What Is Business Compliance That A Company Need To Adhere To?

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As a business owner or founder, did you aware of the business compliance that you need to adhere to? If yes, have you really adhere to it or you just close your eyes and do business as usual? Or maybe you really got no ideas what is business compliance and how you can adhere to it? Worry not because in this article, we will briefly share some of the basic, yet fundamental business compliance that you needs to know when starting a company.

The Basic Business Compliance 101

ATTENTION: Do note that any contravention to the list mentioned below commits an offence under the Act and can be subjected to a hefty penalty

A company shall:

  1. Display its registered name and company registration at/ on the relevant place as noted in Section 30 (1) and (2) of the Companies Act1 (the Act).
  2. Appoint a Secretary (via its Board of Directors) within 30 days from the date of the company’s incorporation, subject to the Act and the consent of the appointee2.
  3. Keep at its registered office all the relevant documents as required under Section 47 (1) of the Act (with the exception of Section 47 (1)(f), all other documents may be kept at a place other than at the registered office provided the company has given notice to the registrar of Company its intention of doing so3).
  4. Lodge with the registrar an Annual Return (beginning on the next calendar year after it has been incorporated) for each calendar year not later than 30 days from the anniversary of its incorporation date, and shall contain the relevant particulars as noted in Section 68 (3) of the Act4.
  5. Keep a proper accounting record within 60 days of completing any transactions5. In this regard, the record that is kept6:
    1. Must be able to sufficiently explain the transaction and financial position of the company when it is examined; and
    2. Must be able to be conveniently procured/ produced to be properly audited.
  6. Prepare the company’s financial statement within 18 months from the date of its incorporation and subsequently within 6 months of its financial year-end and allow it to be audited before it is circulated to every member of the company as required under Section 257 and 258 of the Act or be presented before a General Meeting, in a public company scenario7.
  7. Lodge its financial statement and reports for each financial year8:
    1. 30 days from when the financial statements are reported are circulated to its members (if it’s a private company);
    2. Within 30 days from when it is presented before a General Meeting (if it’s a public company).
  8. Appoint an Auditor for each financial year to audit its financial statement unless it is exempted by the registrar9. For example, a company is exempted for auditing purposes if10:
    1. The company is dormant i.e. there is no occurring transaction and its operation has been put on hold;
    2. The company does not:
      1. Generate any revenue;
      2. Total assets do not exceed RM300,000.00;
      3. Revenue does not exceed RM100,000.00; and
      4. Does not have more than 5 employees
        for its current financial year as well as its previous two financial years.
  9. Manage its obligations in relation to tax diligently. In this regard, a company must:
    1. Obtain a Company Tax Registration Number from Inland Revenue Board (IRB) before filing its first tax return;
    2. Furnish an estimate of payable tax to IRB, revise and resubmit the estimate of payable tax to IRB and submit an income tax return based on the company’s audited account under point 8.
  10. Manage its obligations in relation to Sales and Service Tax (SST) diligently. In this regard, a company must:
    1. Register for Sales Tax (of the company is engaged in the manufacturing of goods) if there is an annual turn over that exceeds RM500,000.00;
    2. Register for Service Tax (of the company is engaged in taxable services) if there is an annual turn over that exceeds RM500,000.00;
    3. Keep proper accounting records for its SSTs for seven years;
    4. Summit SSTs return and pay the tax that is due;
    5. Inform Custom:
      1. If the company cease to operate (within 30 days from the cessation); and
      2. Of any changes that might affect the accounting and payment of SSTs.

Do take note we have not covered all that a company needs to do in terms of business compliance. As there are many more aspects to a company in relation to business compliance (for example, the employer’s obligation in a company), we would share more in our future articles.

Read more on How to Prepare for Annual Compliance Requirement for Private Limited Company (Sdn Bhd).

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2Section 236, Ibid.

3Section 47 (2), Ibid.

4Section 68, Ibid.

5Section 245 (2), Companies Act 2016.

6Secretion 245 (1), Ibid.

7Section 248, Ibid.

8Section 259 (1), Ibid.

9Section 267 (1) and (2), Ibid.

10SSM Practice Directive 3/2017.