Setting Up a Startup in Malaysia: A Checklist

Establishing a startup in Malaysia involves navigating a series of legal steps to ensure compliance and safeguard the business's future. This checklist for startup provides a detailed overview of the legal requirements, from company registration to intellectual property (IP) protection, drawing on the relevant sections of the Companies Act 2016 and other applicable regulations.

1. Choose a Business Structure for your Startup

The first step is to decide on the type of business entity that suits your startup's needs. The most common types are:

• Private Limited Company (Sendirian Berhad or Sdn Bhd):

  This structure limits the liability of its shareholders to the amount they have invested in the company. According to Section 10(1)(a) of the Companies Act 2016, a company can be incorporated as a company limited by shares.

  
  

• Sole Proprietorship:

  Suitable for small businesses owned and run by one individual. This structure is not a separate legal entity, meaning the owner has unlimited liability.

  
  

• Partnership:

  Involves two or more individuals sharing ownership of a business. Partners have unlimited liability, as specified under the Partnership Act 1961.

  
  

2. Register Your Company Name

Choosing and registering a unique company name is mandatory.

• Section 25 of the Companies Act 2016 requires that the company name must not be identical to an existing company name or trademarked name. Startups should check the availability of their proposed name with the Companies Commission of Malaysia (SSM) and reserve it.

  
  

3. Incorporate Your Company

The incorporation process involves submitting the necessary documentation and fees to the SSM.

• Section 14 of the Companies Act 2016 outlines the application requirements for incorporation, which include details such as the company’s name, type, registered office address, and details of directors and shareholders.

  
  

• Section 15 requires payment of a prescribed fee and submission of a completed incorporation form. Upon successful registration, the SSM will issue a Notice of Registration.

  
  

4. Draft a Company Constitution (Optional)

While the Companies Act 2016 does not mandate a company constitution, having one can provide clarity on the company's internal governance, rights, and obligations.

• Section 32 allows companies to adopt a constitution, which should align with the Companies Act 2016 and detail the roles of directors, shareholder rights, and decision-making processes.

  
  

5. Appoint Company Directors and a Company Secretary

• A private company must have at least one director who is a natural person, ordinarily residing in Malaysia, as per Section 196(1). Directors are required to act in good faith and in the best interest of the company, following Section 213.

  
  

• Section 235 mandates the appointment of a qualified company secretary within 30 days of incorporation. The secretary must be registered with the Malaysian Institute of Chartered Secretaries and Administrators (MAICSA).

  
  

6. Establish a Registered Office

The registered office must be located in Malaysia and is where official documents are served.

• Section 46 of the Companies Act 2016 requires that a company’s registered office be open to the public and operate during business hours. It is also where statutory records must be kept.

  
  

7. Obtain Necessary Licenses and Permits

Depending on the nature of the business, startups may need specific licenses and permits from local authorities. This may include industry-specific licenses, health permits, or professional certifications.

8. Open a Corporate Bank Account

After incorporation, open a corporate bank account to manage company finances. Banks will typically require a copy of the company’s Notice of Registration, company constitution (if applicable), and identification documents of directors.

9. Register for Tax and Statutory Contributions

Startups must register with the Inland Revenue Board of Malaysia (LHDN) for tax purposes. They should also register for Goods and Services Tax (GST) if applicable.

• Income Tax:

  File tax returns annually and ensure compliance with tax obligations under the Income Tax Act 1967.

  
  

• Employee Provident Fund (EPF) and Social Security Organization (SOCSO):

  Register and make monthly contributions for employees.

  
  

10. Protect Your Intellectual Property (IP)

Securing IP rights is crucial for protecting business ideas, brand identity, and innovations.

• Trademarks:

  Register your brand name, logo, or slogan with the Intellectual Property Corporation of Malaysia (MyIPO) under the Trademarks Act 2019.

  
  

• Patents:

  If you have a unique invention, consider applying for a patent to secure exclusive rights.

  
  

• Copyrights:

  Protect original works, such as software, written content, or artistic creations.

  
  

11. Comply with Employment Laws

Startups hiring employees must comply with Malaysian labour laws:

• Employment Act 1955:

  Governs employee rights, including working hours, wages, and leave entitlements. Startups should ensure that employment contracts are clear and comply with statutory requirements.

  
  

• Section 57 of the Companies Act 2016 requires companies to maintain a register of directors, managers, and secretaries.

  
  

12. Regularly Update and Maintain Company Records

Maintain up-to-date records of financial statements, shareholder information, and company resolutions.

• Section 245 mandates that companies keep accounting records that accurately reflect the financial position and operations.

  
  

13. Annual Compliance and Reporting

• Annual Return:

  Lodge an annual return with the SSM as required by Section 68 of the Companies Act 2016.

  
  

• Financial Statements:

  Prepare and lodge financial statements annually, following Section 248.

  
  

Conclusion: A Roadmap to Compliance and Success

Setting up a startup in Malaysia involves adhering to legal requirements to ensure compliance and smooth operations. By following this checklist, startups can establish a strong legal foundation, protect their interests, and pave the way for sustainable growth.

Engaging with legal professionals for guidance throughout the process can further enhance compliance and mitigate potential risks. Should you have any questions related to the article above, please do not hesitate to contact our managing partner, Eugene Yeong for clarification.