FOREIGN DIRECT INVESTMENT (FDI) Guide (1) Setting up a company in Malaysia

FOREIGN DIRECT INVESTMENT (FDI) Guide (1) Setting up a company in Malaysia

Setting up a company in Malaysia is simple and flexible. There is no restriction as to the the percentage of foreign ownership in the Malaysian Company.

At the time of formation of Malaysian Company, there shall be at least two (2) shareholders and two (2) local directors.  If the client wish to have only single holding entity to the Malaysian company, then after the formation of the Malaysian company, we can assist to arrange the transfer of shares to a single holding foreign company

As for the requirement of two (2) local directors, Companies Act 1965 provides that a Malaysian company shall have at least two directors, each having his principal or only place of residence within Malaysia. The meaning of “residence” or “resident” shall mean a person permanently resides in Malaysia for a period or periods amounting in aggregate to 180 days or more in a year, cases referred MY v Comptroller-General of Inland Revenue [1972] 1 MLJ 84 and Fong Poh Yoke v The Central Construction Co. (Malaysia) Sdn Bhd. [1998] 4 CLJ Supp 112. In the latter, the court has decided that the word “resident” connotes residence in one place with some degree of continuity and apart from accidental or temporary absences (please refer page 136, b of the case).

A foreigner intending to set up a company in Malaysia shall try to find two local Malaysian Directors before incorporating or buying over a company. In terms of the finance of the company, the foreigner can still resume control of the company by making the foreigner as the sole signatory to operate the Company’s Bank Account therefore the financial investment in the shelf company is more secure ( subject to agreement by the company Board of Directors ).

The control can be further entrenched by amendment of Articles of Association of the Company by making it compulsory to have unanimous resolution to perform certain reserved matters. It is advisable for a foreigner to consult a lawyer before setting up a company especially when cooperation with local shareholders is inevitable. Lawyer can assist to prepare a Shareholders Agreement to stipulate the rights, duties and other obligations.

You are advised to seek consultation with a Malaysia Law Firm. For further information you may  email us

For consultation on the issue of foreign investment in Malaysia, please proceed to send in your enquiry by clicking here.