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FOREIGN DIRECT INVESTMENT (FDI) in Malaysia: SETTING UP OF MANUFACTURING BUSINESS IN MALAYSIA (PART 1)

FOREIGN DIRECT INVESTMENT (FDI) in Malaysia: SETTING UP OF MANUFACTURING BUSINESS IN MALAYSIA (PART 1)

MANUFACTURING LICENSE APPLICATION – 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 licence for approval by the Ministry of International Trade and Industry (MITI). Applications for manufacturing licences 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.

You are advised to seek consultation with a Malaysia Law Firm. For further enquires, kindly contact us at consult@lylu.com.my

For consultation on the issue of foreign investment in Malaysia, please proceed to send in your enquiry by clicking here.

By : L Y Lu & Co.