Can a Foreigner Be a Director in Malaysia? Definitive Legal & Practical Guide

Malaysia remains one of the most appealing destinations to foreign investment with a friendly legal environment that enables foreign investors to join companies as company directors. However, this opportunity cannot be utilized without knowledge of the legal requirements, statutory compliance, and operational implications of any investor or corporate planner.

This is the comprehensive, definitive guide on whether a foreigner may be a director in Malaysia, what conditions shall be fulfilled, what does it mean in practice, and the most popular questions, supported by official recommendations and reference material.

Jurisdiction: Malaysia has no objections to foreign Directors.

The act of corporate governance is provided in the Malaysian Companies Act 2016, which does not limit the nationality of the company directors. A foreign national can be made a director, but he has to satisfy minimum statutory conditions including:

• Being a natural person and at least 18 years old.
• Not disqualified by the Companies Act provisions.
• Making a statutory statement (Form 48A) that they are a qualified person and would be happy to be the director.

This will imply that any board of a Malaysian firm can be filled with a foreigner without any prejudice against nationality, provided that he or she is legally qualified to serve as a director.

To verify these granting procedures, refer to the official SSM Compendium that states that a foreigner national can be a director of a company in Malaysia provided that other statutory requirements are met.

Resident Director Requirement: What Every Company Needs to Know.

Although nationality is not a limiting factor, the most significant ones are the residency requirements of the company. According to the Malaysian corporate law:

• The minimum number of directors who should be appointed by the private companies (Sdn. Bhd.) should include at least one director who is ordinarily resident in Malaysia.
• There should be at least two resident directors in the public companies.
• Resident directors are those who have their main residence in Malaysia. They can either be citizens of Malaysia, permanent residents or foreigners, who possess a suitable and sustainable pass (e.g. Employment Pass or other qualified residential work visa).

Suruhanjaya Syarikat Malaysia (SSM) is very strict on this requirement of a mandatory residence and incorporation cannot be done without it. The legislation guarantees the existence of a local source of regulatory compliance and enforcement of the law.

Is it possible to have a foreign director without residence?

Yes. A foreigner is allowed to be a director without being a resident of Malaysia, but as a non-resident director. In this scenario:

• And they are not the necessary resident director.
• Regarding the statutory compliance, the company still has to appoint one or more directors who satisfy the resident director requirement.
• Board directors do not have to reside locally because non-resident board directors can do their board work remotely, attend meetings electronically, and contribute to strategy without a local residential address.

This structure is used by many multinational corporations, which obtain a balance between foreign personnel on the board of directors and local law enforcement requirements.

Special Note: Foreign Nationals as residents directors.

A foreign director living in Malaysia with a valid long term visa (Employment Pass, Permanent Resident pass and so on) could be treated as a resident director provided that his primary place of residence is in Malaysia. This implies that such a pass allows a foreigner to technically meet the local director requirement in case he or she proves to be of physical residence.

Nevertheless, when a foreign director is not residing in Malaysia, he or she cannot be the resident director, but can be appointed as the non-resident director.

Director Corporate Compliance Obligations.

The fiduciary duties and statutory duty of local and foreign directors both pertain to the Companies Act 2016. These are but not restricted to:

• Good faith and in the best interests of the company.
• Taking reasonable care, skill and diligence.
• Assuring the fulfillment of all the statutory filings particularly annual returns and financial statements.
• Keeping proper records of the company and disclosing needed information.

Violation of duty may be imposed on directors personally. It is hence urgent that foreign directors should be aware of their statutory exposure to accepting directorship in Malaysia.

Board Organization and Strategic Issues.

Sdn. Bhd. Company Limited.

• Has a minimum number of resident directors as one.
• As an additional director, foreigners are allowed.
• The company secretary should be a Malaysian resident who is licensed by SSM.

To companies that do not have an appropriate resident director, nominee director services are a popular solution; professional service firms offer qualified resident directors in order to meet the statutory obligations without giving up control over their operations.

Implications of Employment Pass.

Although the position of a director does not necessarily provide work permits, in most cases a foreign director planning to live and undertake executive duties in Malaysia will require a valid Employment Pass or other long-term visa. The legal work can not be authorised by only being a directorship in title.

Taxation on foreign directors.

There is a risk that the foreign directors will generate a Malaysian tax liability in case they are paid directors fees or other remuneration obtained in Malaysia. Such forms of income normally fall under the category of withholding tax, and the company is liable to comply and deduct and pay the corresponding tax to the Malaysian taxation authority.

Tax planning is also important especially when directors work across borders or even when their roles are mixed with strategic oversight and other operational tasks.

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HL Khoo Group is a company that provides accounting services. Our headquarter is situated in Skudai, Johor, Malaysia.

Posted by HL Khoo Group on 13 Jan 26