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Entrepreneurship

The Legal Form of New Ventures

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The law relating to incorporation of a company in Malaysia

is governed by the Malaysian Companies Act, 1965.

As per the act any company doing business or wishing

to do business in Malaysia must register with the

Companies Commission of Malaysia (CCM) under theCompanies Act 1965.

http://www.ssm.com.my/

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PROCEDURE FOR

INCORPORATION Apply CCM using Form 13A + Name search

Submit documents within the three months to secure the use of

the proposed name:

Memorandum and Articles of Association

Declaration of Compliance (Form 6)

Statutory declaration by a person before appointment as a director,

or by a promoter before incorporation of a company (Form 48A).

The Memorandum of Association shall describe the

company's name, the objects,

the amount of its authorized capital (if any) proposed for registrationand

its division into shares of a fixed amount.

A certificate of incorporation will be bestowed by the Registrar

of Companies once registration procedures are completed

and approved.

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REQUIREMENTS OF A LOCALLY INCORPORATED

COMPANY

A company must :

maintain a registered office in Malaysia where all books and documents required

under the provisions of the Act are kept. The name of the company shall appear inlegible romanized letters, together with the company number, on its seal and

documents.

A company cannot deal with its own shares or hold shares in its holding

company.

Each equity share of a public company carries only one vote at a poll at any general meetingof the company.

The secretary of a companymust be a natural person of full age who has

his principal or only place of residence in Malaysia. He must be a member of a prescribed body or is licensed by the Registrar of Companies.

The company must also appoint an approved company auditorto be the company auditorin Malaysia.

In addition, the company shall have at least two directors who each has

his principal or only place of residence within Malaysia. Directors of public companies or subsidiaries of public companies normally must not exceed 70

years of age. It is not incumbent that a company director should also be a shareholder.

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Sole Proprietorship

One company, one owner

Require only license(s) to

open

Low costs involved

Owner has total control

Disadvantages

Unlimited personal liability

Owner represents sum total of

management resources

No shares to sell to investors

Financial institutions may be reluctant to

assume risk of a loan

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Partnerships

Association of two or more

people who co-own a business

for the purpose of making a profit

Terms are spelled out in a

partnership agreement or subject

to the Uniform Partnership Act

Disadvantages

Unlimited liability

Difficult to continue if one partner is

unable to participate

Cant sell shares; may experiencedifficulties raising capital

Limited partners

Invest but forego right to manage

Share in the profits according to the

limited partnership agreement

Have limited liability

Limited liability partnership

All partners are limitedpartners

Individuals pay taxes

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Advantages of

Corporations Limited liability for stockholders

Ability to attract capital

Continue beyond lives of founders

Shares are transferable

Liquidity can be very highDisadvantages of

Corporations

Complex and expensive to start

Profits subject to double taxation

Subject to legal and financial requirements Record and report decisions and financial data

Hold annual meetings

Consult with board

File reports with SEC

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Limited Liability Company

Cross between a corporation and a partnershipIncome flows through to owners who pay taxes asindividualsCan only offer two of the following:

Limited liabilityContinuity of life

Free transferability of interestsCentralized management

The Joint Venture

Resembles a partnership without general or limited partners

Purpose is very limitedAll participate in management and decision making

Taxed like a partnership

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Franchising

A system of distribution in which legally independent

business owners (franchisees) pay fees and royalties to a

parent company (franchisor) in return for the right to

Use its trademark

Sell its products or services Use the business model

Types of Franchising

Trade-name franchisingallows sale of products under

franchisors name and trademark

Business format franchisingprovides franchisee with a

complete business system

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Benefits of Franchising

Training and support

Standardized products and services

National advertising

Buying power

Financial assistance

Site selection and territorialprotection

Proven business model

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Drawbacks of Franchising

Fees and royalties

Enforced standardization

Restricted freedom over purchasingand product lines

Poor training programs

Market saturation

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Trends in Franchising

Smaller outlets in nontraditional

locations

Co-branding franchise

International franchising

Expansion of types of businesses

being franchised