If you are looking to start and register a business, you need to fully understand the types of business models that exist in Malaysia. In total, there are 8 types of business that you can register in Malaysia. Sole proprietorship, partnership, private limited company (Sendirian Berhad), company limited by guarantee, unlimited company (Berhad), public limited company, a foreign company, and limited liability partnership (LLP).
Given the many choices of company structure in Malaysia, the differences between these companies might become very confusing for some. In this article, we will be looking into the differences between Sendirian Berhad otherwise abbreviated as Sdn Bhd, and Berhad (Bhd).
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The 4 Main Differences Between Sendirian Berhad And Berhad
Sendirian Berhad otherwise abbreviated as Sdn Bhd in Malaysia is known as a private limited company in other parts of the world. A private limited company ends with a Pte Ltd on the company name. Berhad is abbreviated as Bhd, it is otherwise known as a public company which usually ends with an Ltd.
There are four main differences between a Sendirian Berhad and Berhad. These differences are mainly about company invisibility. Here are the 4 differences between Sendirian Berhad and Berhad:
We have previously mentioned in our articles on shareholder agreements that companies are required to show their financial report to shareholders. However, for Berhad companies, they are usually more strict with their financial reporting standards because their financial report has to be made visible to the public. Sendirian Berhad companies might be less stringent with their financial report, but this does not give them any excuse to not follow the general Financial Reporting Standards (MFRSs) in Malaysia.
Shareholders are a big part of every company. Shareholders are a part of a company’s management system. In a Sendirian Berhad company, the total number of shareholders within the company is limited to a maximum of 50 shareholders. A Berhad company, on the other hand, has an unlimited capacity of shareholders.
There is certain information that a company needs to make available to the public. As its name suggests, a Berhad (Public) company needs to ensure that its financial records are made available to the public. A public company should always be ready to answer any questions that shareholders have for them.
In a Berhad company, the general public is allowed to purchase their shares with no exception, while in a Sendirian Berhad company, the availability of shares is much more limited. As previously mentioned, a Sendirian Berhad company is limited to 50 shareholders. Therefore, their shares are limited to those that have signed their shareholder agreement.
So, Which Company Should I Register Under?
Not all public companies are listed on the stock exchange list as not all Berhad companies are listed as public companies. These companies are usually those who are transitioning into a bigger company or are going through some changes to their structure as a company.
It is essential to select the right business model that suits your company to avoid future complications within your company. If you are ever confused, it would be best to consult a professional who understands the terms and conditions to be met before registering your business under Sendirian Berhad or Berhad.
The stock exchange is one of the most important factors that you should consider before registering your company. A public company allows the public to invest as a shareholder, this allows Berhad companies to gather much more investors.
A Sendirian Berhad company is more restricted to its shareholders. Shareholders are limited to those with a shareholder agreement from the company itself. When small to medium companies start to grow bigger than a sole proprietor and partnership, they tend to switch over to become a Sendirian Berhad company.
As for a Berhad company, they tend to switch over to a public company as they are looking to receive more funding from the public. By making themselves available to the public, the company would be able to invite more potential shareholders to invest in the business as well. There are many reasons why companies would register as a Berhad or Sendirian Berhad. These reasons are related to how the two business models differ in terms of shareholders, stock exchange, and even company size.
If you are still on the fence about Sendirian Berhad and Berhad, do not hesitate to contact us for further advice. Here at Sim & Rahman, we are always available to help you with your legal demands.