Shelf Company vs. New Incorporation in Malaysia

Roger Pay
3 days ago
7 min read

Shelf Company vs. New Incorporation in Malaysia

When looking to establish a business presence in Malaysia, entrepreneurs often face the choice between incorporating a new company or acquiring a shelf company. Both options have distinct advantages and disadvantages, and the best choice depends on your specific business needs, urgency, and risk tolerance.

Here's a breakdown of shelf companies vs. new incorporation in Malaysia:

Shelf Company (Ready-Made Company)

A shelf company, also known as a ready-made or vintage company, is a business entity that has been pre-registered with the Companies Commission of Malaysia (SSM) but has remained dormant. It has no prior business activities, assets, or liabilities, and is essentially "on the shelf" waiting to be purchased.

Advantages of a Shelf Company:

Speed of Setup: This is the primary advantage. Ownership transfer can happen very quickly, sometimes within 24 hours of signing the necessary documents. This allows you to commence business operations almost immediately, which is crucial for urgent contracts or business opportunities.
Perceived Credibility: An older company registration number can give the impression of a more established business, which might be beneficial for securing contracts, loans, or building trust with clients and partners, especially in certain industries or for government tenders.
Less Paperwork (Initially): The initial incorporation documents are already prepared, requiring only amendments for the new directors, shareholders, company name (optional), and registered address.
Clean History: Reputable shelf company providers ensure that the companies they sell are dormant and have no existing debts or liabilities. Due diligence is still recommended to confirm this.
General Trading Scope: Most shelf companies are registered for "General Trading," allowing for a wide range of business activities, as long as they comply with Malaysian laws and any required industry-specific licenses.

Disadvantages of a Shelf Company:

Cost: Shelf companies are generally more expensive than incorporating a new company, especially older ones, due to the premium placed on immediate availability and perceived longevity.
Name Change: While you can change the company name, the previous name will still appear on the business profile as "formerly known as" (f.k.a.), which is public information. This might not align with your branding strategy.
Administrative Work Post-Purchase: You'll still need to change directors, shareholders, company secretary, registered address, and potentially amend the company's constitution (Memorandum and Articles of Association) to suit your specific business needs. If a corporate bank account is associated with the shelf company, the bank will need to be informed of the change in ownership.
Due Diligence is Crucial: Although reputable providers offer "clean" shelf companies, it's essential to conduct thorough due diligence to ensure there are no hidden liabilities, outstanding tax issues, or other complications from its dormant period.
Initial Generic Structure: Shelf companies usually have a generic structure (e.g., single director/shareholder, basic constitution), which might not be ideal for complex ownership structures or specific business requirements without further amendments.

New Incorporation

New incorporation involves registering a brand new company with the Companies Commission of Malaysia (SSM) from scratch. The most common type of company incorporated in Malaysia is a Private Limited Company (Sdn Bhd).

Advantages of New Incorporation:

Customization: You have complete freedom to choose your company name, directors, shareholders, share capital, and tailor the company's constitution from the outset to perfectly match your business model and future plans.
Cost-Effective: Generally, it is cheaper to incorporate a new company as you only incur the registration fees and professional service fees for company secretarial services.
Clean Slate: You start with a completely fresh company history, free from any potential (though unlikely, with due diligence) past issues associated with a shelf company.
Transparency: All details of the company's formation are directly aligned with your vision from day one.
Limited Liability: For a Sdn Bhd, shareholders' liability is limited to the amount of share capital they have contributed, protecting personal assets.
Professional Image (Modern): While a new company lacks "age," a professionally incorporated and well-managed new entity can still project a strong, modern, and credible image.
Access to Financing: Banks and financial institutions are generally willing to extend credit facilities to Sdn Bhds, which are typically audited by independent auditors.
Tax Benefits: Sdn Bhds can enjoy corporate tax rates that may be lower than personal income tax rates, along with various tax incentives and exemptions.
Business Continuity & Perpetual Succession: A Sdn Bhd has a separate legal entity and can continue to exist even if shareholders or directors change, providing stability and longevity.

Disadvantages of New Incorporation:

Time-Consuming: The incorporation process, while streamlined, still takes time. It typically involves steps like name search and reservation, preparing and submitting incorporation documents to SSM, and obtaining the certificate of incorporation. This can take a few days to a couple of weeks, depending on the complexity and efficiency of the process.
More Initial Paperwork: While the process is digital, you are involved in generating all the initial documents and declarations.
No "Aged" Perception: A newly incorporated company will have a recent registration date, which might not be ideal if you specifically require an older company for certain tenders or to project a long-standing image.
Compliance Learning Curve: While professional company secretaries assist, you'll still need to understand and manage ongoing compliance requirements from the start.

Key Considerations When Deciding:

Urgency: If you need a company immediately to sign a contract, bid on a tender, or start operations without delay, a shelf company is the faster option.
Budget: If cost-effectiveness is a primary concern and you have time to wait, new incorporation is usually cheaper.
Branding & Name Preference: If a specific company name is crucial for your brand and you want a fresh start without any historical name associations, new incorporation is preferable.
Credibility Requirements: If an "older" company appearance is a significant advantage for your target market or financing, a shelf company might be appealing.
Complexity of Business: For very specific or complex business structures, starting fresh with a new incorporation allows for tailor-made articles of association.
Risk Tolerance: While shelf companies are generally clean, a new incorporation inherently carries no historical baggage.

Conclusion:

For most new businesses in Malaysia, new incorporation is often the recommended path. The process has become significantly more efficient, and the cost savings, full customization, and clean slate often outweigh the time advantage of a shelf company.

However, a shelf company remains a viable and attractive option for entrepreneurs who face tight deadlines, require immediate business operations, or seek the perceived credibility of an older company registration number. In such cases, engaging with a reputable corporate service provider to ensure thorough due diligence on the shelf company is paramount.

How Bestar can Help

Shelf Company vs. New Incorporation in Malaysia

Bestar plays a crucial role in assisting both local and foreign entrepreneurs with company incorporation and ongoing compliance. We act as a one-stop solution, offering a wide range of services that simplify the complexities of setting up and running a business in Malaysia.

Here's how Bestar can help, whether you choose a shelf company or new incorporation:

For New Incorporation:

Company Name Search and Reservation: Bestar can conduct a thorough name search with the Companies Commission of Malaysia (SSM) to ensure your preferred company name is available and compliant with naming conventions. We will then reserve the name for you.
Preparation of Incorporation Documents: We handle the drafting and preparation of all necessary documents, including the company's constitution (formerly Memorandum and Articles of Association), statutory declarations by directors and shareholders, and other forms required by SSM.
Filing with SSM: Bestar has the expertise to submit all incorporation documents accurately and efficiently, ensuring a smooth registration process.
Registered Office Address: By law, every company in Malaysia must have a registered office address. Bestar provides this service, allowing you to use our address as your official registered address, which is crucial for receiving official correspondence from SSM and other government bodies.
Appointment of Company Secretary: It is a legal requirement for every Malaysian company to appoint a qualified company secretary within 30 days of incorporation. Bestar has qualified company secretaries on our team who can fulfill this role, ensuring compliance with the Companies Act 2016.
Advisory on Business Structure: We can advise you on the most suitable business structure (e.g., Private Limited Company, Limited Liability Partnership, Sole Proprietorship) based on your business activities, ownership structure, and future goals.
Bank Account Opening Assistance: While the final decision rests with the bank, Bestar can assist in preparing the necessary corporate documents required for opening a corporate bank account.
Initial Compliance Guidance: We will guide you through the immediate post-incorporation requirements, such as setting up the company's statutory registers and minute books.

For Acquiring a Shelf Company:

Sourcing of Reputable Shelf Companies: Bestar maintains a list of pre-registered, dormant shelf companies that are guaranteed to be clean (no prior business activities, assets, or liabilities). We ensure the shelf company has a clear history.
Due Diligence: Bestar will conduct thorough due diligence on the shelf company to verify its dormant status and ensure there are no hidden issues, giving you peace of mind.
Ownership Transfer and Amendments: We facilitate the swift transfer of ownership (shares) from the previous shareholders to you. We also handle the necessary amendments to appoint new directors, company secretary, change the company name (if desired), and update the registered address.
Update of Statutory Records: We will update the company's statutory registers to reflect the new ownership and management.
Post-Acquisition Compliance: Even with a shelf company, ongoing compliance is crucial. Bestar will ensure the company immediately adheres to all statutory requirements under the new ownership.

Ongoing Support and Compliance for Both:

Regardless of how you set up your company, Bestar offers essential ongoing services:

Company Secretarial Services: This is a core service. We handle the maintenance of statutory records, preparation and filing of annual returns with SSM, drafting of board resolutions and minutes, and ensuring compliance with all provisions of the Companies Act 2016.
Accounting and Bookkeeping: Bestar offers outsourced accounting services, managing your financial records, preparing financial statements (profit and loss, balance sheet), and ensuring compliance with Malaysian accounting standards.
Tax Compliance and Advisory: We can assist with corporate tax registration, preparation and submission of tax returns to the Inland Revenue Board (IRB), advising on tax planning strategies, and handling sales and service tax (SST) matters.
Payroll Services: Bestar provides payroll processing services, ensuring timely and accurate salary payments, EPF, SOCSO, and EIS contributions, and other related HR administrative tasks.
Business Advisory: Beyond compliance, Bestar offers advisory services on business licensing, regulatory updates, company restructuring, and market entry strategies.
Work Permit/Visa Applications: For foreign individuals establishing businesses in Malaysia, Bestar can assist with applying for work permits and other necessary immigration passes.
Ensuring Compliance and Avoiding Penalties: Our expertise ensures that your company meets all regulatory requirements, helping you avoid costly mistakes, fines, and legal issues.
Time and Resource Saving: By outsourcing these administrative and compliance tasks, you can free up your time and resources to focus on your core business operations and growth.

In essence, Bestar acts as your compliance and administrative partner, navigating the legal and regulatory landscape of Malaysia on your behalf, allowing you to concentrate on building and expanding your business.

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