Unless otherwise indicated, the company stated in this article refers to the private company incorporated in Malaysia in accordance with the Malaysian Companies Act 2016 (CA 2016).

In broad terms, Malaysian legislation typically does not impose restrictions on foreign ownership in the share capital of companies. However, in cases where specific licenses are necessary for operations, equity conditions or mandates for hiring a minimum number of local employees might be enforced. These measures are intended to enhance the participation of Bumiputera (Malaysians of Malay origin) in the broader economy. The particulars of the policy may differ based on the industry and the prevailing economic goals of the government.

Below are the several types of industrial licenses that incorporate foreign equity policy:

1. Manufacturing
   
   Manufacturing companies are required to either secure a manufacturing license or seek exemption under the Industrial Coordination Act 1975. Since 2003, equity conditions for companies have been abolished. While new licenses typically entail no local equity requirements, previous restrictions persist. However, companies can request for the removal of these conditions, with approval granted based on individual case merits.
   
   
2. Wholesale, Retail and Trade
   
   Foreign-owned companies involved in distributive trade services, encompassing retail, import/export, distributive trade, restaurants, franchises, and consultancy in Malaysia are encouraged and recommended to apply for a WRT (Wholesale, Retail, Trade) license prior to commencing operation. Foreign-owned companies are defined as those with over 50% foreign shareholding. There are also minimum capital requirements to be complied with for WRT license application. Guidelines issued by Ministry of Domestic Trade and Costs of Living offer a spectrum of measures to encourage Bumiputera participation, including the reservation of Bumiputera or Malay ownership in the company's equity structure and the employment of Bumiputera or Malay managerial staff.
   
   
3. Travel Agency
   
   Companies intending to establish a travel agency must fulfill equity and paid-up capital prerequisites corresponding to their desired license type. There are three categories of tour operating or travel agency licenses: inbound, outbound, and ticketing. Foreign companies are solely permitted to seek inbound and ticketing licenses, with 100% foreign equity ownership confined to the inbound license exclusively.
   
   
4. Construction
   
   Foreign investors keen on establishing a company in Malaysia for construction endeavors must register with the Malaysian Construction Industry Development Board ("CIDB"). A foreign contractor may either be a Malaysian-registered company with over 30% foreign ownership or be represented by a foreign company incorporated elsewhere. Additionally, foreign contractors must meet minimum paid-up capital requirements for Foreign Contractor Registration with CIDB.
   
   Previously, to participate in government works tenders, companies needed a Government Employment Certificate ("SPKK"). However, as this required a valid Local Contractor Registration, it excluded foreign contractors from participating in such tenders.
   
   With the introduction of the Foreign Contractor Government Employment Certificate ("SPKKA") in 2023, foreign contractors intending to participate in government tenders can register for Foreign Contractor Registration and obtain the SPKKA. Notably, SPKKA issuance is limited to contractors from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) signatory countries, including Australia, Canada, Chile, Japan, Mexico, Peru, New Zealand, Singapore, and Vietnam.
   
   
5. Transportation
   
   Companies aiming to offer transportation services to third parties using commercial vehicles must acquire Carrier Licence A, while those providing services for internal use need Carrier Licence C. Carrier Licence C applications do not necessitate equity requirements. However, for Carrier Licence A, companies must hold at least 51% Malaysian equity (inclusive of 30% Bumiputera equity), with up to 49% foreign equity ownership permitted.
   
   
6. Legal Services
   
   A legal firm registered with The Bar Council of Malaysia is required to maintain a 100% Malaysian equity ownership. Foreign law firms and lawyers can practice in Peninsular Malaysia through International Partnership (IP), Qualified Foreign Law Firms (QFLF), or employment by Malaysian law firms.
   
   The determination of equity and voting rights shall be at the discretion of the Selection Committee, contingent upon the submission of a business plan. The Malaysian Bar will recommend that the Selection Committee follow the subsequent guidelines concerning this issue:
   
   In addition to the aforementioned, certain sectors prohibit foreign involvement, including but not limited to the following:
   

   (1)	At least 60% of the equity and the total number of lawyers in the IP should come from the Malaysian law firm;
   (2)	QFLF should have at least 30% of Malaysian lawyers; and
   (3)	Malaysian law firms can employ a maximum of 30% foreign lawyers.

   
   Businesses must prioritise comprehensive research and seek guidance from legal experts to grasp the foreign equity policies pertinent to their industry and operations in Malaysia.
   

   (1)	supermarket/ mini market;
   (2)	convenient shop;
   (3)	news agent;
   (4)	miscellaneous goods store;
   (5)	medical hall (inclined towards traditional alternative medicines plus general dry foodstuff);
   (6)	fuel station;
   (7)	permanent wet market store;
   (8)	food and beverage shop; and
   (9)	Non-exclusive textile shop.

Kaizen, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professionals in Kaizen for further clarification.