Major Problems Faced by Foreigners Of Malaysia Sdn Bhd Company
There are many new policies changes in recent few months from Malaysia various authorities and bankers which made many foreigners trapped after they registered their Malaysia Sdn Bhd company. The major problems faced by foreigners of Malaysia local company Sdn Bhd is as follows:
1. Foreign investors unable to open a company’s bank account.
2. Foreign investors unable to set DP10 working permit approved due to the newly set up company with a profile.
3. Foreign investors may not able to increase his/her company’s paid-up capital.
4. Foreign investors required at a minimum of RM1 million paid-up capital and the WRT license to approve the 100% foreign ownership applicable only to “unique” business concept where Malaysians cannot do.
5. Unable to renew various business license and/or work permit due to non-compliance of company records, tax and licensing requirements.
Registration of Local Resident Sdn Bhd Company- Facts you should know!
Company secretary or local friends may agree to provide the service of local nominee directors and shareholders, as such you may be able to get:
1. Company bank account opened. This arrangement will require the nominee to be one of the signatories controlling the bank account. There is still a risk of DP10 work permit application which may or may not approve by the Immigration Department. The approval is very subjective, the company is new, no profile to justify.
2. Lower paid-up capital of only RM350,000 instead of RM 1 million and waived of WRT license.
Under the CCM (Companies Commission Malaysia) Company Act 2016, all directors are required to sign company documents and resolutions. A company status is deemed a “local resident” company where minimum 50% shares of the Company is owned by local Malaysians.
But you may face real risk is at any one time in near future, where the nominees may not turn up for any company meetings, signing company resolutions, financial reports, etc for company compliance or the nominees’ names may be possibly blacklisted in the central bank system if they do not take care of their personal finance.
Any of these happen will jeopardize your day to day company operations, not compliance with relevant authorities on licensing, etc and also the onward renewal of your working visa with the Immigration Department.
Also, the expansion can be limited. As a start when the company is new, the investment is small, it is pretty alright. However, when the capital or sales size ballooned up to a few million, you may have sleepless nights thinking of how to safeguard your interest in the company all the time! For those who have assigned nominee as the cheque signatories, the issues are even more serious if the nominees refuse to further co-operate to sign cheques and assist in the banking!
CASE EXAMPLE NO. 1- Rejection by the Immigration Department
A typical case scenario which happened all the time to foreign investors who opt for a local nominee with the “right” as bank signatory.
Mr. John, UK nationality, came to Malaysia with a tourist visa to explore business set-up in Malaysia during his business trip. After much consideration, he set-up Malaysia Sdn Bhd with the help from local “agent” for local nominee directors and shareholders owning 51% shares with the paid-up capital as RM350,000 (a minimum requirement by Immigration Department) to eligible to apply for DP10 two(2) years’ work permit under the company.
Office tenancy and telephone lines are part of the requirement before any Company can lodge their work permit application in the Immigration Department. Approval is slim, due to the new company which has no profile and any transaction.
The approximate investment losses incurred by Mr. John will be as follows:
- Registration of Company Malaysian Sdn Bhd of Authorised Capital of RM500,000 – RM4,500
- Secretarial Fee for 4 months: RM400
- Nominee fee for Director and Shareholder: RM10,000
- Rental of Office with 3 deposits and advance 24 months rental @ RM1,200: RM32,400
- Telephone line deposit, installation and one month fee: RM1,000
- Strike off a company and secretary misc. charges (close the company) : RM2,000
Note: Most office rental lease for a commercial is 2 years’ period and you are legally bound with tenancy agreement with no exit clause during the tenancy period. This means you need to honor the 2 years rental or faced legal suit. He also needs to withdraw the RM350,000 paid up capital that he has injected into the company bank account and this will require the local nominee to sign the cheque or make the bank transfer out. To close down the company and all matters, Mr. John would need at least 6 to 9 months to complete the procedure.
CASE EXAMPLE NO. 2- Unable to Open Bank Account for Newly Set Up Company
Due to the recent 6 months, there are a lot of changes in the banking policies for an opening account which foreign directors, many foreign investors caught off guard!
Ms. Khyum, Vietnam, came to Malaysia on the tourist of 90 days to explore business set-up in Malaysia. He intends to set-up 100% foreign ownership to safeguard his investment of RM 5 million. The company intends to do importing and exporting goods from her country and sourced Malaysia goods to sell to Yemen.
She set-up Malaysia Sdn Bhd company with Authorised Capital of RM 1 million which is the requirement for 100% foreign ownership by the Ministry of Trade Consumerism for WRT license. With the WRT license approval, her company will be able to apply for her two(2) years’ work permit at the Immigration Department. However, she faced problem in opening the company bank account with the bankers in Malaysia where the bank account can be opened provided all directors have the valid work permit under the company.
Without the company bank account, she could not deposit the capital monies into the Company! Malaysia Ministry Trade Consumerism required minimum paid up capital of RM 1 million while the Immigration Department required RM500,000 paid up capital. No work permit, no bank account! No bank account no WRT license! No WRT license, no work permit!
CASE EXAMPLE NO. 3- Wrong Type of Visa
Mr. Shamsul, Bangladesh, an MM2H visa holder went ahead to register Company and realized it is not possible to open a bank account as bankers required valid work permit under the company he registered. Any other form of visa ie MM2H, student visa, guardian, a dependent and professional visa is not permitted to open the company bank account for the company they owned.
The company bank account will not be able to open for:
1. Student Visa
2. Guardian Visa
3. Professional Visa which is not issued by the Company
4. Spouse Dependent Visa which is not issued by the Company
5. MM2H Visa
6. Malaysian who are the bad ‘cheques’ offenders
7. Malaysian or foreigners whose name blacklisted in the Central Bank System
8. Malaysians who have declared “bankrupt”.
CASE EXAMPLE NO. 4 – WRT License Rejected
Without WRT license for a foreign-owned company, Malaysian Sdn Bhd company is not eligible to lodge their work permit application for a work permit with the Immigration Department. Mr. Lee, Singaporean started a franchise business with Malaysian famous “Kopitiam” which has been approved for a franchise and apply for WRT License. WRT required a minimum paid up capital of RM 1 million which he did the paid up but the approval of WRT License is rejected with the reason this franchise is not a “unique” business where Malaysian can do. Mr. Lee is stuck with his RM 1 million investment with signing the Franchise Agreement, renting a shop, etc!
CASE EXAMPLE NO. 5- Wrong Company Structure
Registration wrong company structure happened all the time to foreigners! Many foreign investors often confused the meaning of Authorised Capital and Paid-Up Capital. Authorized Capital is a limit of capital allowed to put into the company.
Eg. If you registered a company with Authorised capital of RM100,000, you can put in paid-up capital up to RM100,000. Anything more than that, you are required to change your Authorised Capital to a higher limit. To apply for a work permit, the Immigration Department’s guidelines required the following structure of paid-up capital:
Local Resident Company with Malaysian Joint-Venture – minimum RM350,000
Foreign-owned company – minimum RM500,000
Many foreigners are disappointed to find out that they are unable to apply for any working permit under their new company with such a low paid-up capital which is wrongly recommended by “agent”.
Authorized capital of the company is not “real” capital injected into the company and do not make the company qualified for the application of a working permit.
In order to increase the paid-up capital of a company, you will need to complete the following processes which will take about 5 to 7 days:
a) Do a change on the authorized capital to a higher limit
b) Deposit real “cash” into the company’s bank account as “Share Application Monies” as paid up capital
c) Request the company secretary to prepare the necessary documents (resolutions and lodgement forms)
d) All directors & shareholders must approve & sign all documents
e) After signing & payment of the fee, your company secretary will lodge the documents to CCM for registration
CASE EXAMPLE NO. 6 – Unable to Get Renewal of work permit
Mr. Hassan, a shareholder, and director currently on Malaysian Sdn Bhd company 2 years’ work permit went to Immigration to renew work permit for another 2 years and was rejected. This is due to annual turnover as reported in Audit Account is “too low” to justify the need for an expatriate for the Company. He is stuck with the past 2 years’ investments and time spent on setting up Malaysia Sdn Bhd company. This similar scenario goes to Mr. Tan, Singaporean trying to renew his WRT license and found that it cannot be approved!
Why Malaysia Sdn Bhd is difficult for foreigners to own? This is simply due to “protection of earning policy” as Malaysian Sdn Bhd company is targeting the local market. This is normal for any Government to protect their netizens for certain businesses or industries from foreign competitions.
It is advisable to find out more before you register any company in Malaysia to avoid any complications and lost in investment. Get advise from us to minimize your risk. We “simplify your investment” in Malaysia! Contact us at +630-2181 2882 or whatsup us at +6012 6089809 for an appointment today!