The impact of a great company secretary in modern Malaysia

The impact of a great company secretary in modern Malaysia

The impact of a great company secretary in modern Malaysia

How company secretary responsibilities are evolving in Malaysia

Historically, the responsibilities of a company secretary were limited to basic administrative tasks such as minute taking, annual return filing, editing company constitutions and other internal office duties. But the role is evolving as business management and corporate governance grow increasingly complex and gain greater importance.

In modern-day Malaysia, the company secretary is an executive-level role tasked with a wide range of important responsibilities across multiple business functions. As such, the company secretary plays a critical role in helping a business reach its maximum potential.

In this article, we explore the evolving role of a company secretary, and how a skilled company secretary can help your business gain a competitive advantage.

Why is a company secretary important?

Company secretaries carry out various duties to support the running of a business: importantly, they ensure full compliance with the Companies Act and related regulations.

If your goal is to succeed in business, particularly in competitive markets, do not underestimate the value of an experienced company secretary. They will be able to help elevate your governance practices in a way that maximises both benefits and performance.

Company secretarial services can include:

  • establishing the best structure for your business;
  • lobbying for the development of a strong environmental, social and governance strategy, known as ESG in Malaysia;
  • ensuring regulatory compliance; and
  • implementing contemporary corporate governance practices.

The company secretary acts as a voice of reason, ensuring your business pursues its goals with equal determination and integrity.

Corporate Secretary

The role of a company secretary in Malaysia

The rules and regulations for company secretarial services vary across the Asia-Pacific (APAC) region. In Malaysia, businesses are required by law to appoint a company secretary after incorporation.

Common duties for company secretaries in Malaysia include:

Participating in board meetings
Coordinating annual general meetings
Liaising with shareholders and directors
Keeping secretarial records of the company
Preparing and lodging annual returns
Obtaining certification of documents by local authorities
Handling the consolidation, division and transfer of shares
Performing ad hoc tasks on behalf of the board (e.g. signing bank or statutory statements).

Company secretaries can help at every stage of business, from registering a company to closing a company.

How has the company secretary role evolved?

While company secretaries used to have very little authority, today they are well-versed in local laws and regulations. This means the role has taken on a key business advisory function: directors and shareholders can seek the company secretary’s advice on the best way to handle compliance matters.

New focus areas for company secretaries include guiding the board on ESG and matters of legal compliance.

Environmental, social and governance

Rising expectations from regulators, investors and customers for strong ESG in Malaysia means businesses are under mounting pressure to demonstrate good governance. According to a 2020 KPMG survey, sustainability reporting in APAC has grown from 78–84% since 2017.

The company secretary’s broad involvement in both business operations and board activities means they have a crucial role to play in ESG advancement.

Company secretaries can support ESG performance by:

  • helping devise contemporary ESG measures (e.g. introduction of a whistleblower protection policy);
  • working collaboratively with the sustainability team to manage and control ESG risks and opportunities;
  • arranging regular ESG auditing; and
  • assisting with transparent ESG reporting in the company’s annual report.

 

    Legal compliance

    Keeping up with statutory requirements and advising updates to the legal team is a core responsibility of the company secretary. While the company secretary is not held accountable for legal decisions, directors and management teams must be able to trust that the company secretary’s compliance advice is reliable and up to date.

    On top of this, company secretaries must help the company prepare for all types of legislative uncertainty.

    Company secretaries support legal compliance in many ways, including:

    • planning and coordinating shareholder and board meetings and taking attendance;
    • preparing shareholder and board resolutions;
    • ensuring timely filing of all necessary ​​returns with the Companies Commission of Malaysia;
    • updating the Companies Commission on changes to statutory information;
    • ensuring compliance with Securities Commission legislation;
    • reviewing and preparing corporate governance reports for inclusion in annual reports; and
    • helping the company meet the requirements of Bursa Malaysia.

    The best company secretaries can develop tailored compliance solutions that satisfy requirements without costing unnecessary resources.

    Top challenges in company secretarial services

    Key qualities to look for in a company secretary include adaptability and strong communication skills. These attributes are crucial for overcoming common challenges in the compliance space.

    Here are the three main challenges company secretarial services may face.

    1. Keeping up with changing regulations

    The biggest obstacle for company secretaries is keeping their organisations compliant amid rapidly evolving regulatory landscapes. One way they support ongoing compliance is by working hand-in-hand with regulators.

    Company secretaries act as a vital link between organisations and authorities. They are able to access information about regulatory changes before they are made and can therefore help their organisation prepare in advance.

    This way, there is no big rush to adjust processes or take action once the changes come into effect.

      2. Developing tailored compliance solutions

      A successful compliance framework will look different for every business depending on its location, size, industry and listing status. This means company secretaries must have the skills to devise tailored business solutions for their organisation in line with the company’s constitution and within the framework of the Companies Act.

      When properly customised, a compliance framework supports a business to operate with integrity while also performing well in its industry.

      3. Obtaining buy-in from stakeholders

      Sometimes, companies fail to see the value of investing in a skilled company secretary. This is usually due to a poor compliance culture, where compliance is viewed as a burdensome box-ticking exercise rather than an opportunity to advance company goals.

      It is the responsibility of the company secretary to oversee compliance activities across the organisation.

      They should help the directors, shareholders and all staff to understand:

      • why statutory, regulatory and corporate requirements exist;
      • why the organisation must comply with these requirements; and
      • how the organisation and its people benefit from strong compliance.

      To ensure your business remains in strict compliance with all relevant requirements, make sure to appoint a company secretary that takes compliance very seriously.

      Corporate Secretary

      Partner with a company secretary you can trust

      If your company secretary lacks the right qualifications, skills or attitude to support good corporate governance, your business will be at risk of penalisation for failing to fulfil its compliance obligations. You may also miss out on valuable opportunities to improve your efficiency, productivity and profitability.

      Many organisations choose to streamline their operations by engaging in a reputable third-party corporate services provider. With this approach, executive staff can worry less about compliance obligations and focus more on business growth.

      Additionally, you can:

      Ensure your company incorporation is handled seamlessly
      Streamline your cross-border business administration
      Achieve multi-country compliance via one point of contact
      Receive vital business advisory services to support success in new regions
      Save time and money through a reduced administrative load
      Put more resources into achieving your primary objectives

      If your organisation has plans to expand across APAC, it is important to consider and prepare for the new set of regulations and cultural nuances each region will bring. You will also need to adhere to legislative requirements for any international partnerships you establish.

      The complexity of your operations can increase however if you engage corporate service providers in each region to meet relevant requirements.

      Corporate Secretary

      Gain a competitive advantage

      If your aim is to achieve successful business growth across APAC, BoardRoom provides a full suite of corporate services to suit your needs. Our Malaysian company secretary team stays up to date on regulatory developments and industry best practices to provide you with insightful advice every step of the way.

      To find out more about partnering with a skilled corporate secretarial team, chat with our specialists today.

      Related Business Insights

      Great corporate governance in Malaysia starts with a qualified company secretary

      Great corporate governance in Malaysia starts with a qualified company secretary

      Great corporate governance in Malaysia starts with a qualified company secretary

      The COVID-19 pandemic reshaped the corporate landscape of markets all over the world. Survival has meant adapting to ongoing uncertainty and change. But as we enter a new era of economic promise, Asia-Pacific businesses are proactively pursuing corporate governance to secure a prosperous future for themselves and the broader economy.

      In this article, CEO of BoardRoom Malaysia, Samantha Tai, explains the importance of corporate governance in Malaysia and how leaders can establish values-based governance practices for the best outcomes. We will also explore the pivotal role of the company secretary in advising and implementing best-practice corporate governance initiatives effectively.

      What is corporate governance?

      At an organisational level, the meaning of corporate governance lies in achieving higher performance, acting with integrity and maximising value to stakeholders. Businesses that meet corporate governance standards are more likely to achieve corporate objectives, attract investment and outperform competitors.

      Importantly, Group-wide corporate governance also helps reduce the risk of malpractice and subsequent penalisation.

      “Under Section 17A of Malaysia’s Anti-Corruption Commission Act, organisations can now be held liable for the corruption act of an individual officer,” Samantha says. “So companies need to make sure they have adequate procedures in place.”

      Corporate governance itself is not a legal requirement for all businesses in Malaysia, but Samantha says its alignment with fiduciary duty makes it an important investment for any leader.

      “In BoardRoom training sessions, we start by explaining a director’s fiduciary duty to the Commonwealth to always prioritise the best interests of the company, minimise conflicts of interest and act in good faith,” she says.

      “In Malaysia, fiduciary duty is taken very seriously, with regulators taking action against directors who neglect their duty — including independent directors.”

      Successful corporate governance frameworks involve:

      • the development of customised policies; and
      • the subsequent implementation of those policies.

      Stewardship of this function usually resides with the company secretary.

      CorporateGovernance

      How company secretaries drive good governance

      Historically, the company secretary performed a purely administrative role and had very little authority. Today, the company secretary performs a wide range of vital responsibilities for the company, as both a senior business manager and a statutory officer.

      Alongside their key role in the administration of important undertakings such as company incorporation, company secretaries serve as the link between the board of directors, senior management and the company’s stakeholders (including regulatory bodies). This includes leveraging digital technologies, such as board management and ESG software, to strengthen board and shareholder processes and improve corporate governance. In addition, their thorough knowledge of local regulations means they can ensure corporate governance standards are implemented, followed and regularly reviewed.

      Samantha says the current role of the company secretary is clearly set out in the Malaysian Code on Corporate Governance.

      “In Malaysia, the views of the company secretary on corporate governance are sought because they attend all board meetings, know the relevant policies and understand compliance requirements,” she says. “They advise the board on corporate governance processes that need to be put in place. This may relate to the board composition or the company’s policies and code of ethics, for example.”

      They also help publicly listed companies demonstrate corporate governance in their annual report, including mention of any alternative methods used to achieve the same objective.

      Company secretarial duties have become so synonymous with corporate governance that the UK’s Institute of Company Secretaries and Australia’s Institute of Chartered Secretaries and Administrators have both rebranded to the ‘Chartered Governance Institute’, with other regions expected to follow suit.

      Corporate Secretarial

      How to improve your corporate governance

      Good corporate governance will become increasingly important in the years to come, with regulators expected to introduce new recommendations for both public and private businesses. Organisations that continue to meet best-practice standards as they evolve will be in a strong position to grasp new opportunities and meet market demands.

      By taking the following steps, you can lead your organisation towards stronger corporate governance.

      1. Appoint a qualified company secretary in Malaysia

      The first step to improving your corporate governance is ensuring your business complies with current rules and applies best practices, particularly those prescribed in the Malaysian Code on Corporate Governance. This also means adapting to new standards as they come into effect.

      For example, the Securities Commission Malaysia recently rolled out group-wide governance requirements for listed corporations.

      “Publicly listed companies already need corporate governance because they must report to the stock exchange,” Samantha explains. “But now, on top of that, they must ensure corporate governance is practised in all their subsidiaries too — regardless of whether the subsidiaries are themselves listed entities or located in Malaysia or overseas.”

      To satisfy this requirement, an experienced company secretary would assist with the establishment of a group-wide framework for corporate governance. The framework would include a code of conduct, as well as policies and procedures for corporate governance issues such as whistleblowing, anti-corruption, board diversity and sustainability.

      Company secretaries help uphold corporate governance by:

        • Staying across changing standards
        • Checking compliance levels
        • Conducting gap analyses

        Company secretarial services providers are a popular choice for leaders who want peace of mind about receiving specialist advice that’s tailored to their organisation.

        2. Develop detailed, customised policies

        Despite Malaysia’s relatively strong corporate governance performance, the country still experiences corporate irregularities month to month. Failure to meet expectations tends to come down to internal perceptions of corporate governance as a mere box-ticking exercise, with the resulting policies lacking sufficient length and detail.

        Demanding workloads at a senior level can lead to quick copy-paste solutions.

        “But corporate governance is not just copywriting,” Samantha warns. “For corporate governance frameworks to work, you have to bring your relevant management team together to discuss their development, as there are many tools available.”

        The most effective corporate governance policies:

        • are comprehensive;
        • reflect the values of the organisation;
        • suit the organisation’s industry and size; and
        • detail how good governance is actively applied.

        3. Adopt integrated reporting

        While it is important to ensure your corporate governance policies and annual reports are up to standard, good governance can’t be achieved through documentation alone. Samantha says that integrated reporting is likely to become mandatory in the coming years.

        “Integrated reporting is a process founded on integrated thinking for communicating how an organisation’s strategy, governance, performance and prospects lead to value creation,” Samantha says. “It makes your annual report more meaningful.” Embarking on an integrated reporting journey allows for better employee engagement and value creation, rather than looking at reporting as a compliance exercise alone.

        All members of an organisation have a role to play in pursuing good governance, so it is also important to spend time demonstrating the value of corporate governance to board members and staff. You can do this by explaining how corporate governance practices are important tools for enhanced company performance, rather than arbitrary obligations that must be met.

        “Successful corporate governance is integrated into the day-to-day operations of the company,” Samantha says. “It’s not just a policy for compliance.”

        CSReporting

        4. Incorporate and prioritise ESG in your company culture

        Aligning your company culture with your Environmental, Social and Governance (ESG) initiatives, will help employees better understand corporate governance and the role they play in it. Investing in an ESG professional can help you communicate important messages, maintain up-to-date ESG reporting and ultimately drive a positive company culture.

        According to Samantha, many leaders are so focused on navigating a challenging economy that they deprioritise ESG issues. “But remember, the ‘social’ part of ESG is about your employees,” she says. “At the end of the day, taking care of your employees will impact your bottom line.”

        In the interests of top-down corporate governance, regulators are also encouraging greater board involvement in ESG initiatives, with country-specific compliance requirements changing regularly. Board directors are in the best position to account for ESG risks and make decisions to lift shareholder value. Because of this, greater responsibility is placed on securing a comprehensive ESG strategy that benefits the company, its shareholders, employees and the environment.

        ESG

        Start practising good governance today

        The effectiveness of your corporate governance efforts in the years to come will determine your business success in the short and long term.

        It is important that your company board and executive staff champion your governance framework, but it is equally important that your company secretary drives its success. For the best results, choose a company secretary that offers varied expertise, strong ethics and outstanding communication skills.

        Having a reliable company secretary handling your corporate governance also allows your executive team to focus on key business objectives, such as taking your company digital.

        Contact BoardRoom’s corporate secretarial experts to discuss how we can help your business reach its corporate governance goals.

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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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        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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