Reduction on the time taken to start a business in Malaysia

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The Minister of Domestic Trade, Cooperative and Consumerism, Dato’ Sri Ismail Sabri bin Yaakob today announces the reform initiatives carried out by the Companies Commission Malaysia (SSM) towards facilitating the conduct of business in Malaysia and improving the country’s ranking in the World Bank’s ‘Starting a Business’ assessment area. The reform initiatives which cover a broad range of aspects involving procedures, duration and costs involved in starting a business was introduced beginning 1 April 2010.

More efficient over the counter services

SSM had since October 2009 carried out a business process re-engineering in relation to its counter services by:

(i)    Identifying and clustering the existing work procedures in relation to the incorporation of companies; and
(ii)    Reconciling and internalizing the business processes involved.

Using the World Bank’s Doing Business 2010 assessment of the number of processes and days involved to start a business in Malaysia, the existing processes in SSM were identified and restructured. The internal processes involving company name approval, lodgement of incorporation documents and stamping of Memorandum and Articles of Association (M&A) were rationalized towards enabling a single-counter interaction and self-contained back-end processing activities behind the counter.

With regard to the stamping of the M&A, the process of procuring, affixing and cancelling revenue stamps has been internalized in SSM pursuant to the conferment of the power to cancel the revenue stamps beginning 1 January 2010 and the permission granted by the Minister of Finance for SSM to make available such stamps at its office premises beginning 1 April 2010.

Previously, the procurement of revenue stamps was made at the post office or the Inland Revenue Board (IRB) while their cancellation was done at the IRB’s office. With the current reform, the stakeholders now need not have their M&As stamped prior to their submission to SSM for incorporation purposes.

Upon submission of the relevant incorporation documents, the stakeholders may also procure the statutory books, share certificates and place an order for company seals. All 3 items are sold as a package at a price of RM100. The selling price of the items is much cheaper than the costs assessed by the World Bank’s Doing Business 2010 which is at RM350.

The statutory books and share certificates can be purchased straight from SSM’s counters while the company seals will be ready and couriered to the stakeholders’ given address on the same day. The stakeholders nationwide with the exception of Kuala Lumpur and the Klang Valley will receive the company seals ordered by the next day.

For Kuala Lumpur and the Klang Valley, the company seals can be collected from SSM’s counter together with the incorporation certificate on the same day. The single-counter interaction concept allows both submission of documents and procurement of post-incorporation items to be done simultaneously.

The detailed business process re-engineering is illustrated in below:

SSM has set out a specific parameter to enable the incorporation of new companies by way of conventional counter transactions to occur within one (1) day. They are:

(i)    Submission of incorporation documents by 12:00 noon;
(ii)    All documents submitted must be in order; and
(iii)    All payments due are made (either in cash, postal order, money order or bank draft)

SSM’s business process re-engineering also included the introduction of incorporation advisory counters. Prior to submission of the relevant documents for incorporation purposes, the stakeholders may check and obtain advice on the documents to be lodged with the advisory counters to ensure a smooth processing of their applications.

Any deficiencies in relation to the forms submitted will be highlighted where this will eliminate the possibility for the application for incorporations to be disapproved or occur in more than one 1 day. Since the introduction of the new Clients Charter on 1 April 2010,102 companies which had submitted their applications for the 1 day incorporation had managed to get their companies incorporated on the same day.

Upon the fulfilment of the above requirements, the certificate of incorporation can be collected at SSM’s office by 5:00 pm on the same day. The business process re-engineering carried out by SSM has resulted in the introduction of the following new Clients Charter:

Connected to IRB

SSM’s reform initiatives are complemented by the reconciliation of the registration and notification processes with the IRB, EPF and SOCSO. Beginning 1 April 2010, the registration with the 3 agencies namely IRB, EPF and SOCSO can be done through myForms (eKL initiative), developed by the Malaysian Administrative and Modernization Planning Unit (MAMPU).

All the relevant forms can be accessed via the official Malaysian Government portal at www.malaysia.gov.my, which is a single interaction window and submitted online.

The synchronized collaboration between SSM, the IRB and MAMPU is targeted to facilitate the public’s entry into the corporate sector and enhance the country’s competitiveness as a business destination.

Temporary reduction of the payment of fees for the incorporation of companies with authorized capital not exceeding RM1 million

SSM has also provided a 15% discount to the incorporation fees of new companies whose authorized capital does not exceed RM1 million. The temporary reduction which commenced on 1 April 2010 until 31 December 2010 is part of SSM’s initiative to provide continous support to the Government’s effort in sustaining the nation’s economic recovery.

Pursuant to the 15% discount given, the incorporation fees payable to SSM are as follows:

The objective of conferring  the 15% incorporation fee discount is to encourage the formation of small and medium enterprises (SMEs) to participate in various business opportunities pursuant to the Government’s RM67 billion economic stimulus packages. The discounted fee is expected to benefit 40,000 new companies whose authorised capital is less than RM1 million projected to be incorporated in 2010.

SSM has identified that approximately 95% of new companies incorporated for the past three years falls under the category of companies with authorised capital of less than RM1 million. This statistic possess strong correlation with the total percentage of SMEs which constitute 99.2% of the total companies in the country.

SSM’s focus on the SMEs augurs well with the nation’s aspiration to  increase the formation of new companies and in recognition of the fact that SMEs provide employment for about 56% of the total workforce and contributes 37% to the country’s gross domestic product (GDP).

SSM’s initiative is projected to bring the following positive implications to the country:

(i)    Facilitating the stakeholders’ entry into business pursuant to the discounted incorporation fees;
(ii)    Stimulating the formation of new businesses especially the SMEs in the country;
(iii)    Promoting more business activities and attracting more investments into the country;
(iv)    Enabling existing companies to restructure through the establishment of new subsidiaries; and
(v)    Serving as a strategic mechanism for a ‘soft landing’ towards further reduction and liberalization of incorporation fees in furtherance to the introduction of the no par value regime and the restructuring of incorporation fees.

Future reform initiatives currently in progress

SSM will also introduce the following initiatives towards further facilitating the entry route into business and the overall conduct of business in the country:

(a)    Migration to mandatory e-Lodgement regime
The fastest and most efficient methodology to incorporate a company is by way e-Lodgement. Not only the e-Lodgement service enables incorporation to be carried out within 1 hour, such service can also be accessible without being physically present at SSM’s counters.

(b)    The development of a fully automated MyCoID system
The second phase of MyCoID involves the development of a system which will allow auto generation/population of information into the database of the IRB, EPF and SOCSO upon the incorporation of a company. The MyCoID system will consolidate both the incorporation process in SSM and the registration and notification processes with the IRB, SOCSO and EPF into a single process which can be carried out within a single day.

(c)    Company seal to be made optional
Currently, a company is required to have a common seal upon incorporation which is used for the purposes of the company’s business (if required) and for the purpose of issuance of share certificates. The Corporate Law Reform Committee (CLRC) has proposed for the retention of this requirement. However, SSM has counter proposed that the requirement of company seal to be dispensed with and be made optional. This counter proposal has been approved by SSM Commission Members recently and will be incorporated in the upcoming new Companies Act 2011.

(d)    Migration to no par value regime
The CLRC has proposed for the migration from the current par value regime to the no par value (NPV) regime. The NPV regime entails the abandonment of the current concept of authorised share capital. Thus, for incorporation purposes in the future, a company will no longer be required to state the authorised share capital in its M&A.

Upon the introduction of the NPV regime, the present aggregated fee structure for the purpose of incorporation may be reviewed towards a single fee regime which will in turn reduce the costs of starting a business.

This proposal has been approved by SSM Commission Members recently. As the migration to the NPV regime possesses national implication vis-à-vis the overall corporate environment, SSM has invited the representatives from key related bodies such as the Securities Commission, Bank Negara Malaysia, Bursa Malaysia, the Malaysian Accounting Standard Board, the Malaysian Institute of Accountant and others to form a task force to strategize its nationwide implementation.

(e)    Refinement of the ultra vires principle
The conferment of unlimited capacity for companies would enhance the flexibility for companies to enter into arrangements with third parties. In this regard, the concept of M&A will be phased out towards refining further the abolishment of the ultra vires principle pursuant to section 20 of the Companies Act 1965. This will also lead to the reduction of incorporation costs.

DATO’ SRI ISMAIL SABRI BIN YAAKOB
Minister of Domestic Trade, Cooperative & Consumerism