Learn more about Representative Office in Malaysia
A representative office (RO) is a type of foreign business entity set up for the purpose of promoting and developing the business interests of a foreign company through market research, product promotion, and liaison activities. However, it is not allowed to engage in commercial activities. The process of setting up an RO in Malaysia requires company registration and involves obtaining approval from the Registrar of Companies, submitting required documents such as a letter of appointment and a business plan, appointing a resident representative in Malaysia, and filing regular reports to the relevant authorities. Establishing an RO is a common method for foreign companies to establish a presence in Malaysia and explore potential business opportunities in the country.
The main purpose of a representative office (RO) is to conduct market research, promote and develop business opportunities, and to serve as a liaison between the parent company and local clients or suppliers. A RO is not allowed to generate revenue or engage in commercial activities in Malaysia. It also cannot enter into contracts or agreements on behalf of the parent company. Additionally, it must appoint a local agent who will act as a liaison between the RO and the relevant government agencies.
Overall, it is a useful option for foreign companies looking to establish a presence in Malaysia without incurring the cost and regulatory requirements of setting up a subsidiary or branch office.
How to set up a representative office in Malaysia?
Setting up a representative office (RO) in Malaysia involves several steps, including obtaining the necessary approvals and licenses from the relevant government agencies.
➤ The process begins with submitting an application for approval to the Malaysia External Trade Development Corporation (MATRADE). This application should include information about the parent company, such as its business activities, financial statements, and the proposed activities of the RO in Malaysia.
➤ Once the application is approved, the next step is to register the RO with the Companies Commission of Malaysia (SSM). This involves submitting various documents, including a copy of the MATRADE approval, a copy of the RO's articles of association, and a list of the RO's proposed directors.
➤ After registration, the RO must apply for a business license from the local city council or municipal council.
➤ Finally, the RO must appoint a local agent who will act as a liaison between the RO and the relevant government agencies.
What are the documents required to set it up?
To set up a representative office (RO) in Malaysia, several documents are required to be submitted to the relevant government agencies. The main documents needed include:
1. A letter of application to the Malaysia External Trade Development Corporation (MATRADE) outlining the proposed activities of the RO in Malaysia and the parent company’s business activities, financial statements.
2. A copy of the parent company’s certificate of incorporation and articles of association.
3. A list of the proposed directors of the RO and their resumes or curriculum vitae.
4. A copy of the RO’s proposed articles of association.
5. A certificate of good standing from the parent company’s home country, indicating that the company is in compliance with all legal and regulatory requirements.
6. A detailed business plan outlining the proposed activities of the RO in Malaysia.
7. Proof of the RO’s registered address in Malaysia.
8. A copy of the parent company’s financial statements for the previous 2 years.
9. A copy of the local agent’s identification documents.
10. A copy of the parent company’s tax clearance certificate.
ℹ️ It is important to note that additional documents may be required depending on the specific circumstances of the RO.
What are the restrictions on the activities that a RO can engage in?
Representative offices (ROs) in Malaysia have certain restrictions on the activities that they can engage in. These restrictions are put in place to ensure that ROs are not engaged in commercial activities and are only conducting market research and promoting business opportunities for the parent company.
➤ They are not allowed to generate revenue or enter into contracts or agreements on behalf of the parent company.
➤ They also cannot engage in any commercial activities, such as manufacturing, trading, or rendering services, in Malaysia.
➤ They are not allowed to issue invoices or receipts, or to open bank accounts, in the name of the parent company. All financial transactions must be carried out through the parent company's account.
➤ They are restricted to employ only a maximum of 2 expatriate employees, and must appoint a local agent who will act as a liaison between the RO and the relevant government agencies.
➤ They are required to submit regular reports to the MATRADE and SSM regarding the activities of the office and it's financial status.
Overall, the main purpose of a RO is to conduct market research, promote and develop business opportunities, and to serve as a liaison between the parent company and local clients or suppliers, not to conduct any commercial activities.
What are the responsibilities of the representative appointed to a RO?
The representative appointed to a representative office (RO) in Malaysia has several responsibilities, which include:
1. Acting as a liaison between the RO and the relevant government agencies: The representative is responsible for communicating with government agencies such as the Malaysia External Trade Development Corporation (MATRADE) and the Companies Commission of Malaysia (SSM) on behalf of the RO and ensuring that the RO is in compliance with all legal and regulatory requirements.
2. Overseeing the day-to-day operations of the RO: The representative is responsible for managing the RO’s operations and ensuring that the RO’s activities are in line with the parent company’s objectives.
3. Maintaining accurate records and submitting regular reports: The representative is responsible for maintaining accurate records of the RO’s activities and financial transactions and submitting regular reports to the MATRADE and SSM as required.
4. Ensuring compliance with local laws and regulations: The representative is responsible for ensuring that the RO is in compliance with all local laws and regulations, including those related to tax and labor laws.
5. Representing the company in its relationships with local clients and suppliers: The representative is responsible for representing the parent company in its relationships with local clients and suppliers and for promoting business opportunities for the parent company.
6. Acting as a point of contact for the parent company: The representative is responsible for serving as a point of contact for the parent company and for communicating any relevant information or updates to the parent company.
Overall, the representative appointed to a RO in Malaysia plays a key role in ensuring that the RO’s activities are in compliance with all legal and regulatory requirements, and that the RO’s objectives are met.
Are there any reporting requirements for representative offices?
Yes, there are reporting requirements for representative offices (ROs) in Malaysia. They are required to submit regular reports to the Malaysia External Trade Development Corporation (MATRADE) and the Companies Commission of Malaysia (SSM) regarding the activities of the office and its financial status.
The specific reporting requirements may vary depending on the type of business and the nature of the RO’s activities, but generally, they are required to submit annual reports and financial statements outlining the activities and the financial performance of the parent company. These reports should be submitted within a certain timeframe, usually within 6 months after the financial year end.
They may also be required to submit regular activity reports to MATRADE outlining the progress of their activities and any updates on their business plans.
Additionally they are also required to submit an annual declaration to SSM, which states that the RO has not engaged in any commercial activities during the previous year.
Overall, it is important for ROs to be aware of and comply with all reporting requirements in order to maintain good standing with the relevant government agencies and avoid any penalties or fines.
How does a RO differ from other foreign business entities?
The main difference between a RO and other types of foreign business entities is that a RO is not allowed to generate revenue or engage in commercial activities in Malaysia. It can only conduct market research, promote and develop business opportunities, and serve as a liaison between the parent company and local clients or suppliers.
A subsidiary, on the other hand, is a separate legal entity from the parent company and is allowed to generate revenue and engage in commercial activities in Malaysia. A subsidiary is required to register with the Companies Commission of Malaysia (SSM) and comply with all the legal and regulatory requirements for a local company.
A branch office is also a separate legal entity from the parent company but it is not considered a separate legal entity from the parent company. A branch office is allowed to generate revenue and engage in commercial activities in Malaysia, but it is required to register with the SSM and comply with all the legal and regulatory requirements for a local company.
Another difference is in terms of the ownership structure, a RO is fully owned by the parent company, while a subsidiary or branch office can be owned by the parent company and/or other shareholders.
Overall, a RO is a useful option for foreign companies looking to establish a presence in Malaysia without incurring the cost and regulatory requirements of setting up a subsidiary or branch office, but with certain limitations in terms of activities and ownership structure.
What are the advantages of setting up a RO for foreign companies?
There are several advantages of setting up a representative office in Malaysia for foreign companies:
1. Cost-effective: Setting up a representative office is less expensive than setting up a subsidiary or branch office.
2. Low risk: A representative office does not have legal status and is not allowed to generate revenue in Malaysia, which means that the risk for foreign companies is relatively low.
3. Access to market information: A representative office can be used to gather market information and to promote the parent company’s products or services.
4. Access to government incentives: Foreign companies can access government incentives and programs designed to attract foreign investment.
5. Access to local networks: A representative office can help a foreign company establish relationships with local businesses and government agencies.
6. Easier to set up: Setting up a representative office is generally a simpler and faster process than setting up a subsidiary or branch office.
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