GUIDELINES TO DOING MINING BUSINESS IN MALAYSIA

OVERVIEW

Malaysia is one of the largest economies in South East Asia, and one of the fastest growing. It's estimated around 28 million populations increasingly prosperous, making it a growing market with considerable potential.

Malaysia is endowed with over 33 different mineral types, comprising metallic, non-metallic and energy minerals, worth several billion dollars in economic potential. However, the country's mineral resource industry continues to remain sluggish. There was a generally a lack of exploration, mine development and capacity expansion in the local industry thus providing a great opportunity to those who see to venture into this area. Trade and trade-related policies remain integral parts of Malaysia's broad economic development strategy, whose key objectives are economic growth sufficient for the attainment of developed country status by 2020.

 

MINERAL POLICY

The mining industry comes under the purview of the Ministry of Natural Resources and Environment (NRE). However, as mining activity involves land which is State matter, the approval for mining related applications is empowered to the respective States in consultation with the federal agencies under the purview of the NRE such as the Department of Minerals and Geosciences (DMG), and the Department of Environment (DOE). The Federal Government in 1998, established a National Mineral Council (NMC) to coordinate mineral related matters, co-operation between the Federal and State Governments and oversee the overall integrated development on the mineral industry.

The Federal Government has been urging that abandoned mines be revived, and also encouraging the States to issue more mining licenses. To spearhead the country's mineral resource industry going forward, the Federal Government has recently formulated the National Mineral Policy 2 (NMP2), a revision of the earlier Policy formulated in 1994. The NMP2 was launched in January 2009. The NMP2 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 optimal exploration, extraction and utilization of resources using modern technology supported by Research and Development (R&D).

The salient features of the NMP2 are the provisions for the security of tenure, high land-use priority for mining, uniform and efficient institutional framework, regulations and guidelines. Under the NMP2, emphasis is also given to rehabilitation, environmental protection, sustainable development and the management of social impacts. The country's environmental aspects of mine development are regulated by the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 1987, which is a subsidiary legislation to the Environmental Quality Act of 1974. Under order1987, a mining lease application for mining leases that are larger than 250 hectares must include and environmental protection plan that is approved by the DOE.

 

LEGISLATIONS

A.      COMPANIES LEGISLATION

Companies in Malaysia are governed by the Companies Act (CA) 1965, which protects the rights and interest of shareholders and investors, and provides regulations for the incorporation of companies, the formulation of company constitutions, management and closures. Incorporation of companies and corporations in Malaysia must be undertaken with the Companies Commission of Malaysia (CCM) in accordance with the procedures outlined in the CA, as follows:

 

Incorporation of a Local Company in Malaysia

There are three types of companies that can be incorporated under the Companies Act 1965, as follows:

  • A company limited by shares
  • An unlimited company
  • A company limited by guarantee

For the purpose of conducting business in Malaysia, the most common type is a company limited by shares.

 

Company Limited by Shares

A company having a share capital may be incorporated as a private company (identified by the word

‘Sendirian Berhad’ or ‘Sdn. Bhd.’ appearing together with the company’s name) or public company (identified by the word ‘Berhad’ or ‘Bhd.’ appearing together with the company’s name). Amongst the requirements to form such company are:

  • A minimum of two subscribers to the shares of the company;
  • A minimum of two directors; and
  • A company secretary who can be either :
  1. 1.       An individual who is a member of a professional body prescribed by the Ministry of Domestic Trade, Cooperative and Consumerism; or
  1. 2.       An individual licensed by the CCM.

Both the directors and company secretary shall have their principal or only place of residence within Malaysia.

 

 Incorporation Procedures

Name Search with CCM and Application for Name

A name search must be conducted to determine whether the proposed name of the company is available. The steps involved are:

·         Completion and submission of Form 13 A CA (Request for Availability of Name) to CCM; and

·         Payment of RM30.00 fee for each name applied. When the proposed company’s name is approved by

CCM, it shall be valid for three months from the date of approval.

 

Lodgment of Incorporation Documents

Incorporation Documents must be submitted to CCM within three months from the date of approval of the company’s name by CCM, failing which a fresh application for a name search must be made.

 

The following are the Incorporation Documents to be lodged with CCM:

·         Memorandum and Articles of Association

·         An original copy of the Memorandum and Articles of Association shall each be stamped at RM100.00.

 

Stamps are affixed at the Inland Revenue Board’s stamp office

·         The directors and secretaries shall be named in the Memorandum and Articles of Association.

·         The subscribers to the company’s shares shall sign the Memorandum and Articles of Association in front of a witness.

 

Form 48A (Statutory Declaration by a Director or Promoter before Appointment).

The director or promoter declares under oath that:

·         He/she is not a bankrupt; and

·         He/she has not been convicted and imprisoned for the prescribed offences.

 

Form 6 (Declaration of Compliance)

This declaration states that all the requirements of the CA have been complied with. It must be signed by the company secretary who handles the registration and is named in the Memorandum and Articles of Association.

Additional documents:

·         Original Form 13 A.

·         A copy of the letter from CCM approving the name of the company.

·         A copy of the identity card of each director and company secretary.

 

Registration Fees

Each application for the incorporation of a company shall be accompanied with payment as per the schedule below:

 Authorized Share Capital (RM)

Fees (RM)

Up to 100,000

1,000

100,001 – 500,000

3,000

500,001 – 1 million

5,000

1,000,001 – 5 million

8,000

5,000,001 – 10 million

10,000

10,000,001 – 25 million

20,000

25,000,001 – 50 million

40,000

50,000,001 – 100 million

50,000

100,000,001 and above

70,000

 

 

Certificate of Incorporation

A Certificate of Incorporation will be issued by CCM upon compliance with the incorporation procedures and submission of duly completed Incorporation Documents.

 

Registration of a Foreign Company in Malaysia

A foreign company may carry on business in Malaysia by either:

·         Incorporating a local company with CCM; or

·         Registering the foreign company in Malaysia with CCM.

 

Foreign company is defined under the CA as:

·         A company, corporation, society, association or other body incorporated outside Malaysia; or

·         An unincorporated society, association, or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose and which does not have its head office or principal place of business in Malaysia.

 

Registration Procedures:

1.       Name Search with CCM and Application for Name:

o   A name search must be conducted to determine whether the proposed name of the foreign company is available

For registration, the steps involved are:

                    I.            Completion and submission of Form 13 A CA (Request for Availability of Name) to CCM; and

                  II.            Payment of a RM30.00 fee for each name applied. The name to be used to register the foreign company should be the same as registered in its country of origin. When the proposed company’s name is approved by CCM, it shall be valid for three months from the date of approval.

 

2.       Lodgment of Registration Documents

Registration documents must be submitted to CCM within three months from the date of approval of the company’s name by CCM, failing which a fresh application for a name search must be made.

The following documents shall be submitted to CCM for registration:

        I.            A certified copy of the certificate of incorporation or registration of the foreign company;

      II.            A certified copy of the foreign company’s charter, statute or Memorandum and Articles of Association or other instrument defining its constitution;

    III.            Form 79 (Return by Foreign Company Giving Particulars of Directors and Changes of Particulars);

(NOTE:  If the list includes directors residing in Malaysia who are members of the local board of directors of the foreign company, a memorandum stating their powers must be executed by or on behalf of the foreign company and submitted to CCM)

    IV.            A memorandum of appointment or power of attorney authorizing the person(s) residing in Malaysia, to accept on behalf of the foreign company any notices required to be served on such foreign company;

      V.            Form 80 (Statutory Declaration by Agent of Foreign Company); and

    VI.            Additional documents consisting of:

o   The original Form 13 A; and

o   A copy of the letter from CCM approving the name of the foreign company.

If any of the described registration documents are in languages other than Malay or English, a certified translation of such documents in Malay or English shall be required.

 

Registration Fees

Registration fees shall be as per the payment schedule below:

 Nominal  Share Capital (RM Equivalent)

Fees (RM)

Up to 100,000

1,000

100,001 – 500,000

3,000

500,001 – 1 million

5,000

1,000,001 – 5 million

8,000

5,000,001 – 10 million

10,000

10,000,001 – 25 million

20,000

25,000,001 – 50 million

40,000

50,000,001 – 100 million

50,000

100,000,001 and above

70,000

 

Certificate of Registration

A Certificate of Registration will be issued by CCM upon compliance with the registration procedures and submission of duly completed registration documents.

 

B.      MINING LEGISLATIONS

The two main legal instruments that govern activities relating to mining are the Mineral Development Act (MDA) 1994 and the various State Mineral Enactments. The MDA came into force in August 1998.

Each State has its own legislation governing mining activities. One of the objectives of the National Mineral Policy project was to harmonize these States Laws and a Model State Mineral Enactment (SME) was prepared. As at end of 2008, ten States have adopted the SME.


 

Mineral Development Act (1994)

The MDA defines the powers of the Federal Government on matters pertaining to the inspection and regulation of mineral exploration, mining and other related issues. The legislation is enforced by the Department of Minerals and Geosciences of Malaysia.

State Mineral Enactment

The SME empowers the States the rights to issue mineral prospecting and exploration licences and mining leases. The administration of the legislation is undertaken by the office of the State Director of Land and Mines (SLDM). The SME is currently at various stages of implementation in the respective States, which have adopted the Enactment.

The SME has several distinguishing features, which are conducive to mineral investment, as follows;

·         One-stop-centre

Administration is centralized at the office of the SDLM for lodging applications for prospecting / exploration licenses and mining leases and for up keep of information on mineral tenements, including areas subject to applications.

·         State Mineral Resources Committee

A 10-member State Mineral Resources Committee (SMRC) is established to coordinate vetting of applications for prospecting/exploration, and submits recommendation to the State Authority for a decision pertaining to licenses and mining leases and other mineral tenements.

Members of the SMRC comprise:

        I.            Chairman – appointed by the State Authority;

      II.            State Legal Advisor or his representative;

    III.            State Director of Land and Mines - as the Secretary;

    IV.            Director General of the Department of Minerals and Geosciences or his representative;

      V.            Director General of the Department of Environment or his representative;

    VI.            Director General of the Department of Forestry or his representative;

  VII.            Director of State Economic Planning Unit or his representative; and

VIII.            Three other members to be appointed by the State Authority.

 

Process Flow – Applications for prospecting/exploration licenses and mining leases

Under the SME, a prospecting license, exploration license and mining lease may be granted to;

·         A person;

·         A company;

·         A body expressly empowered to hold mining land under any other written law of Malaysia; and

·         A foreign company as defined in the relevant legislation relating to companies, registered under the said legislation and authorized by its constitution to hold mining land.

 

The issuance of licenses and leases by the State is subjected to certain conditions and restrictions as prescribed under the SME, as follows;

        I.            Prospecting/Exploration License:

 

Prospecting License

Exploration License

Area for exploration work

25-400 hectares

400-20,000 hectares

Valid period

Maximum 2 years

Maximum 10 years

Extension period

+ 2 years

+ 5 years

Application for renewal

Not later than 6 months prior to expiry of the License

Not later than 12 months prior to expiry of the License

                               

      II.            Small scale mining operation/large scale mining operation:

 

Small scale operation

Large scale operation

Target for mining

Alluvial

Hard rock

Area for mining lease

Such size as reasonably required for the mine

Such size as reasonably required for the mine

Requirement for EIA

Areas more than 250 hectares

Areas more than 250 hectares

Duration of mining lease

Estimated life of the ore body to be mined or 21 years whichever is shorter

Estimated life of the ore body to be mined or 21 years whichever is shorter

Term of renewed mining lease

Estimated remaining life of the ore body or 21 years whichever is shorter

Estimated remaining life of ore body or 21 years whichever is shorter

When to apply for renewal

12 months prior to expiry of the lease

12 months prior to expiry of the lease

 

The SME provides an attractive, efficient, harmonious and stable mineral regulatory framework that is conducive to the development of the industry. It was enacted replacing existing laws to cover conditions allowing not only for small scale and labor intensive mining but also for large scale exploration and capital intensive modern mining that the country anticipates in the future.

 

FISCAL REGIMES

        I.            Equity Participation:

Foreign investors undertaking mineral explorations and mining in Malaysia may be permitted to control 100% equity, and may also form joint ventures with local companies.

 

      II.            Incentives:

Amongst some of the incentives that have been accorded to the mineral sector includes abolishment of export duty on most minerals. Most raw minerals, including ores and concentrates, are subject to low or zero level import duty. For those minerals still subject to import duty, the importer may apply to the Government for a waiver. Imported equipment for use in mineral projects are subject to the general schedule of import tariffs but an application for a waiver may be made on a case-by-case basis.

 

    III.            Taxation:

A business entity incorporated in Malaysia, whether resident or not, is assessable on income accrued in or derived from Malaysia. The Government has reduced corporate tax from 28 per cent in 1998 to 25 per cent in 2009. This move has helped to reduce further the cost of doing business and accorded companies with greater capacity to expand capital spending.

 

    IV.            Royalty:

Apart from paying corporate tax to the Federal government, mine operators also pay value-based royalty to the State where their mining operation is located. Royalty rate in general is 5 % of the value of the mineral extracted but may vary depending on the mineral commodity, and as assessed by each of the individual States.

 

INVESTMENT ENVIRONMENT

Apart from supportive Government policies, well developed and uniform regulatory framework and attractive fiscal regimes, Malaysia’s market oriented economy, strategically located in the heart of South East Asia, offers a cost-competitive and conducive business environment which is the ideal prerequisite for growth and profits.

Infrastructure:

The country has a well developed network of good highways and railways, well-equipped seaports and airports and high quality telecommunications network and services.

Utilities:

Competitive electricity tariff rates and reliable service are provided by:

·         Tenaga Nasional Berhad (TNB) in Peninsular Malaysia.

·         Sabah Electricity Sdn. Bhd. (SESB) in the State of Sabah and the Federal Territory of Labuan, Malaysia's international offshore financial centre.

·         Sarawak Electricity Supply Corporation (SESCO) in the State of Sarawak.

 

Workforce:

The country has talented, educated and productive and multilingual workforce speaking two or three languages, including English. It also has a comprehensive system of vocational and industrial training, including advanced skills training. In addition, industrial relations is generally harmonious with minimal trade disputes.

Quality of Life:

·         Friendly and hospitable Malaysians.

·         Safe and comfortable living environment

·         Excellent housing, modern amenities, good healthcare and medical facilities

·         Excellent educational institutions including international schools for expatriate children

·         World-class recreational and sports facilities

·         Excellent shopping with goods from all over the world

 

Sources:

  1.         I.            Guidelines, Doing Business in Malaysia published by Companies Commission of Malaysia (CCM).
  1.       II.            Invest in Malaysia, Your Profit Center in Asia published by Malaysian Industrial Development Authority (MIDA).
  1.     III.            The State Mineral Enactment: Meeting Investor’s Needs by Dato’ Haji Zulkifly Abu Bakar, Department of Minerals and Geosciences, Malaysia.

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