D&P Law Now

Benefits of a Private Limited Company

A private limited company by shareholding (i.e. Sdn. Bhd.) is the most common legal entity for businesses in Malaysia due to the advantages it offers over other vehicles (e.g. partnership or sole proprietorship). We set out below some benefits of a Private Limited Company in Malaysia:

Separation of Personal and Company’s Liability

Since a private limited company is a separate legal entity which can stand on its own, the liability of the company is entirely separate from the shareholders and directors of the company.

Structure and Change of Ownership

Share ownership structure and the respective shares to be issued can be reflective of contributions (paid up capital, working capital, goodwill injections) by each party and agreed and binding through a shareholder agreement to be entered into between the shareholders or promoters.

Any change of ownership of a limited liability company can be done in an orderly manner via the transfer or sale of shares between shareholders and/or to any third party.

Ease of Raising Funds

A private limited company may raise funds in its own name through equity and/or debt instruments such as:

  1. Equity: Issuance of new ordinary or preference shares for subscription.
  2. Debt: Obtaining a loan from a financial institution.
  3. Equity & Debt Hybrid: Issuance of convertible note with option for repayment or conversion into shares.

Corporate Governance

The rules for governance of a private limited company can be expressly set out in a shareholders’ agreement and the company’s constitution.

This allows the shareholders to set the parameters for the governance of the company whilst delegating the daily operation of the company to the management team and/or the board of directors.

Perpetual Succession

A private limited company has “perpetual succession” since its existence remains unaffected by the death or departure of any shareholder or director of the company. The company will continue to exist until it is legally wound-up or struck off.


As of 2021, the highest income tax rate for a private limited company is twenty-four percent (24%), which is six percent (6%) lower as compared to the highest income tax rate for an individual at thirty percent (30%).

Conversion into Public Company

If a private limited company wishes to be listed on a stock exchange, the status of the private limited company can be converted to a public company.