05/10/2017
IMPORTANT QUESTIONS & ANSWERS:
• o 1) Can a foreigner set up a sole proprietorship or partnership?
Foreigners cannot set up sole proprietorship or partnerships unless in very specific professional industries like medical or engineering whereby there is also culpability for personal indemnities.Only foreigner with permanent residency can set up enterprises and sole proprietorships.
• o 2) What is the difference between a shelf company and a newly formed company?
A shelf company is an existing company formed with a RM2/= paid up share capital,2 local directors and shareholders, and a RM100,000 authorised share capital (stamp duty paid). Upon purchase of a shelf company, the existing directors resign & blank transfer forms are delivered to transfer the share to the purchasers. Business can commence immediately upon purchase.In order to form a new company, first we have to get approval from the register of companies to use this proposed name. This process can sometimes take a long time depending on the name chose. Upon approval of use of name, the company secretary then prepares the necessary documents for incorporation for filling. This may take another 5-10 day from the date the entire relevant documents are signed.Business can only commence after the certificate of incorporation has been issued by the register of companies.
• o 3) How long does a name search take for the Registrar of Companies to approve?
The result are out normally within 5 working days of submission according to the Client's Charter of the Companies Commission (though it is normal for a few days delay) and you will have a time period of 3 months from the date of the results to register your company.
• o 4) Is the shelf company free from liability?
Yes. There is a pre-signed indemnity letter from the previous shareholders admitting liability for transactions before the purchase date but also absolving for liabilities after the purchase date.
• o 5) What is included in the purchase or formation price quoted?
Processing of relevant documents for shares transfers or subscriber's shares.Filing or documents to ROC for relevant changes in directors' secretaries.RM2/= paid up share capital and stamp duty on RM100,000authorized share capital. Any excess stamp duty to be borne by client.Secretarial books consisting of minute's book. Share register, member's register 10 copies of memorandum & articles of association & 1 no. common seal.
• o 6) How long does it take to register a new company?
From the submission of all necessary paperwork to the ROC it normally takes 15 days for the result to be available but as the ROC's internal information technology systems do breakdown often, it may take up to 3 weeks for the Business Registration Certificate to be issued.
• o 7) Who is the company secretary & what responsibility does she have?
According to Section 139 of the Companies Act 1965, all limited companies must have a licensed company secretary who is an officer of the company. Her/his duties are set out in the Act itself and are primarily to ensure the companies are adhering to the procedures set out in the Companies Act. Which is why the company secretary charges a retainer fee for his/her expertise in this field.
• o 8) I am a qualified accountant. Can I be my own company secretary?
Only a Malaysian resident who is licensed by the Companies Commission or is a member of a professional body can be appointed as a company secretary for a private limited company.
• o 9) From the list of shelf companies, what is the difference between the names listed under B9 and the rest?
B9 refers to the names of companies that have been approved but isn't incorporated yet. It will take about 5 days to incorporate the company. The memorandums & articles and incorporation documents can then be filled with the names of the shareholders & directors (the persons buying the company in this case) and these names will be the ones appearing in the M & A unlike the ready made ones which carries the name of someone else who incorporated the company first.
• o 10) What is the difference of a dormant company, a semi-active company and an active company?
A dormant company is one that has ceased operation.A semi-active company is one that is in operation but does not require frequent resolutions to be alone e.g. a trading company. An active company is one take frequently requires resolutions to be done for purpose of obtaining licenses, bank facilities, transactions involving large sums of monies e.g. Developer company.
• o 11) Can any other company personnel draw up their own resolutions without having to go through the company secretary?
Yes, the company can have anyone draw up the resolution document itself but these documents have to be verified by the company secretary since the company secretary shall be held responsible for the preparation of the documents. In most cases, to minimise risks resolutions are done by the company secretary.
• o 12) What are the qualifications require to become a director of a private limited company?
Must be of age 18 years and above.
Must not be an un-discharged bankrupt
Must not have been convicted of an appointment.
Must be a resident of Malaysia or having a permanent residential address in Malaysia. "Having a permanent residential address" is interpreted as "having the right of abode in the country on a long term basis". A person with a valid work permit will qualify for a permanent residential address status. The Companies Commission will not disallowed the incorporation of any application as the onus of responsibility to check and confirm the attainment of the minimum requisites for the incorporation lies with the company secretary. As such, the implications in the event that such a company is incorporated without the minimum 2 "local" directors, that company is deemed to be illegal in status and all contracts are deemed null & void unless the situation is remedied.
• o 13) What are the implications of becoming a director of a private limited company?
Directors are responsible for general management of the company and are answerable to the shareholders of the company and the government. Though the private limited status of the company absolve the shareholders and directors from debt to third parties, directors are personally liable for any monies owing to the government bodiese.g tax, statutory contributions, late fines & penalties levied by any government body. Shareholders are free from all liabilities except for share capital already paid.
• o 14) Can a non-director be a signatory to the company's bank account?
Yes, if he is named as a manager of the company in the Form 49. Some banks do allow third parties to sign cheques without any supporting documents like Form 49 but most do make a big fuss about it.
• o 15) Can foreigners owned shares & what is the maximum shareholding allowed in a local private company & the minimum share capital in a foreign owned company?
There is no restriction on maximum shareholding i.e. foreigners can own 100% of a company.There is no requirement to divest 30% shareholding to any locals unless the business or activities require government licensing and approvals. By law, all companies with foreign ownerships are required to apply for Foreign Investment Committee approval. Approval is normally given on condition that 30% shareholding is divested to an ethnic local Malay within 2 years. Normally, small businesses will not apply for any FIC approval unless there is business with the government departments. If the company intends to transact with government departments which will require licensing, the minimum local "bumiputra" (ethnic Malay) participation must be 30% and above. And the management structure of 50% or above is more favorable to get government contracts.
• o 16) Is it mandatory for all companies with foreign investment to get FIC approval? What if I don't apply? What are the repercussions?
YES. In reality, there are a lot of foreign owned companies that have not applied for the FIC approval. By law, all companies must get the approval and it is normally given. Depending on the size of your investment and business, we leave it up to the directors/shareholders’ discretion to decide on the importance of this approval. If you are caught not having the FIC approval, all contracts entered into by the company may be challenged and declared “null & void”. So if you are going to do significant business, then I would advise that you get this approval. However, if you do decide to go ahead to get the approval , please be aware of the conditions in the next Q & A below.
• o 17) Are there any conditions attached to this approval?
Yes, approval is always granted for the first 2 years with a condition that the company divest at least 30% of its shareholdings to a local investor. A lot of foreign companies have a problem with this condition but the renewal of this approval is usually not a big problem as the government does understand that sometimes it is difficult to find the right partner. However, you may only succeed in renewing without divesting for another 5 years before the government decide on an investor on your behalf. After that, you will be required to go into negotiations with this investor or find your own. Almost always, nominees are used to get around this problem.
• o 18) What if I do not have the requisite amount to be banked into the company? Can the RM500,000 capital put in be used and taken out immediately?
Cash or assets can be pumped in as share capital. If you do not have the cash, assets will also qualify. The minimum share capital requirement for qualification purposes depends on the business activity and the percentage of local shareholding in a company. Certain activities are encouraged and will require RM500K. Others like warehousing, retail & trade distribution require another approval called the WRT approval and this approval require a minimum of RM1 million if the company is 100% foreign owned. However, if there is local equity, then that amount is reduced depending on the percentage of the equity. The company cannot loan money to its shareholders to buy shares from the company i.e. Share capital must be paid into the bank account in cash or into the company’s assets. However, there is no stopping the company withdrawing the same amount immediately after the bank in. The total amount paid into the bank does not have to remain in the account if it is need urgently elsewhere but directors who are also shareholders must not owe the company any monies at year end closing so the auditors would not question whether the shares were actually paid up or not. How this is done will depend on how good your accountant is.
