Company Limited by Guarantee
In a company limited by guarantee, the liability of members is limited to a specified amount undertaken to be contributed to assets on the company's termination. These are generally nonprofit organizations.
Public Company Limited by Shares
Public limited companies, denoted as "Berhad" or "Bhd.," are companies whose shares may be offered to the public for subscription. Companies may apply to the stock exchange for permission to have their shares listed. A public company is a company other than a private company. A public company must be issued a certificate by the Registrar of Companies (ROC) before it can commence business. It is required to issue a prospectus that is approved by the ROC before it can invite the public to purchase shares in the company.
A listed company on the Kuala Lumpur Stock Exchange is required to have an independent audit committee.
Foreign Company
Companies incorporated outside Malaysia that do business in Malaysia are classed as Foreign Companies by the Companies Act. Before local establishment, a Foreign Company is required to deposit the following with the Companies Registry: 1. A certified copy of its certificate of incorporation 2. A certified copy of the charter, statutes, and/or articles of the company that define its constitution. 3. A list of its directors and secretary 4. A memorandum of appointment stating the names and addresses of two or more persons resident in Malaysia authorized to act legally and responsibly on the company's behalf
A Foreign Company is required to lodge with the ROC within two months of its AGM, a copy of its balance sheet made up to the end of its last financial year and supporting documents, if applicable. In addition, it must lodge an audited statement showing the assets used in and the liabilities arising out of its operations in Malaysia and an approved auditor's report which complies with the provisions of the Companies Act.
Branch of a Foreign Company
The registration of a foreign branch in Malaysia requires an application to be made to the ROC to approve the proposed name of the intended branch.
The foreign company's Memorandum and Articles of Association (duly translated in English if it is in a foreign language) and certain other prescribed documents relating specifically to the foreign company must be submitted together with the application. Upon approval of the proposed name, the Memorandum of Appointment of Agent or Power of Attorney appointing at least one person residing in Malaysia as the local agent and other prescribed documents relating to the registration of a foreign branch must be lodged with the ROC.
On payment of a registration fee, which depends on the amount of the authorised share capital (converted to Ringgit Malaysia) of the foreign company, a Certificate of Registration of a Foreign Branch will be issued by the ROC. The registration fee payable is the same as the fee payable by a Malaysian company (see above). The certificate is conclusive evidence of the existence of the foreign branch. The registration of a foreign branch generally takes three to six weeks.
Offshore Company
An Offshore Company (or an Offshore Foreign Company) is only permitted to carry on business in, from or through Labuan. An Offshore Company may not:
carry on business with a resident of Malaysia except as permitted by the Offshore Banking Act 1990;
carry on the business of Banking or Insurance or such similar business unless it is licensed so to do under the Offshore Banking Act 1990 or the Offshore Insurance Act 1990;
carry on business in the Malaysian currency except for defraying its administrative and statutory expenses;
carry on business of shipping or petroleum operations in Malaysia or carry on business as a trust company.
The Offshore Companies Act was amended recently to allow Malaysians to own offshore companies, as well as to permit foreign-owned offshore companies to invest in Malaysia subject to certain conditions.
Manufacturing activities are normally carried out by companies incorporated under the Malaysian Companies Act. An activity which is neither offshore trading nor offshore non-trading will be subject to tax under the regular tax regime.
Offshore insurance and banking businesses are permitted to maintain a marketing office in Kuala Lumpur until the Government decides that the management office should be relocated in Labuan.
An Offshore Company is not treated as carrying on business with residents of Malaysia if:
it makes or maintains deposits with a person carrying on business in Malaysia;
it makes contact with professional advisers carrying on business in Malaysia;
it prepares and maintains books and records in Malaysia; it acquires or holds any lease or property for operational purposes or accommodation of its employees;
it holds directors’ or members’ meetings within Malaysia;
it holds shares, debt obligations, or other securities in a company incorporated under the Offshore Companies Act 1990 or in a domestic company, or holds shares, debts obligations or other securities for the purposes of a transaction entered into in the ordinary course of a money-lending business.
Shelf companies are available for regular Malaysian companies but not for Offshore Companies.
Offshore Companies are allowed to have names in a foreign language, provided they use the Latin alphabet. The words: Bank, building society, insurance, assurance, reinsurance, fund management, investment fund, trust, trustees, Chamber of Commerce, university, municipal or their foreign language equivalents require approval.
To denote limited liability, any of the following are permitted: Corporation, Incorporated, Limited, Sociètè Anonyme or Sociedad Anonima or the relevant abbreviations. If the Malaysian word Berhad is used then it must be preceded by "(L)" to denote that the company is incorporated in Labuan.
The following are some of the features of an Offshore Company:
Beneficial ownership does not have to be disclosed;
The standard authorised capital is US$10,000; divided into 10,000 shares of US$1;
The minimum issued capital is one share, which may be fully or partly paid;
Registered shares of par value, preference shares, redeemable shares and shares with no voting rights are all permitted;
Bearer shares are not permitted
There must be a registered office and agent in Labuan;
There is a minimum of 1 director and 1 secretary which can be corporate;
There is a minimum of 1 shareholder;
An annual return must be filed;
A set of accounting records must be kept in Labuan.
Offshore Companies that are trading pay 3% on net audited profits or the sum of RM 20,000. Offshore Companies that do not trade do not pay tax. Non-trading (i.e. investment and holding companies) and trading companies which elect to pay tax of RM 20,000 p.a. are not required to file financial statements, and do not have to employ an auditor unless they are offshore banks or insurance companies.
A trading company which pays 3% of audited net profits is required to appoint an auditor and file audited financial statements.
The registration fee payable by an Offshore Company is RM1,000 to RM5,000 depending on its authorised capital; an Offshore Foreign Company pays RM6,000. In addition, ongoing annual fees of RM2,000 and RM5,000 are payable by an Offshore Company and an Offshore Foreign Company respectively.
Offshore Limited Partnership
An offshore limited partnership can be set up in Labuan and consists of not fewer than two and not more than 20 partners. There must be at least one general partner. An offshore limited partnership can be formed for the purposes of a specific project or for carrying on an offshore professional partnership (which is restricted to the fields of accounting, actuarial science, engineering, law and other fields that may be prescribed).
The Labuan Offshore Limited Partnership Regulations 1999 specified the process for setting up a Limited Partnership, and the fees payable to LOFSA, as follows:
Registration fee RM 1,000
Certificate of registration RM 50
Fee for renewal of registration RM 50
Fee for filing notice of changes to details on file RM 50
Fee for filing notice of dissolution RM 50
Fee for filing an application to restore the name of the partnership which has been struck off RM 100
Annual fee to be paid by the offshore limited partnership RM 1,000
Limited Partnerships
Limited partnerships are governed by the Limited Partnerships Law 1994, supplemented by the Limited Liability Partnerships (Jersey) Law 1997 and the Limited Liability Partnerships (Insolvent Partnerships) (Regulations) 1998, putting Jersey LLP law on a very advanced basis for this useful form. Companies may be limited or general partners. Limited partnerships are often used in ownership structures for funds, real estate and leveraged financing packages. To form a limited partnership a declaration must first be lodged with the registrar, giving the names of the general partners, but not of the limited partners. The partnership agreement need not be filed. A registration fee of J£500 is payable, but there is no annual registration fee. The tax treatment of limited partnerships is the same whether they are registered in Jersey or abroad. Each of the partners is separately assessed to tax on their partnership income and gains; resident partners on worldwide partnership income, and non-resident partners only on Jersey income.
Trusts
An offshore trust can be created by a will or other instrument of writing including a unilateral declaration of trust. The duration of an offshore trust shall not exceed 100 years unless otherwise provided in the terms of the trust. A foreign trust may be enforceable, recognised or registered in Labuan. Similarly, a Labuan offshore trust can be transferred to another country.
In November 2001, the Association of Labuan Trust Companies Malaysia (ALTCM) persuaded the Board of the Labuan Offshore Financial Services Authority (LOFSA) to change the status of Labuan trust firms from domestic to offshore companies and is currently awaiting final approval of the move from the Malaysian Finance Ministry.
It is believed that the move will help enhance the Island's competitiveness, and will deliver a fillip to the Island's trust industry which had been affected by the 1997 economic crisis.
Currently, trust companies in Labuan are incorporated under the Companies Act 1965 unlike offshore entities which are incorporated under the Offshore Companies Act 1990 which means that the trust companies pay higher taxes. By being offshore companies the trust firms will be able to enjoy a more attractive tax structure having to pay only a 3 per cent tax of their net audited profit.