A Sendirian Berhad (Sdn Bhd) company is a private limited company that both locals and foreigners in Malaysia can start. With the World Bank ranking Malaysia as the 12th easiest and friendliest place to do business, Sdn Bhd companies are becoming popular business entities.
Choosing the right company structure is crucial to taking advantage of Malaysia’s numerous business opportunities. Embarking on your Malaysia company registration as an Sdn Bhd will undoubtedly allow your company to expand and flourish.
Key characteristics of Sdn Bhd Company
Limited Liability Protection for Shareholders
- The idea of a limited liability company protects the shareholders/ owners’ personal wealth.
- The company’s shareholders are only liable for debts accrued by the company in accordance with their levels of investment and not more.
Separate Legal Entity Status & Perpetual Succession
- A Sdn Bhd company is a separate legal entity from its shareholders/owners.
- Its status as a separate legal entity allows it to operate regardless of the identities of its founders, directors, and shareholders.
- Any deaths or retirements of its founders, directors, and shareholders will have no effect, as the company will continue to exist and operate unless it is dissolved.
- A Sdn Bhd company can acquire assets, enter into contracts, and sue or be sued.
Transferability of Ownership in Sdn Bhd
- A shareholder of an Sdn Bhd in Malaysia can sell or transfer shares to any person of the shareholder’s choice as long as the potential buyer can afford the shares.
Ease of Fundraising for Sdn Bhd Companies
- It is relatively simple for an Sdn Bhd company to raise money either by equity or loan.
- The share concept of Sdn Bhd makes it easy for investors to invest in the company, as long as they can agree on the valuation.
- Sdn Bhd is a well-recognised corporate structure, so it is easier to borrow money from banks at lower rates than rates paid by other business structures. Banks may view loans for Sdn Bhd companies as less risky than loans for other business structures.
Flexibility in Profit Distribution
- The shareholder/owner of an Sdn Bhd company benefits from the advantage of being able to distribute the company’s profit as deemed suitable.
- Company owners determine the salaries, directors’ fees, bonuses, dividends, and other benefits. They also dictate how much money is to be reinvested into the business.
Roles of people in an Sdn Bhd Company:
Shareholders: Ownership & Decision-Making
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- They are the investors and owners of the Sdn Bhd company
- They may not run the day-to-day operations of the company and will delegate such responsibility to directors
- They may call for a meeting to discuss and decide on important issues, such as appointing and removing directors and an auditor
- They are only liable for capital invested in the Sdn Bhd and not more
Directors: Management & Compliance Responsibilities
- They are the officers appointed by the shareholders to manage the company
- They have a statutory obligation to ensure the company follows the Companies Act 2016 and the Corporate Tax regulations
- More often than not, most small to medium-sized (SME) Sdn Bhd may have the same individual as shareholders and directors
Company Secretary: Legal Compliance & Governance
- As required by the Companies Act 2016, all Sdn Bhd companies must have a Malaysian company secretary
- Their roles are to advise directors on issues pertaining to the Companies Act 2016 and ensure the company complies with it.
Advantages of Operating as an Sdn Bhd in Malaysia
- Foreigners can be shareholders and can fully own the Sdn Bhd
- Foreigners can be a director as long as they have a local residential address
- A single shareholder company/single person company (“SPC”) is possible
- Malaysia’s corporate tax rate (17%/24%) is lower than the personal tax rate after a certain threshold
- There are more tax incentives (e.g. pioneer status, investment tax allowance) given to Sdn Bhd companies as compared to other corporate structures
- A company can act as a holding company to own real assets such as properties etc. This allows property investors to have a corporate structure to better manage their property portfolio
- Sdn Bhd can have up to 50 shareholders which is sufficient for small medium-sized businesses. Berhad would be an alternative company structure if there are more than 50 investors
Disadvantages of Operating as a Sdn Bhd in Malaysia
- There are more statutory compliance required for Sdn Bhd company as compared to other corporate structures such as yearly statutory audits and the appointment of Malaysia company secretary.
- Compliance costs could be higher as the Company needs to incur company secretary’s retainer fee (approximately RM2,000 a year) and audit fee (approximately RM1,000 to RM8,000 depending on revenue).
Overall, a Sdn Bhd company would be considered the best corporate structure in Malaysia that’s suitable for any type of entrepreneurs be it foreigners, start-up or established businessmen.
So what are you waiting for? Kickstart your business venture in Malaysia as a Sdn Bhd company by registering with us online in 10 minutes.
FAQs About Sdn Bhd Company in Malaysia
- Yes, foreigners can register a Sdn Bhd. However, at least one director must be a resident of Malaysia. Foreign ownership is allowed, making it attractive for international entrepreneurs.
- Advantages include limited liability, credibility with banks and clients, easier fundraising, flexible ownership and profit distribution, perpetual existence, and eligibility for tax incentives and government schemes.
- Advantages include limited liability, credibility with banks and clients, easier fundraising, flexible ownership and profit distribution, perpetual existence, and eligibility for tax incentives and government schemes.
- Disadvantages include higher setup and compliance costs, mandatory audits, more regulatory requirements, annual reporting obligations, and restrictions on share transfer compared to sole proprietorships or partnerships.
- Requirements include at least one director and one shareholder, a local registered office, a company name approved by SSM, and submission of incorporation documents including the Constitution (if any) and Form 9.
- Directors manage the company’s operations, ensure legal compliance, maintain statutory records, file annual returns, and act in the best interest of shareholders and the company.
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