WEEK 3 BUSINESS RULES & SUPPORTS

Lecture Content: Business Formation In Malaysia Rule & Regulation Business Supports & Assistances

Learning Outcomes: Understand business entity govern to Malaysian Law. Understand rules and regulations need in Malaysia. Identify strength and weakness in business entity selection. Be able to register business formation chosen. Understand the business supports and assistances needed.

Establishment of business entities in Malaysia Business in Malaysia can be registered within four Acts Business Registration Act 1956 (Amendment 1978) and procedures of business registration 1957. Companies Act 1965 Cooperation Act 1948 Parliment Act or State Ecatment Act

BUSINESS ENTITY IN MALAYSIA Sole Proprietorship I Business Registration Act Partnership Limited Company by Guarantee Private Limited (Sdn. Bhd) II Company Act 1965 Public Company (Berhad) Limited Company by Share III Cooperative Act 1948 Foreign Owned Company Unlimited Company IV Parliamentary Act & State Government Enactment

Companies Commission of Malaysia (SSM) State Address Head Quarter Tingkat 2, 10-19 Putra Place 100 Jalan Putra 50622 Kuala Lumpur Melaka Suruhanjaya Syarikat Malaysia (Negeri Melaka) Aras Bawah Menara MITC, Kompleks MITC Jalan Konvensyen, 75450 Air Keroh, Melaka Perak Tingkat 2C, Greentown Mall Jalan Hospital 30450 Ipoh, Perak Kedah Tingkat 10, Menara Sentosa Jalan Tuanku Ibrahim, 05621 Alor Setar

State Address Kelantan Tingkat 2,3&4, Kota Sri Mutiara Jalan Sultan Yahya Petra, 15150 Kota Bharu Terengganu Tingkat 6-7, Menara Yayasan Islam Jalan Sultan Omar, 20300 Kuala Terengganu Pulau Pinang Tingkat 6-7, Bangunan KWSP, No 3009 Off Leboh Tenggiri 2, Bandar Seberang Jaya 13700 P.Pinang Pahang Lot 202-216, Tingkat 2, Block B Kuantan Centre Point Jalan Haji Abdul Rahman, 25000 Kuantan Johor Podium 4B & 5, Menara Ansar 65, Jln Trus, 80000 Johor Bahru

State Address Perlis Tingkat 8, Bangunan KWSP Jalan Bukit Lagi, 01000 Kangar Selangor Tingkat 3 & 4, Plaza Alam Sentral Jalan Majlis, Seksyen 14, 40000 Shah Alam Negeri Sembilan Tingkat 2, Wisma Fook Loong Jalan Dato’ Abdul Rahman 70000 Seremban Sabah Tingkat 4, Menara MAA 6, Lorong Api-Api 88999 Kota Kinabalu Sarawak Tingkat 2 & 3, Wisma STA 26, Jalan Datuk Abang Abdul Rahim 93450 Kuching

1. Sole Proprietorship Characteristics Advantages Disadvantages Easy to register. Own by one person. Simple business structure. example: Tailor shops, Beauty Salons, Restaurant, Mini markets (Retail Sector) Small set-up cost Easy to manage Easy to form and dissolve All profit will go to the owner Not subject too much government rules & regulations (Financial statement doesn’t required validity by qualified auditor) Limited source of capital Unlimited business liability Business expansion depend on owner capability Life span depend upon the age and how efficiently business management by owner

Partnership Establishment Definition A person forms a partnership with one or more person to carry out a business with a view to making profits. Partnership Establishment Based on Partnership Act 1961 Each partner consider the company representative and acts on behalf of the company Partnership formation can be verbal or written agreement. Partnership Act as reference (Verbal agreement) .

Characteristics Advantages Disadvantages 2. Partnership Characteristics Advantages Disadvantages 1< person <20 Professional < 50 Partners share the capital, profits and losses According to section 6, Partnership Act 1061: they are collectively called a firm Easier to secure financing Business management and risks, resources can divided among partners Ideas, talents and skills can be pooled together Unlimited business liabilities The life span depend on the life span of the partners Misconduct or unethical will happen if no ‘Letter of Agreement’ is being made

Registration Guide for Sole Proprietorship and Partnership Business Business Establishment Notification Adjustment Business Information Business Dissolve (Terminate)

Application being rejected: The applicant does use capital letter Application form is too dirty or untidy Corrections are made using ‘liquid eraser’ The business is already registered, but the owner not terminate existing business before applying the new one Verification of application form has been made by unauthorised personnel The applicant doesn’t attach a copy of licenses or permit.

Business Organization In Malaysia (Companies Act 1965) Private Limited Company Characteristics Requirements Membership Must have at least 2 members – Malaysian nationality, acts as company director and founder. The members of company will appoint the Board of Director. Liabilities Limited to the total shares contributed. Personal assets not affected. Right and Responsibility It can acquire assets under its own name. Take legal action and face legal action under its own name.

Business Organization In Malaysia (Companies Act 1965) - continue Private Limited Company Life Span Not dependent upon the death or resignation of it members. Dissolved when its members no longer interested.

Business Organization In Malaysia (Companies Act 1965) - continue Private Limited Company Terms & Conditions Member not exceed 50 people. Transfer ownership of members’ share with the approval BOD. Not allowed to offer or sell any share or debenture to public. Not allowed to offer public to deposit money within stipulated time frame. Use the word “Sdn. Bhd.” atau “Sendirian Berhad” at the end of its name.

Business Organization In Malaysia (Companies Act 1965) - continue Private Limited Company Advantages Disadvantages Funds easy acquire through exchange of share ownership or loan from financial institution. All shareholders are legally protected by law. Shareholders are not burden with mgmt of business. Liabilities limited to the capital contribute to company. Life span is not depend on age or resignation its members. Greater potential for expansion. Legally, it one business entity by itself. Subject to more rule & regulations. Shares can’t traded through share market. Must pay corporate tax. Qualified Auditors must audit yearly financial stat & stat complete, updated. Financial affairs must transparent to public. Cost setting up is high.

Business Organization In Malaysia (Companies Act 1965) - continue Private Limited Company Members of Shareholders Board of Directors Secretary Auditors Registered Office Company Seal Authorisation Letter

Private Limited Company - Registration Procedure Registration Fee (Based in Authorised capital) Authorised Capital Fee (RM) Nominal share capital ≤RM100,000 1,000 > RM100,000 Nominal share capital ≤ RM500,000 3,000 > RM500,000 till ≤ RM1 juta 5,000 >RM1 juta till ≤ RM5 juta 8,000 >RM5 juta till ≤ RM 10 juta 10,000 > RM 10 juta till ≤ RM 25 juta 20,000 > RM 25 juta till ≤ RM 50 juta 40,000 > RM 50 juta till ≤ RM100 juta 50,000 > RM 100 juta 70,000  

2. Procedures & Legal Aspects Business Local authorities Wholesaling Sale in large quantities Manufacture activities >RM100,000 paid-up capital Manufacturing Licences Food manufacture Food processing - PBT Imported & local products exempted tax Sales Tax manufacture products subject to excise tax (car, soft drink, cigarette) Excise

Procedures & Legal Aspects (continue) Transportation – Apply to Commercial Vehicles Board under MECD according to different types: Taxis, school & factory buses, lorry (A or C class) Permit Foreign Workers – Plantation sector, retail, construction need approval from KSM & meet rules Immigration Dept. Letter of Authority – The cert. of fitness (CF) issued by local authorities

Procedures & Legal Aspects (continue) Assembling of Machinery & Equipment Factory and Machinery Act 1967 (Amended 1974), provide workers’ safety, health and welfare at the site installation of machinery and equipment Pollution Control The Quality Environmental Act for plant design, layout and installation of pollution control.

Procedures & Legal Aspects (continue) Business Rights Trademark Protection The Trademark Act protects from unhealthy business practices (product imitation) Patent Protection The Patent Act 1983, provides registration of design (maratus, articles, tools, materials and composition. Application to Registrar of Patents made through agents registered with Office of Patent Registration, Ministry of Domestic Trade & Consumer Affairs. Copyright The Copyright Act 1987, to protect businesses, writers, composers and broadcasters in the area of literature, music, art, sound recording and broadcast programs.

Procedures & Legal Aspects (continue) Standards and Quality (SIRIM) Recognition to quality prod & services. Different types of quality standards are given to business entities based on products, system, services and environment management. Hire Purchase Act The Hire Purchase Act 1967 (Amended 978) – control the forms and contents of hire purchase agreement. Assets covered Vehicles Radios,TV, cassette recorders or any combination of the items Refrigerators, freezers or combination of both Sewing machines or Air-Conditioners other than for industrial use Vacuum cleaners Gas, electric cookers and ovens Down payment (20%), balance finance companies on installment basis

Procedures & Legal Aspects (continue) Workers’ Social Needs Employee Provident Fund Act 1961 (KWSP) & Workers Social and Safety Act 1991 (PERKESO). Infrastructure Needs Basic facilities & infrastructure (TNB, Telekom, JBA) Import & Export Regulations Approved Permit (AP) from Ministry of International Trade and Industry (MITI) and Royal Custom & Excise etc.

3. Business Supports In Malaysia Courses, Seminars & workshops Technical Assistance Extension Services Marketing Assistance Advisory Services Entrepreneur Infrastructure Assistance Financial Assistance Information Assistance Research & Development

Business Supports (continue) Technical Assistant To expose production methods and systematic management. Agencies involved such as SIRIM, MARA,Multimedia Development Corporation S/B (MDeC), MARDI, RRIM, MPOB ,FRIM, Jab. Pertanian and Jab Perkhidmatan Haiwan. Marketing Assistant Help entrepreneur distribute an market their products locally or internationally. Agencies involved such as MITI, MATRADE, FAMA. Infrastructure Assistant Getting business premises. Agencies involved such as MARA, SEDC, SIRIM, UDA, KPLB, SME Bank dan MITI

Business Supports (continue) Information Assistance Business opportunities, statistics, new research findings, technology research etc. MITI, MATRADE, MARDI, SIRIM, FRIM & IPTA Research and Development Project feasibility studies, market research and technology related studies. MARDI, SIRIM, IPT. Financial Assistance Provide financing facilities to implement business ideas. Commercial banks, merchant banks, licensed banks, related governments such as MDec, SMIDEC (e–manufacturing ICT grants scheme), SME bank.

Business Supports (continue) Advisory Services Managing business training and consultation. Tax deduction from HRDF, Ministry of Human Resources. Training, Seminars and Workshops Consist of management training, efficiency, skills, motivation etc. MITI, PUNB, MARA, MFA (PFM), SEDC & Financial Institutions. Extension Services MDec, MITI, SIRIM, MATRADE, MARDI, NPC to ensure implementation of proposed projects (follow-up services).