My last post discussed the biotech landscape in Malaysia. Now I want to talk about setting up a company there. Malaysians can register sole proprietorship firms and co-operatives, partnership firms, private limited and public limited companies with the Companies Commission of Malaysia (CCM). However, foreigners cannot set up sole proprietorship or partnerships in Malaysia, unless they have permanent residency (PR) or have availed citizenship under the “Malaysia My Second Home” (MM2H) program.
There is no restriction on maximum shareholding, meaning that foreigners can own 100% of a private limited company. However, it is mandatory to apply to the Foreign Investment Committee (FIC) for approval, for any company with foreign investment that intends to transact with governmental departments. This also requires that there is at least 30% investment by the local “bumiputra” (ethnic Malay). Foreigners can register a private limited company (by shares or by guarantee or unlimited liabilities) or a foreign company under the provisions of the Companies Act 1965. Foreigners must appoint a company secretary, who is authorized to register a company or a member of a professional body approved under the Companies Act, or a person licensed by CCM.
Malaysian has e-governance and most stamp duties, transactions and forms are printed and uploaded by the company secretary. Usually it takes 5 working days for allocation of a valid company after application (Business Name Approval Form: Form A or PNA.42) with three proposed company names under the provisions of the Business Registration Act 1956 (ROBA 1956). You will have a maximum of 3 months from the date of the results to register a company to operate in West Malaysia, which includes Peninsular Malaysia and the Federal Territory. It costs between Malaysian Ringgits (RM) 2,500 and RM2,800 to setup a company or buy a “shelf company.”
A “shelf company” is a ready made or an existing company incorporated under the Companies Act. These are available to investors, who require a Malaysian company on an urgent basis. Normally they are formed with a RM2 paid up share capital, 2 local directors and shareholders, and a RM100,000 authorised share capital (stamp duty paid).
It is to reduce the time needed for various statutory and regulatory processes in forming the company in CCM. Entrepreneurs who want to start the business immediately often make use of a shelf company. Upon purchase of a shelf company, the existing directors resign and transfer shares to the purchasers. Transfer is deemed complete upon full payment with return of signed documents for stamping.
There is a pre-signed indemnity letter from the previous shareholders admitting liability for transactions before the purchase date and absolving for liabilities after the purchase date. Therefore, shelf companies are free from liabilities and the company secretary should be able to help you to buy them. The name of the shelf company may be changed to another name, subject to the approval of the ROC (Registrar of Companies). The format and description of Memorandum of Association (MOA) and Articles of Association (AOA) are quite similar to other countries.
A company must have a minimum of two directors (18 years or older) with their principal or only place of residence in Malaysia and not operating under bankruptcy. A person with a valid work permit will qualify for a permanent residential address status and can become company director in Malaysia. Directors need not be shareholders of the company. In Malaysia, company directors are imposed with statutory duties, duty of care and fiduciary duties and are governed by a code of ethics. Always, the first directors of a company shall be named in the MOA and AOA of the company.
I strongly advise you to understand the implications of becoming a director of a private limited, or of your own company, in Malaysia. Directors there are responsible for general management of the company, whereas shareholders are free from all liabilities except for share capital already paid.
Biotechnology companies in Malaysia:
BiotechCorp (Malaysian Biotechnology Corporation) is an independent agency under the Ministry of Science, technology and Innovation (MOSTI) and is owned by the Minister of Finance (MOF). BiotechCorp is governed by the Biotechnology Implementation Council and advised by the Biotechnology International Advisory Panel, both chaired by the Prime Minister of Malaysia.
I’d advise all foreigners to contact BiotechCorp, which actively promotes foreign direct investments by creating a conducive environment for biotechnology. After successful registration of a biotechnology company with CCM, I recommend that you to apply for the BioNexus Status, which has many associated benefits and incentives. A biotech company with a strong portfolio of scientists and advisors and a strong business model with research and development activities in life sciences or use of biotech processes will be eligible to get BioNexus Status.
There are nine Bills of Guarantees (BOG) for BioNexus status companies, namely, freedom of ownership, free to source funds globally, free to bring in knowledgeable workers, eligibility for competitive incentives and other assistance, eligibility to receive assistance for international accreditations and standards, a strong intellectual property regime, access to supportive information network linking research centres of excellence, access to shared laboratories and assistance from BiotechCorp as the one-stop agency.
In the next blog, I will write about my experiences setting up a biotechnology company in Malaysia.