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Business in Malaysia Simplified

Baker Tilly Malaysia Jun 30, 2017

Malaysia’s Companies Act 2016 came into effect on 31 January 2017 with the purpose of simplifying the business process in Malaysia, thus enabling companies to set up and operate with greater efficiency. Furthermore, the Act will help strengthen corporate governance, refine existing laws and reduce compliance costs.

1. Incorporation 

Private companies now require only one director – a Malaysia resident – and one shareholder to form a company; from two directors and two shareholders. The incorporation process has been simplified into a single form, while the Memorandum and Articles of Association have been eliminated and replaced with the company’s Constitution, which is optional except for companies limited by guarantee.

2. Annual General Meeting (“AGM”)

Private Companies are no longer required to hold an AGM. Likewise, the terms on the appointment or reappointment of auditors have also changed. Essentially, auditors from the previous financial year will be deemed reappointed if no other auditor is appointed by the members within a stipulated time.

3. Decision-making 

Under the new Act, written resolutions of private companies can now be passed when approved and signed by a majority of its shareholders.

4. No Par Value regime

In line with international trends, the new Act provides that all shares issued before or upon the commencement of the Act will have no par value. Instead, the value of shares will be determined based on directors’ valuation or market value, if available. This will provide greater flexibility to businesses in pricing their shares and raising capital. With the no par value regime in effect, the amounts in the company’s share premium account and capital redemption reserve will become part of the company’s share capital.

5. Directors’ accountability

The new Act requires directors of a company to sign a statutory declaration to verify that the company is solvent when the company undertakes to declare dividends, carry out capital reduction without a court order, engage in share buybacks, and providing financial assistance and redemption of preference shares (“new solvency test requirement”). This increases director accountability and protects third parties, while facilitating capital reduction exercises without the need for a court order. Further, a company now has the power to recover dividend improperly distributed from shareholders and the director who authorised the payment. The new Act also requires for a company to make a dividend payment to shareholders out of profits available, if the company is solvent.

6. Sanctions on directors

The new Act places greater responsibility on a company’s leadership, with directors facing greater sanctions and penalties for breaches, up to a 5-year imprisonment and up to RM5 million fine or both depending on severity.


Financial statements and accompanying reports (refer to Directors’ Report, Statement by Directors, Statutory Declaration and Auditors’ Report) for annual periods ended on or after 31 January 2017 are subject to the provisions of the new Act. The Companies Act 1965 will apply to financial statements for annual periods ended on or before 30 January 2017. The accompanying reports of these financial statements dated on or before 31 July 2017 may be prepared, either in compliance with the requirements under the Companies Act 1965; or the Companies Act 2016.


For any queries on how the Companies Act applies to your business, please contact Baker Tilly Malaysia or visit


DISCLAIMER: All opinions, conclusions, or recommendations in this article are reasonably held by Baker Tilly at the time of compilation but are subject to change without notice to you. Whilst every effort has been made to ensure the accuracy of the contents in this article, the information in this article is not designed to address any particular circumstance, individual or entity. Users should not act upon it without seeking professional advice relevant to the particular situation. We will not accept liability for any loss or damage suffered by any person directly or indirectly through reliance upon the information contained in this article.

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