Many Get the First Step Wrong When Setting Up a Company in Malaysia!
When Chinese businesses look to expand into Malaysia, one of the most common mistakes happens right at the beginning:
Confusing the roles of shareholders and directors.
Shareholders can be companies, but directors must be individuals
Under Malaysian law:
• Shareholders can be either individuals or corporate entities. For example, your Chinese headquarters can directly hold 100% of the shares as a corporate shareholder.
• Directors must be natural persons, not companies — and at least one must be a Malaysian resident.
Note: If the shareholder is a corporate entity, a natural person must be appointed as its authorised representative to act on behalf of the company in official matters, including signing documents and receiving notices.
What does a proper structure look like?
Let’s say a Chinese parent company wants to set up a subsidiary in Malaysia:
• The parent company can own 100% of the shares.
• A local representative or trusted executive is appointed as director, along with at least one Malaysian resident.
This setup is fully compliant, and offers flexibility for control, tax planning, and governance.
Why do so many get this wrong?
• Some think all directors must be locals — not true.
• Some don’t realize that corporate shareholding is allowed.
• Others use the wrong names for directors or shareholders, causing issues when opening bank accounts or applying for business licenses.
Follow FOZL, your trusted partner for business setup and compliance in Malaysia.
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