Labuan Offshore Company Formation

Legal form: The Offshore Companies Act 1990 (OCA) provides for the establishment of offshore companies and the registration of foreign offshore companies in Labuan. In addition, a foreign company incorporated under the laws of another country may also apply to be registered as being continued in Labuan. Every offshore company may be a company limited by shares or by guarantee. The abovementioned companies may participate in the offshore activities and enjoy the attractive tax treatment provided under the Labuan Offshore Business Activity Tax Act 1990. Amendments to modernize the OCA are being planned in 2006.

An Offshore Company (or an Offshore Foreign Company) is only permitted to carry on business in, from or through Labuan. An Offshore Company may not: carry on business with a resident of Malaysia except as permitted by the Offshore Banking Act 1990; carry on the business of Banking or Insurance or such similar business unless it is licensed so to do under the Offshore Banking Act 1990 or the Offshore Insurance Act 1990; carry on business in the Malaysian currency except for defraying its administrative and statutory expenses; carry on business of shipping or petroleum operations in Malaysia or carry on business as a trust company.

The Offshore Companies Act was amended recently to allow Malaysians to own offshore companies, as well as to permit foreign-owned offshore companies to invest in Malaysia subject to certain conditions.

Name of the company: Offshore Companies are allowed to have names in a foreign language, provided they use the Latin alphabet. The words: Bank, building society, insurance, assurance, reinsurance, fund management, investment fund, trust, trustees, Chamber of Commerce, university, municipal or their foreign language equivalents require approval. To denote limited liability, any of the following are permitted: Corporation, Incorporated, Limited, Sociètè Anonyme or Sociedad Anonima or the relevant abbreviations. If the Malaysian word Berhad is used then it must be preceded by "(L)" to denote that the company is incorporated in Labuan.

Memorandum and Articles of Association: Offshore companies in Labuan are incorporated by submission to the Registry of the Memorandum and Articles of Association, consent to act as a director form, Statutory Declaration of Compliance and the payment of requisite fees. An annual fee of RM 2,600 is payable 30 days after the anniversary date of incorporation to renew the registration of the company for another 12 months.

Shareholders: A minimum of one shareholder is required which may be an individual or a corporate body. The details of company beneficial owners and shareholders are not part of the public records.
The share capital: There is no minimum authorized share capital requirement, however our standard companies include an authorized share capital of US$10,000 ordinary share at a nominal value of US$1 per share which one share is required to be issued. Share capital can be held in any currency other than Malaysian Ringgit. Registered shares of par value, preference shares, redeemable shares and shares with no voting rights are all permitted. Bearer shares are not permitted.

Directors of the company: There must be at least one director, which can be either corporate or individual. The director may be a non-resident or resident of Malaysia. Trust Company may be appointed to be a nominee resident director of the Labuan offshore company. Particulars of the directors must be filed with the Companies Registry.

Registered office and local agent/secretary: It is a requirement under the OCA that an offshore company must employ the services of a trust company, which is a company incorporated under the Companies Act 1965 and registered under the Labuan Trust Companies Act 1990, to provide trust company services to the offshore companies. The trust company provides the registered office, Resident Secretary and performs the secretarial duties of the offshore company, such as lodgment of any documents required under the OCA, and also makes available any of its Trust Officer for appointment as Resident Director.

Taxation: Labuan offshore companies who are engaged in offshore trading activities are subject to corporate profits tax, which will be levied at 3% on assessable net profits as per the audited accounts. A return and a statutory declaration will be required to be submitted. Alternatively, the companies can elect to pay a flat tax of RM20,000. In this case, a statutory declaration and a prescribed from will be required to be submitted. For offshore companies who are engaged in non-trading activities, no tax shall be payable for income earned through these activities. In such cases only a statutory declaration will be required to be submitted.

Audit and financial returns: A Labuan Offshore Company needs to have an audit performed by an approved auditor if the company is engaged in offshore trading activities and does not elect to pay the flat tax of RM20,000. An annual return must be filed 30 days prior to the companies' anniversary date of incorporation. A set of accounting records must be kept in Labuan.