Open a Foundation in Malaysia

Updated on Sunday 13th January 2019

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A foundation is used for the purpose of funding a good cause, like helping special categories of individuals. In most cases, a trustee or director manages the programs. 

Investors who want to open a foundation in Malaysia will need to observe the country’s rules and regulations for setting up a charity organization. One of our lawyers in Malaysia can give you information about the liabilities and legal aspects when setting up this type of legal entity and can help all investors interested in opening a foundation.
 

Foundations in Malaysia


Foundations are charitable entities incorporated for the purpose of providing aid or relief to certain categories of individuals or groups. It can be set-up using an initial donation made by the investor in Malaysia and later set-up a charity fund collection program, which will help it maintain a certain level of funds through periodic donations. 

A charitable foundation can be set-up in Labuan by following the provisions of the Labuan Foundations Act. Another option is to open a Labuan Islamic Charitable Foundation, which is set-up in accordance with the Sharia law.

One of the experts at our law firm in Malaysia can answer any questions on the Labuan Foundations Act and the establishment of a foundation or trust in the country.
 

Opening a Malaysian foundation


A Malaysian foundation can take the form of a charitable trust or a company limited by guarantee. This type of establishment in Malaysia will have a founder, a secretary and council members. The foundation will have a set of constitutive documents, the Articles of the Foundation. The foundation will be able to hold assets both offshore and in Malaysia. There are no restrictions for non-residents who want to set up a Labuan charitable foundation.
 
When opening a foundation in Malaysia, investors should keep in mind the following essential elements:
  • it must have the registered office: the foundation will need to have a registered office which must be based in Labuan;
  • it does not need a minimum capital: the initial startup capital is a minimum one and this is an advantageous key feature;
  • it is easily incorporated: the foundation can be registered within just a few business days, especially when aided by our team of lawyers in Malaysia who specialize in foundations.
  • it can hold various types of assets: the Labuan foundation can acquire movable and immovable assets.
 
The foundation will have a number of beneficiaries, as stated in its articles, which may be individuals or corporate entities. This will differ according to the purpose of the foundation and whether or not it is a charitable one. The rights of the beneficiaries are expressly stated in the articles.
 
The Labuan foundation can be dissolved when it has fulfilled its purpose or when it can no longer do so, when the charter needs to be dissolved or when the expiry term has passed (for those foundations incorporated for a definite, pre-determined period). The beneficiaries of the foundation receive the remaining assets once the dissolution is complete.
 
One of our attorneys in Malaysia can help you with detailed information on the set-up process for a foundation and the differences between opening this type of legal entity and a limited liability company.
 

Foundation setup process in Labuan

 
A Labuan foundation can be used for multiple purposes and has a set of advantages, among which easy and fast formation as well as privacy, which make it advantageous for a number of investors. Two of the common uses of a foundation include asset protection as well as estate planning (it is not subject to probate and inheritance laws and thus can be used for family asset planning). 
 
The registration of a Labuan foundation starts by filling in the appropriate forms. The steps are the following ones:
  • prepare the forms: fill in the application for registration for and the needed declarations and submit them to the Companies Registry. 
  • appoint the foundation officer: he can be the same as the founder or the beneficiary and must be appointed when registering the foundation.
  • appoint the foundation council: for the purpose of overseeing and managing the foundation; must comply with the requirements for holding meetings.
  • appoint the secretary: the Labuan foundation will typically also have a secretary who is fit to occupy this position.
 
Our team of lawyers in Malaysia can give you more details about each of these steps and about the administration principles.
 
Specific requirements can apply according to the type of the foundation: charitable or non-charitable. When establishing a non-charitable one, the founders must obtain a pre-registration approval from the Labuan Financial Services Authority. It is important to note that this approval is not applicable to charitable foundations. This is why one of our lawyers in Malaysia can give you complete information according to the type of foundation you wish to register. For a non-charitable one, some of the general compliance criteria include the following:
  • own unencumbered properties: the foundation is to endow properties that are unencumbered or otherwise obtain the relevant consent.
  • lawful ownership: this applies to the endowed property, which must be obtained through legal means.
  • obtain consent: this is only applicable in some cases, and it refers to the fact that the endowed properties must be supported by consent letters from the relevant authorities, such as Bank Negara Malaysia or the Companies and the Securities Commissions. 
 
As far as charitable foundations are concerned, they must submit copies of the certificates that approve the endowment of property, whether it is the property of a corporation or that of an individual. When the foundation is one that requests donations from the public, the following must occur:
  • the council must include at least three qualified individuals;
  • the majority of the council members should be individuals who are not related to the founder (although the founder himself can be a council member);
  • the foundation must have a supervisory who is appointed accordingly and who is fit and qualified for the position.
  • offer public information: a minimum amount of information is to be offered to the public, including but not limited to the name and the purpose/objective of the foundation, the names of the founder, the council members, the secretary, and the supervisory individual, the statement of establishment according to law; additionally, it must submit an annual audited account.
Registration and annual fees apply to foundations in respect to the licenses issued by the Labuan Financial Services Authority.
 
You can contact our office in Malaysia for detailed information on the particularities of a Malaysian foundation, its taxation and the conditions for using it for different charitable purposes.