Setting Up a Sdn Bhd

What is Sdn Bhd (Private limited company)?

This type of business entity is more well known as Sendirian Berhad (private limited company) or Berhad (public limited company) and is the most common type of business entity in Malaysia.

Contributing Advisor

Quinn Lu

Senior Associate, International Business Advisory

A foreign investor can own the majority shares (100 percent) of a private limited company, depending on the industry the business is engaging in. The CA 2016 restricts the members of a private limited company to 50 and restricts the rights of members to transfer their shares. Establishing a private limited company is the most common type of business entity in Malaysia for foreign investors.

Advantages of a Sdn Bhd

There are some key characteristics of a private limited company in Malaysia.

Limited liability

The company’s shareholders are liable for the debts accrued by the company in accordance with the amount they invested, and no more.

Status as a separate legal entity

The private limited company is a separate legal entity from its shareholders and thus allows the company to operate regardless of if the directors and shareholders have retired, died, or changed unless the entity is dissolved.

Ease of fundraising

The Sdn Bhd company can raise loans and the entity can borrow from banks at lower rates compared to other business structures. This is because many banks view loans issued to private limited companies as a lower risk compared to loans for other business entities. 

Financial and non-financial incentives

There are more financial and non-financial incentives given to private limited companies compared to other business structures, such as an investment tax allowance.

How to set up Sdn Bhd in Malaysia?

Step 1: Understand the characteristics of a Private Limited Company

• Foreign investors can own up to 100 percent of the company shares, subject to industry-specific restrictions.
• Shareholders’ liabilities are limited to their share capital contributions, protecting personal assets.
• The company is legally distinct from its shareholders and directors, enabling continuity regardless of personnel changes.
• Banks are more willing to lend to Sdn Bhd companies due to their regulated nature.
• Private limited companies often qualify for financial and non-financial government incentives, including tax allowances.

Step 2: Prepare required documentation

Applicants must submit the following to the Companies Commission of Malaysia (SSM):

• Proposed company name.
• Declaration of compliance with the Companies Act 2016.
• Description of primary business activities.
• Details of directors and shareholders (minimum one resident director required).
• Registered Malaysian business address.
• Disclosure of shareholding per shareholder.
• Declaration that directors have no criminal convictions and are not undischarged bankrupts.

A qualified company secretary residing in Malaysia must also be appointed.

Step 3: Consider paid-up capital requirements

While there is no statutory minimum paid-up capital to incorporate a company, businesses intending to employ foreign workers must meet industry-specific paid-up capital thresholds, including:

• RM 1 million (US$ 237,000) for import, export, trading, and restaurant businesses.
• RM 350,000 (US$ 83,000) for joint ventures with Malaysian partners holding at least 51 percent shares.
• IT services – RM 500,000 (US$ 111,862)
• 100 percent local owned companies – RM 250,000

Step 4: Register with SSM and pay fees

The registration process generally takes 5 to 10 working days. Registration fee is RM1,010 flat (US$237)

Step 5: Post-incorporation compliance

Once incorporated, the company must comply with statutory obligations including annual returns filing, tax registrations, and employment regulations. Having a local legal entity facilitates easier work permit applications for foreign employees, access to government incentives, and banking relationships.