Manufacturing License and
Incorporation of a Company
Co-ordination Act 1975 (ICA)
Approval of Industrial Projects
Production Capacity and Diversification of Products
Incorporation of a Company
Company Limited by Shares (Private
/ Public Companies)
Requirements of a Locally Incorporated Company
for Foreign Companies
The Industrial Co-ordination Act 1975
The objective of the Industrial Co-ordination Act 1975
(ICA) is to ensure
orderly development and growth in the manufacturing sector. The ICA requires
person(s) engaging in any manufacturing activity to obtain a license from the
Licensing Officer in respect of such manufacturing activity. Only
manufacturing companies with shareholders’ funds of RM2.5 million and above or
engaging 75 or more full-time employees need to apply for a license under the
All applications for manufacturing licenses should be made in the
prescribed form to the Director-General of the Malaysian Industrial
Development Authority (MIDA) in Kuala Lumpur, Malaysia. MIDA, is the
Government’s principal agency for the promotion and coordination of industrial
development in Malaysia.
The relevant definitions in the ICA are as follows:
- The “Licensing Officer” is the Secretary-General of the Ministry of International Trade and Industry
- “Manufacturing activity” means the making, altering, blending,
ornamenting, finishing or otherwise treating or adapting any article or
substance with a view to its use, sale, transport, delivery or disposal and
includes the assembly of parts and ship repairing but shall not include any
activity normally associated with retail or wholesale trade.
- “Shareholders’ funds” means the aggregate amount of a company’s paid-up
capital (in respect of preference shares and ordinary shares and not
including any amount in respect of bonus shares to the extent they were
issued out of capital reserve created by revaluation of fixed assets),
reserves (other than any capital reserve which was created by revaluation of
fixed assets and provisions for depreciation, renewals or replacements and
diminution in value of assets), balance of share premium account (not
including any amount credited therein at the instance of issuing bonus
shares at premium out of capital reserve by revaluation of fixed assets) and
balance of profit and loss appropriation account.
- “Full-time paid employees” means all persons normally working in the
establishment for at least six hours a day and at least 20 days a month for
12 months during the year and who receive a salary. Persons such as traveling
sales, engineering, maintenance and repair personnel, or who are
paid by and are under the control of the establishment, are also included.
Full-time paid employees also include directors of incorporated enterprises
except those paid solely for the attendance at Board of Directors meetings.
Family workers who receive regular salaries or allowances and who contribute
to the Employees Provident Fund (EPF) or other superannuating funds are also
included in the definition.
Guidelines for Approval of Industrial
Malaysia’s rapid industrial growth over the past decade has created a high
demand for labor in the manufacturing sector. The last few years has seen a
tightening in the labor market situation.
In view of this, the Government has set down guidelines for the
consideration of industrial projects based on the Capital Investment Per
Employee (C/E) Ratio. With effect from 26 August 1995, projects with a C/E
Ratio of less than RM55,000 will be defined as labor-intensive and will not
be considered for a manufacturing license or for tax incentives by MITI.
However, projects which fulfill one of the following criteria will be
exempted from the above guideline:
- - If value-added is more than 30%.
- - If the Managerial, Technical and Supervisory (MTS) Index is more than
- - If the project undertakes activities or products listed as promoted
activities and products of high technology.
- - If the project is located in the Eastern Corridor* of Peninsular
Malaysia, Sabah and Sarawak.
* The Eastern Corridor of Peninsular Malaysia covers
Kelantan, Terengganu, Pahang and the district of Mersing in Johor.
Expansion of Production Capacity and
Diversification of Products
An existing licensed company which proposes to undertake an expansion of
production capacity for its approved products or a diversification to
manufacture additional products is required to submit an application for the
expansion or diversification in the prescribed form to MIDA.
INCORPORATION OF A
Methods of Conducting
- In Malaysia, a business may be carried on in any one of the following
- By an individual operating as a sole proprietorship
- By two or more (but not more than 20) persons in partnership
- By a locally incorporated company or by a foreign company registered
under the provisions of the Companies Act 1965.
The above may be utilized by almost any form or type of business. In the
case of partnerships, partners are both jointly and severally liable for the
debts and obligations of the partnership if assets are found to be
insufficient. Formal partnership deeds may be drawn up governing the rights
and obligations of each partner but this is not obligatory.
All sole proprietorships and partnerships must be registered with the
Registrar of Businesses under the Registration of Businesses Ordinance 1956.
The Companies Act 1965 is the principal legislation governing companies in
Malaysia. Under the Act , every company intending to carry on business in
Malaysia must register with the Registrar of Companies (ROC) before conducting
any business activity. The Act provides for three types of companies:
- A company limited by shares, where the personal liability of its members
is limited to the par value of their shares.
- A company limited by guarantee, where the members guarantee to meet
liability up to a nominated amount if the company is wound up.
- An unlimited company, where there is no limit to the members’ liability.
Company Limited by Shares
The most common company structure in Malaysia is a company limited by
shares. Such limited companies may be either private (Sendirian Berhad or Sdn.
Bhd.) or public (Berhad or Bhd.) companies.
A company having a share capital may be incorporated as a private company
if its Memorandum or Articles of Association:
- restricts the right to transfer its shares;
- limits the number of its members to 50, excluding employees and some
- prohibits any invitation to the public to subscribe for its shares and
- prohibits any invitation to the public to deposit money with the
A company can be formed as a public company or, alternatively, a company
which is incorporated as a private company can be converted to a public
company subject to Section 26 of the Companies Act 1965.
A public company cannot offer shares to the public unless a prospectus
which complies with the requirements of the Companies Act has been registered
with the ROC. The proposal for the issue or offer of shares to the public
should first be submitted to the Securities Commission for approval before a
prospectus can be accepted for registration.
A public company can apply to the Kuala Lumpur Stock Exchange (KLSE) for
permission to have its shares quoted on the Exchange, subject to compliance
with the requirements laid down by the KLSE. Any subsequent issue of
securities (e.g. issue by way of a rights or bonus, or issue arising from an
acquisition, etc.) requires the approval of the Securities
Procedure for Incorporation
The first step for incorporation of a company is to make an application to
the ROC in the prescribed Form 13A with a payment of RM30.00 to determine if the
proposed name of the intended company is available and, if so, the application
could be approved and the proposed name would be reserved for the applicant for
a period of three months. A proposed name which is of a kind which the Minister
of Domestic Trade and Consumer Affairs has directed the Registrar not to accept
for registration vide Gazette Notification No. 716 dated 30 January 1997 will
not be approved.
The following documents should be lodged with the ROC within three months
from the date of approval by the ROC for the use of the proposed name:
- Memorandum and Articles of Association
- Statutory declaration of compliance
- Statutory declaration by a person before appointment as a director, or by
a promoter before incorporation of a company.
The Memorandum of Association is the document stating the name, the objects,
the amount of authorized capital (if any) with which the company proposes to be
registered and the division thereof into shares of a fixed amount.
The Articles of Association describes the regulations governing the internal
management of the affairs of the company and the conduct of its business.
On the issue of the certificate of incorporation, the subscribers to the
Memorandum together with such other persons as may from time to time become
members of the company shall be a body corporate, capable of exercising the
functions of an incorporated company and of suing and being sued. It has a
perpetual succession under common seal with power to hold land but with such
liability on the part of the members to contribute to the assets of the company
in the event of it being wound up, as is provided by the Act.
Requirements of a Locally Incorporated Company
A company must have a registered office in Malaysia at which all books and
documents required under the provisions of the Act should be kept. The name of
the company in legible romanised letters and the company number shall appear
on its seal and documents as mentioned under the Act.
A company cannot deal with its own shares or hold shares in its holding
company. Each equity share of a public company carries only one vote at a poll
at any general meeting of the company. A private company may, however, provide
for varying voting rights for its shareholders.
The Secretary of a company must be a natural person of full age who has his
principal or only place of residence in Malaysia. He must be a member of a
prescribed body or is licensed by the Registrar of Companies, Malaysia. The
company shall have at least two directors who each has his principal or only
place of residence within Malaysia. Directors of public companies must not
normally be over 70 years of age.
It is not incumbent that the director should also be a shareholder. The
company must appoint an approved company auditor to be the company auditor in
Registration for Foreign Companies
A foreign company desiring to establish a place of business or carry on
business in Malaysia must apply for registration to the ROC. The application
which can be filed at the Registry of Companies in Kuala Lumpur or through any
of its branch offices in Malaysia, must be made in the prescribed Form 13A with
a payment of RM30.00 to determine the availability of the intended name of the
foreign company. If the name is available, the approval will be issued to the
applicant. However, the approved name will be reserved for three months from the
date of approval.
When the approval has been obtained, such a branch must lodge with the ROC
the following documents:
- a certified copy of its certificate of incorporation (or a document of
- a certified copy of its charter statute on memorandum and articles or
other instrument constituting or defining its constitution
- a list of its directors and certain statutory particulars regarding them
- where there are local directors, a memorandum stating the powers of those
- a memorandum of appointment or power of attorney
authorizing one or more
persons resident in Malaysia to accept on behalf of the company, service of
process and any notices required to be served on the company
- a statutory declaration in the prescribed form made by the agent of the
The appointed agent is answerable for the performance of all acts required to
be done by the company under the Companies Act 1965. Any change in agents must
be reported to the ROC.
Every foreign company shall, within one month after it establishes a place of
business or commences to carry on business within Malaysia, lodge with the ROC
for registration, notice of the situation of its registered office in Malaysia
in the prescribed form.
A foreign incorporated company must file each year, within one month of its
Annual General Meeting, a copy of the Annual Return and, within two months of
its Annual General Meeting, a copy of the balance sheet of the head office, a
duly audited statement of assets used in and liabilities arising out of its
operations in Malaysia, and a duly audited profit and loss account.