For businesses entering the Malaysian market for the first time, navigating the appropriate corporate structure, equity and local ownership conditions, and directorship requirements can feel like a maze.

Many of these requirements aren’t fully set out in legislation. Instead, they’re found in sectoral guidelines, policy documents, licensing pre-conditions, or included as conditions to licences. Failure to fulfil a pre-requisite can mean rejection of licence application. Breaching a licence condition may result in revocation or non-renewal of the licence.

I once explained this to a foreign lawyer, and his response was: “This is so complicated.”

Indeed, which is why one of the first steps for any foreign investment into Malaysia is to seek legal advice on local ownership and licensing.

But compliance doesn’t stop at setup. Once the business is established, ongoing corporate governance becomes just as important and this is where I often see issues emerge.

In due diligence on companies where shareholders are preparing to exit, I frequently find:

– Incomplete filing of statutory forms

– Failure to obtain shareholders’ approval for certain transactions required under the law

– Lack of proper record-keeping for share transfers

These are not just technical oversights. They often reflect failures in governance, breaches of directors’ duties, or neglect of shareholders’ rights. They can delay or even derail exit strategies.

This post was first posted on LinkedIn on 5 June 2025.