Foreign Investment: Setting up of Manufacturing Business in Malaysia- Basic Requirements


     By L Y Lu & Co

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Manufacturing license application - Eligibility and statutory requirement.

The Malaysia's Industrial Co-ordination Act 1975 (ICA) requires manufacturing companies with:

(a) Shareholders' Funds of RM2.5 million and above; or
(b) engaging 75 or more Full-Time Paid Employees
to apply for a manufacturing license for approval by the Ministry of International Trade and Industry (MITI). Applications for manufacturing licenses are to be submitted to the Malaysian Industrial Development Authority (MIDA), an agency under MITI in charge of the promotion and coordination of industrial development in Malaysia.

The ICA further defines:
(a) “Manufacturing activity” as the making, altering, blending, ornamenting, finishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal; and includes the assembly of parts and ship repairing but shall not include any activity normally associated with retail or wholesale trade.

(b) "Shareholders' Funds" as the aggregate amount of a company's paid-up capital, reserves, balance of share premium account and balance of profit and loss appropriation account, where:

(i) Paid-up capital shall be in respect of preference shares and ordinary shares and not including any amount in respect of bonus shares to the extent they were issued out of capital reserve created by revaluation of fixed assets;

(ii) Reserves shall be reserves other than any capital reserve created by revaluation of fixed assets and provisions for depreciation, renewals or replacements and diminution in value of assets.

(iii) Balance of share premium account shall not include any amount credited therein at the instance of issuing bonus shares at premium out of capital reserve by revaluation of fixed assets.

(c) "Full-Time Paid Employees" as all persons normally working in the establishment for at least six hours a day and at least 20 days a month for 12 months during the year and who receive a salary. It also includes directors of incorporated enterprises except those paid solely for their attendance at board of directors meetings. The definition encompasses family workers who receive regular salaries or allowances and who contribute to the Employees Provident Fund (EPF) or other superannuation funds.

ABOUT THE AUTHOR: Ong Mun Siong
Mun Siong was admitted into Malaysian Bar in 2006 after 11 years of military service with the Malaysian Armed Forces which earned him the rank of Captain. During the career as a military officer, Mun Siong was appointed as a member of court martial and also worked as defense council in the court martial proceedings. Mun Siong received his Bachelor of Laws from University of London in 2004 and Certificate of Legal Practice in 2005.

Mun Siong joined Messrs L Y Lu & Co in 2010 after heading property department in a major Kuala Lumpur law firm. Mun Siong’s practice focuses on all areas of commercial and consumer banking and real estate transactions of which including the purchase, sale, leasing and financing of residential, industrial, retail and office properties. And since his participation in Messrs L Y Lu & Co, he took up the firm's corporate advisory port folio and focus on areas of property, natural resources and ICT.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.