Category: Corporate Secretarial

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

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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

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    How to Register a Company in Malaysia

    Thinking of registering a company 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 to a foreign business owner.

    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. Read on for more insight on how to register a company in Malaysia:

    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 which make it ideal for registering a company 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, allowing an increase in foreign company interaction.

    How to establish and register a company in Malaysia

    01 Step 1 - Choose a company type

    • Private Limited Company (Sdn Bhd): Although there are many different business entities, the only option for foreign investors registering a company in Malaysia is a Private Limited Company. This private 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

    When you register a company, the name of your business can fall under two different categories:

    The Companies Commission will make sure your company name meets 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 before registering a company.

    how to register an enterprise company in Malaysia

    03 Step 3 – Set up your company structure

    Next, determine your suitable business entity or company structure, ensuring you meet the following requirements for a Private Limited Company (Sdn Bhd company), as this is the only option for foreign companies:

    • 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 business registration application

    To submit your company registration 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 entity.

    To help you navigate the process of registering your company 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 your Malaysian company registration.

    How to successfully open a company 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 open a corporate bank account;
    • 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 or want more information on the business registration process 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 and register a company in Hong Kong.

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    Business Expansion into Malaysia — Yay or Nay?

    Business Expansion Malaysia

    Business Expansion into Malaysia — Yay or Nay?

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    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 geographical factors that help boost Malaysia’s chances as the next destination to launch your business expansion strategy.

    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 of 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 are 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 efforts 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 5-10 days, and employment permits for expatriates are processed within 5 working days. Find out the steps on How to register a company in Malaysia.

    Operationally and financially, Malaysia has built a strong case for itself. It boasts one of the lowest start-up costs compared to the other Asia Pacific countries, as shown by its 17.5 days and 11.1% of income per capita2 required to start a business. This is largely driven by its low property rental rates, with an average gross rental yield of 5.16%3, and its generally low minimum wage.

    Knight Frank currently estimates the supply of office space in Kuala Lumpur (KL) city is 58.33 million sq ft, followed by KL fringe with 30.31 million sq ft and Selangor with 26.09 million sq ft, which brings the total to 114.73 million sq ft4.

    In addition to low office rental rates, businesses can operate economically because of Malaysia’s relatively low minimum wage, which sits at RM1,288.35 (US$275.235) per month.

    incorporating in Malaysia

    02 You’ll Avoid Double Taxation for Your Business Expansion Strategy

    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 countries 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 Malaysia by Malaysian businesses and within Malaysia by foreign-owned businesses. On this note, companies in Malaysia are protected against the possibility of a singular income being subject to two countries’ taxes 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.

    For advisory on double taxation reduction, consider speaking with a professional tax consultant who can provide expert guidance on how to enhance your company’s tax savings.

    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 total nominal GDP is expected to reach US$710 billion by 2030 and US$1 trillion by 20356, with a healthy growth rate of 4.0% – 4.5%7.

    Malaysia’s strong GDP is attributed to the government’s effort to remain robust in the agriculture, construction, manufacturing, mining, and services industries. The theme of Budget 2024, “Reformasi Ekonomi, Memperkasa Rakyat8” (Economic Reform, Empowering People), focuses on three main objectives: improving governance and public delivery system, transforming the business and economic sectors, and enhancing the quality of life of the people. This budget, which is the largest in the nation’s history, also reaffirms the government’s dedication to fiscal reforms to overcome the dual challenges of a less robust global economic outlook and Malaysia’s financial constraints.

    With such a reform-oriented and resilient budget, Malaysians’ incomes are improving, and depending on your type of business, you can benefit from a growing number of consumers who are able or willing to purchase low- to middle-market products and services readily.

    04 The Local Government Supports Your International Expansion Strategy

    Malaysia has been growing economically in tandem with global trends. In line with the adoption of Industrial Revolution 4.0 (IR4.0), it has introduced its own National 4IR Policy. This broad, overarching national policy drives coherence in transforming the socioeconomic development of the country through the ethical use of 4IR technologies, such as Artificial Intelligence, Blockchain, and the Internet of Things.

    The National 4IR Policy aims to attract foreign investments by fostering a culture of innovation and digitalisation, enhancing the performance and productivity of local industries, and enabling Malaysia to join global value chains. The policy also offers incentives and support for foreign investors who adopt 4IR technologies and develop the human capital and infrastructure in Malaysia. By tapping into the opportunities of 4IR, Malaysia can position itself as a regional hub for advanced and knowledge-intensive industries and achieve its vision of becoming a high-income and inclusive nation by 2030.

    While there are limited restrictions on foreign ownership in certain strategic sectors, the Malaysian government encourages the inflow of foreign investments. This is apparent in the incremental liberalisation 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 allowances 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) stands as a pre-seed initiative targeting aspiring entrepreneurs in sectors such as ICT and other technology fields. This program offers up to RM 300,000 to these startups looking to develop and promote their innovative services.
    2. MaGIC Global Accelerator Programme (MaGICGAP) is a three-month intensive programme that helps promising local and global mid-to-late stage start-ups with established product-market-fit to get investment. It is designed for start-ups that have launched a product with reasonable traction, as well as highly scalable ones carrying a growth potential business model. This programme is open to start-ups from various industries, such as creative and lifestyle, e-commerce, education, finance, healthcare, and smart cities.
    3. Technology Acquisition Fund (TAF) is a hybrid grant and loan scheme that assists eligible Malaysian companies in procuring foreign technologies and integrating them into their existing business and manufacturing activities. The fund aims to allow companies to accelerate their growth potential by acquiring new technology and improving their technological capabilities and production processes. This applies to businesses in the priority technology clusters identified by MOSTI, such as aerospace, medical devices, pharmaceuticals, advanced electronics, and renewable energy.
    4. Domestic Investment Strategic Fund is a matching grant designed to offer incentives to established companies within the manufacturing and services sectors, boasting a minimum of 60% Malaysian equity ownership. This fund supports and encourages reinvestments, encompassing activities such as expansion, modernisation, and diversification. Notably, it facilitates initiatives like training, R&D, outsourcing, international standards, and technology licensing or acquisition. The fund is accessible to businesses in priority sectors such as aerospace, food security, machinery and equipment, and services.
    5. Women Exporters Development Programme (WEDP) is a specialised export support program aimed at empowering women in the export industry. This three-year program is tailored to assist competitive and sustainable businesses led by women to foster the growth of product and service exports. To be eligible for this programme, the company must be women-owned, hold a majority stake (at least 51%) and hold key leadership positions as the CEO and/or Managing Director. This programme covers both merchandise and services trade across various industries.

    The Malaysian government also has a dedicated agency, the Malaysian Investment Development Authority (“MIDA”), to help facilitate your international expansion strategy into the country. Besides the ease and low cost of incorporation, Malaysia also offers other advantages for businesses, including:

    • Low corporate tax rates of 15%-24%9 depending on the company size and income
    • New Companies Act 2016 simplifies the registration process and reduces the compliance burden for companies

    Strategic location in the heart of the ASEAN Community, providing access to a large and diverse market of over 600 million people

    business expansion support

    Launch Your Business Expansion Plans in Malaysia with BoardRoom

    So, if you were wondering if you should establish incorporation in Malaysia, here is our advice: you should. Malaysia is a promising destination for business expansion in the Asia Pacific region, offering a range of advantages for businesses across all industries. If you are looking for an international expansion strategy that can help you grow your business and achieve your goals, Malaysia might be the perfect option for you!

    However, whilst incorporating a business in Malaysia may seem like a straightforward process, it can be fraught with challenges and risks. You may encounter common difficulties like obtaining the necessary permits, licenses, and approvals, opening a bank account, complying with local laws and regulations, and dealing with cultural and language barriers. These challenges can cause delays, errors, and frustrations and ultimately affect your business performance and reputation.

    That is why you should always consult a team of dedicated experts who can guide you through the entire process of company incorporation in Malaysia. These professionals can assist you in your business expansion by 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 local regulations. By doing so, you can ensure the best possible outcome for your business expansion plan 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.

    If you are looking to incorporate in Malaysia, or if you already have a business in Malaysia but are looking to outsource your administrative functions so you can focus on expanding your business, a full-suite corporate services provider offering end to end services can help you with:

     

    Contact us today to find out how we can help you!

    Source
    1. statista.com
    2. https://www.doingbusiness.org/
    3. https://www.globalpropertyguide.com/
    4. The Edge | Knight Frank Kuala Lumpur and Selangor Office Monitor 2Q2023: Klang Valley office market sees sustained, steady recovery
    5. https://www.statista.com/
    6. https://www.spglobal.com/
    7. https://www.nst.com.my/
    8. https://www.mof.gov.my/
    9. https://taxsummaries.pwc.com/

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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

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    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 agreements between 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 Business in Malaysia? Here’s what you need to know

    Closing a company in Malaysia

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

    boardroomsuperadmin

    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 or business 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”). This will effectively dissolve a company.

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

    • not carry on business/operations (and must not intend to do so);
    • resolve financial obligations;
    • 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 and file dissolution documents.

    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 business 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 company 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 when deciding on how to close down your business.

    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 for closure of business.

    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 and close down your business.

    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 company secretarial services in Malaysia will help you to dissolve your company in a quick and effective manner.

    03 Closing down a foreign business or 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 before you close down 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 to aid your business closure

    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 closure of business. 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 company secretarial experts to learn more or get advice on how to close down a business in Malaysia.

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