  • filing of statutory forms with the relevant government authorities
  • notifying of tax agents, auditors and other regulatory authorities (if applicable) that the branch has closed
Take advantage of our exit strategy expertise

Before you decide on a company exit strategy, you need to carefully consider any compliance, regulatory and tax implications that may be unique to your business.

BoardRoom’s experienced team can advise you on the best course of action for closing down a company in Malaysia. More than that, we can also take care of all the formalities and guide you step-by-step through the complexities.

Get in touch with our corporate secretarial experts to learn more.

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