Policy & Legislation
Investment and Trade Policy
 
Malaysia's government pursues an investment and trade policy designed to serve the country's industrial promotion and development policy. The authority involved with investment regulation and promotion in the country is the Malaysian Industrial Development Authority ( MIDA) , which presides under the Ministry of International Trade and Industry (MITI).
 
The manufacturing and processing sector, under MITI capable supervision, has long been the catalyst of growth.  Malaysia, one of largest exporters of semiconductors in the world, is now climbing the value chain to move its electronics industry from commodity chip-making to testing and design in order to stay ahead of competitors.
 
Malaysia's industrial policy during the seventies and the eighties was focused on promoting exporting industries. As a result, export performance was used as the main conditionality for foreign equity ownership. Basically, the greater the percentage of the products exported, the higher the foreign equity share. For example, if the project exports more than 80% of the products, 100% foreign ownership is allowed. Consequently, foreign firms in Malaysia have been confined to export industries. Only in 1998 were such restrictions lifted by the Government in order to revive the sluggish FDI inflows.
 
The mining and quarrying sector meanwhile resides under the purview of the Ministry of Natural Resources and Environment (MNRE). The Government  established a National Mineral Council (NMC) in 1998 to oversee the overall integrated development of the mineral industry and to assure such development would meet its policy objectives. The National Mineral Council is also charged with coordinating relations between the Federal and State Governments
 
To spearhead the country's mineral resource industry, it is expected that the Government will launch a new National Mineral Policy (NMP)  in 2009. This is because the previous policy formulated in early 1990 and finalised in 1994, is outdated as the situation in the nation’s economy and the mineral sector since then had changed dramatically.
 
The NMP provides the foundation for the development of an effective, efficient and competitive regulatory environment for the mineral sector. The thrust of the policy is to expand and diversify the mineral sector through optimum exploration, extraction, and utilization of resources using modern technology as well as R&D. Emphasis is also given to environmental protection, sustainable development and the management of social impacts.

Under the NMP, a mining lease application must include an environmental protection plan that is approved by the Department of Environment of the Ministry of Science, Technology, and Environment. The environmental aspects of mine development are regulated by the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 1987, which was an amendment to the Environmental Quality Act of 1974. Under Order 1987, an environmental impact assessment is required for mining lease areas that are more than 250 hectares.

The salient features of the NMP are the provisions for security of tenure, high land-use priority for mining, uniform and efficient institutional framework, regulations and guidelines, and rehabilitation and environmental control.

Two main legal instruments that had been formulated for the full implementation of the NMP, are the Mineral Development Act, 1994 and the State Mineral Enactment. The Mineral Development Act came into force in August 1998, while the State Mineral Enactment is currently at various stages of being adopted by the respective State Governments.

The Mineral Development Act 525 of 1994 defines the powers of the Federal Government for inspection and regulation of mineral exploration and mining and other related issues. However, as of 2000, only the States of Sabah and Selangor had adopted the State Mineral Enactment, which provides to the States the powers and rights to issue mineral prospecting and exploration licenses and mining leases and other related matters.
 
 
Business Legislation 
 
In Malaysia, the most common types of businesses are sole proprietorships, partnerships and companies.

 

SOLE PROPRIETORSHIPS commonly have just one business owner, and only citizens or permanent residents of Malaysia can register. Personal names or trade names can be used as business names, however, certain names, like those associated with royalty or government agencies (i.e. "national", "chartered" or "di-Raja") is prohibited. The relevant authorities, such as the Registrar of Business, is empowered to reject any submitted name deemed inappropriate or misleading.

 

PARTNERSHIPS comprise two or more business partners. Similar to sole proprietorships, only citizens or permanent residents of Malaysia can register partnerships. A partnership agreement is usually drawn up by legal practitioner , which outlines the responsibilities of each partner, conditions of termination and means of resolving intra-partner disputes.

 

COMPANIES are registered legal entities comprising shareholders that can own property, draw contracts and employ people. The most common type of company in Malaysia is a company limited by shares (public limited and private limited companies).

 

Private limited companies cannot sell shares to the public, and are distinguished by the appellation "Sendirian Berhad", shortened to "Sdn Bhd" or "S/B".

 

Public limited companies source their capital by selling shares to the public, and are distinguished by the appellation "Berhad", shortened to "Bhd".

 

Companies in Malaysia are governed by the Companies Act 1965, which protects the rights and interests of shareholders and investors, and provides regulations for the incorporation of companies, the formulation of company constitutions, management and closures.

 

A company must have a minimum of two members, but a private limited company is limited to 50 members (public limited companies have no member limit). A minimum paid-up capital of only RM2 is needed to start a private limited company, while public limited companies need a paid-up capital of not less than RM60mil (if it seeks to be listed on the Kuala Lumpur Stock Exchange Main Board) or not less than RM40mil (if it seeks to be listed on the KLSE Second Board).

 

Companies and corporations wishing to operate in Malaysia are required to register with the country Registar of Business, the Companies Commission of Malaysia (CCM). Under CCM’s regulations, for local and foreign enterprises. there are different procedures.


Local companies firstly must file an application to the CCM to inquire if the intended name is still available for registration. If the name is available, a reservation period of three months will be granted, during which time the company should submit copies of documentation amongst others the company Memorandum and Articles of Association (MMA), Statutory Declaration of Compliance and Statutory Declaration, plus relevant fees. CCM will issue a certificate of incorporation once registration procedures are completed and approved. Companies must file registers of members, directors, managers, secretaries and interest holders with CCM at all times.

Foreign companies are required to register a branch or set up a local company in Malaysia in order to conduct business in the country. The company must also undergo the same procedure as a local company, which is to put an application to inquire if the intended name is still available.  A reservation period of three months will also be granted, during which time the company must submit copies of documentations such as Certificate of Incorporation, Company Charter, List of Directors, a memorandum of appointment authorising a Malaysian resident to accept any notices served on the company and Statutory Declaration, plus relevant fees. Documents in a language other than the country’s national language, Bahasa Malaysia or English must have an accompanying certified translation. Once all procedures are completed and approved, CCM will grant the applying company the status of a foreign company operating in Malaysia. 
 
 

               

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