What is a Sdn Bhd Company in Malaysia? (2024)

January 30, 2020 by Christine

A Sendirian Berhad (Sdn Bhd) company is a private limited company that can be started by both locals and foreigners in Malaysia. With the World Bank ranking Malaysia as the world’s 12th easiest and friendliest place to do business, a Sdn Bhd company is becoming a popular business entity. To take advantage of Malaysia’s numerous business opportunities, choosing the company structure is crucial. There is no doubt that embarking on your malaysia company registration as a Sdn Bhd company will allow your company to expand and flourish.

Key characteristics of Sdn Bhd Company

Limited Liability

• The idea of a limited liability company protects the shareholder/ owners’ personal wealth.
• The company’s shareholders are only liable for debts accrued by the company in accordance with their levels of investment and not more.

Status as a Separate Legal Entity and Perpetual Continuity

• A Sdn Bhd company is a separate legal entity from its shareholders/owners.
• Its status as a separate legal entity allows it to be in operation regardless of the identities of its founders, directors, and shareholders.
• Any deaths or retirements of its founders, directors, and shareholders will have no effect as the company will continue to exist and operate unless it is dissolved.
• A Sdn Bhd company has the rights to acquire assets, enter into contracts, and sue or be sued.

Transferability of Ownership

• A shareholder of a Sdn Bhd in Malaysia is allowed to sell or transfer shares to any person of the shareholder’s choice as long as the potential buyer can afford the shares.

Ease of Fund Raising

• It is relatively simple for a Sdn Bhd company to raise money either by equity or loan.
• The share concept of Sdn Bhd makes it easy for investors to invest into the company so long they can agree on the valuation.
• Sdn Bhd is a well recognised corporate structure hence it is easier to borrow money from banks at lower rates when compared to rates paid by other business structures. Banks may view loans for Sdn Bhd companies as less risky compared to loans for other business structures.

Flexibility of Profit Distribution

• The shareholder/owner of a Sdn Bhd company benefits from the advantage of being able to distribute the company’s profit as is deemed to be suitable.
• Company owners determine the salaries, directors’ fees, bonuses, dividends, and other benefits. They also dictate how much money is to be reinvested into the business.

Roles of people in a Sdn Bhd Company:

Shareholders:

• • They are the investors and owners of the Sdn Bhd company
  • They may not run the day-to-day operations of the company and will delegate such responsibility to directors
• They may call for meeting to discuss and decide on important issues such as appointing and removing of director and auditor
• They are only liable for capital invested into the Sdn Bhd and not more

Directors:

• They are the officers appointed by the shareholders to manage the company
• They have statutory obligation to ensure the company follows Companies Act 2016 and Corporate Tax regulations
• More often than not, most small medium-sized (SME) Sdn Bhd may have the same individual as shareholders and directors

Company Secretary:

• As required by Companies Act 2016, all Sdn Bhd companies must have a Malaysia company secretary
• Their roles are to advise directors on issues pertaining to Companies Act 2016 and ensure the company is in compliance with the Companies Act

Related Read: 5 Different Types of Business Entities in Malaysia »

Advantages of Sdn Bhd Company

• Foreigners can be shareholder and can fully own the Sdn Bhd
• Foreigners can be a director so long they have a local residential address
• Single shareholder company/single person company (“SPC”) is possible
• Malaysia corporate tax rate (17%/24%) is lower than personal tax rate after certain threshold
• There are more tax incentives (e.g. pioneer status, investment tax allowance) given to Sdn Bhd company as compared to other corporate structures
• A company can act as a holding company to own real assets such as properties etc. This allows property investors have a corporate structure to better manage their property portfolio
• Sdn Bhd can have up to 50 shareholders which is sufficient for small medium-sized businesses. Berhad would be an alternative company structure if there are more than 50 investors

Disadvantages of Sdn Bhd Company

• There are more statutory compliance required for Sdn Bhd company as compared to other corporate structures such as yearly statutory audits and the appointment of Malaysia company secretary.
• Compliance costs could be higher as the Company needs to incur company secretary’s retainer fee (approximately RM2,000 a year) and audit fee (approximately RM1,000 to RM8,000 depending on revenue).

Related Read: Find out how your compliance needs can be taken care of with the right Corporate Secretary in Malaysia»

Overall, a Sdn Bhd company would be considered the best corporate structure in Malaysia that’s suitable for any type of entrepreneurs be it foreigners, start-up or established businessmen.

So what are you waiting for? Kickstart your business venture in Malaysia as a Sdn Bhd company by registering with us online in 10 minutes.

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