Incorporation: Basic on How to Prepare for Annual Compliance Requirement for Private Limited Company (Sdn Bhd)

A Private Limited Company (Sdn Bhd) is commonly the preferred form of business for new start-ups and SMEs to conduct business in Malaysia, mainly because of the ability to conduct equity fundraising.

The main reason I prepared this article is because I discovered that most (if not all) reading materials available online only mention WHAT is the basic annual compliance requirement for a Private Limited Company (Sdn Bhd), but fails to mention HOW a business owner/start-up founder can prepare for it. Although it is an annual requirement, it will definitely save you a lot of time and cost if the preparation is done since day one.

Before I elaborate further, credit must be given to Nur Qistina Binti Zoal Azha (FSP’s new Legal Assistant/Lead Minion) for helping me prepare this article.

  • If you want to know more about DIY Registration / Incorporation of a Private Limited Company you can check out our article HERE.
  • If you want to know more about How to Choose Your Company Secretary? you can check out our article HERE.

1) ANNUAL RETURN

Every Private Limited Company (Sdn Bhd) must lodge its annual return for each calendar year with the Companies Commission of Malaysia (“CCM a.k.a SSM”) no later than thirty (30) days from the anniversary of its incorporation date.

What is an Annual Return?

It is basically a form to notify SSM of any material changes of information pertaining to the Company or to notify SSM that there are no changes in particulars. This is something your Company Secretary will prepare and lodge for the Company (provided that you pay their fees and don’t owe them any money).

What do you need to do to comply?

Use your smartphone/diary/calendar/alarm clock/mother/wife to set a reminder on the anniversary of incorporation to instruct your Company Secretary to prepare the annual return and lodge it with SSM within thirty (30) days. Although most (if not all) Company Secretaries will send you a reminder, my advice is to not rely on them because at the end of the day the onus is on you to ensure that the requirement is complied with.

  • WARNING: Failure to comply with this requirement is an offence punishable with a fine not exceeding RM5000.00 and a further fine not exceeding RM1000.00 for each day the offence continue.

2) AUDITED FINANCIAL STATEMENT

Other related Article: Audit Exemption in Malaysia

It is the responsibility of all the director(s) of every company to prepare their audited financial statements within eighteen (18) months from the date of its incorporation and subsequently, within six (6) months of its financial year end (the deadline).

Next, the audited financial statement must be circulated to all Shareholder(s) within six (6) months of its financial year end. Thereafter, lodge the audited financial statement to SSM within thirty (30) days from when the said statement is circulated to all Shareholder(s).

What is an Audited Financial Statement?

Financial statements of a company reflect the true and fair view of the financial position and performance of a company. To keep it simple, get an auditor to prepare for you (Important Note: auditor of the company must be appointed at least thirty (30) days before the end of the period for the submission of the audited financial statements)

How to Prepare for Audited Financial Statement? 

Extremely Important Note: Before an auditor can prepare an audited financial statement, they will need to see your management account and the book keeping record (General Ledger, Payment Voucher, Invoice, Receipts and etc…). You can either learn to do this yourself, use an accounting software and/or hire a book keeper.

Common Mistake: Business owners fail to maintain proper records of all these documents. Therefore, the auditor will not be able to prepare an audited financial statement due lack of records.  Worst case scenario, although I discourage this practice and advise you against it, if you are just too lazy, get a shoe box and keep all your documents in the said box.

(Please read another article HERE to know the difference between an Accountant and a Book Keeper)

What do you need to do to comply?

Again, use your smartphone/diary/calendar/alarm clock/mother/wife to set a reminder at the end of the financial year to instruct the auditor to prepare the audited financial statement.  But before you can do that, during the said financial year, you MUST keep all the relevant documents as mentioned above. It is advisable to start the process early and allow sufficient time to your auditor.

Common Mistake: Giving the instruction at the very last minute i.e. 1-2 months before the deadline. Ideally give the instruction as soon as the financial year end.

  • WARNING: Failure to comply with this requirement is an offence punishable with a fine not exceeding RM5000.00 or imprisonment for a term not exceeding one year or both.

3) DIRECTOR’S REPORT

The directors’ report shall be prepared by the director(s) for each financial year and must be attached to the financial statements (so the timeline is similar to audited financial statement).

What is a Director’s Report?

It is basically a document to notify SSM of any material changes of information pertaining to:

  • The name of every past and existing director(s);
  • The principal activities of the company;
  • The net amount of profit or loss;
  • Any shares or debentures; and/or
  • Any other information required under the Companies Act 2016.

What do you need to do to comply?

Again, use your smartphone/diary/calendar/alarm clock/mother/wife to set a reminder to instruct your Company Secretary to prepare the said document for you. The timeline is similar to audited financial statement.

  • WARNING: Failure to prepare the directors’ report is an offence for the director(s) and punishable with a fine not exceeding RM500,000.00 or imprisonment for a term not exceeding one year or both. Failure to comply with this requirement is an offence for the company and every officer and punishable with a fine not exceeding RM20,000.00.

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