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Are names easily available?

Yes. To date there are more than 6500 companies registered in Labuan so there is no problem with choice of names. In addition LOFSA as the Registrar is not subjected to the Government’s gazette restricting the use of certain names. For example, under the domestic registry, the name “Puteri” is gazetted for restricted use, and subject to Ministerial approval. This is not the case in Labuan where the name “Puteri” may be used.

Is a Labuan offshore company considered as non-resident for Malaysia Exchange Control?

Yes. A Labuan offshore company enjoys dual residency status, being a resident of Malaysia for tax purpose and non-resident of Malaysia for Malaysia Exchange Control purpose. On a weekly basis, LOFSA submits to Bank Negara Malaysia the list of newly incorporated offshore companies together with relevant forms. Upon approval BNM will issue a declaration of non-resident status for each company to LOFSA who will then forward the declaration letters to the respective trust companies. This declaration is normally obtained within 2-3 weeks after incorporation.

Can an offshore company elect to be taxed under the Income Tax Act 1967?

Yes, a Labuan offshore company may now elect to be taxed under the Income Tax Act 1967. Such election however is irrevocable and allows the offshore company to enjoy the benefits of Malaysia’s double taxation treaties with 68 countries.

Can a company search be done on a Labuan offshore company?

Yes, but company search is basic. The search may be performed by anyone if written authorisation for the search is given by the director of a Labuan offshore company.

Does the recent BNM guarantee on deposits cover deposits with offshore banks in Labuan?

Yes, Bank Negara Malaysia has issued a guarantee for all bank deposits held with banks in Malaysia. The guarantee covers all Ringgit and foreign currency deposits with domestic and locally incorporated foreign banking institutions. Offshore banks incorporated in Labuan are thus covered by the guarantee.

Is the use of bearer shares allowed in Labuan?

No.

What is Letter of Good Standing?

A letter issued by LOFSA confirming among others, that a company is in good legal standing in that it is duly incorporated, still on the register, is not in the process of merger, consolidation or reconstruction, is not in the process of winding up, re-domiciliation or ceasing business and no proceeding is being brought to strike it off from the register. This letter is normally requested by a bank when an account is to be opened for an offshore company.

What is Letter of Information?

A letter of information is one issued by LOFSA confirming, among others, the details of the directors, shareholders, officers and nature of business of a Labuan offshore company. The letter also confirms that the company continues to exist and there is no legal administration process with regards to winding-up or dissolution of the company which has been brought to LOFSA’s attention. This letter is normally used when opening bank accounts. The alternative to this letter is the letter of good standing although the letter of good standing is worded in a more general way.

What is certificate of incumbency?

A certificate of incumbency is normally issued by a company secretary or a registered agent and not the Registrar. The certificate normally gives details of shareholders, directors, officers, etc. This certificate is rarely used for the opening of bank accounts but to confirm basic company details to business counter-parties.

What is a bare trust?

This is the most basic form of trust which is commonly used in company management business where shares in an offshore company are held by a trust company in its capacity as nominee or ‘bare trustee’ for the actual beneficial owner.

What is certificate of indemnity?

This basic document is commonly used in company management where a beneficial owner indemnifies a nominee director from all risks, damages or liability incurred by the nominee arising from the exercise of his function as nominee director for and on behalf of the beneficial owner.

Is the use of nominee shareholder allowed?

Yes and this is very common. This works as an added layer of confidentiality to a beneficial owner where his name will not appear in the shareholder’s register save for the bare trust.

Is the use of nominee director allowed?

Yes and this is very common. This works as an added layer of confidentiality to a beneficial owner whose name will not appear in the director’s register save for the certificate of indemnity.

What is an apostille?

This a method of certifying a document for use in another country pursuant to the 1961 Hague Convention on Legalisation of Foreign Documents. With this certification by apostille, a document is entitled to recognition in the country of intended use, and does not require certification or legalization by the embassy or consulate of the foreign country where the document is to be used. This avoids the use of expensive and lengthy back-to-back legalisation but only available in a country which is a signatory to or has ratified the Convention.

Can apostille be obtained in Labuan?

No,  apostille can only be obtained in a country which is a signatory to or has ratified the Hague Convention on Legalisation of Foreign Documents. Malaysia is neither a signatory nor has it ratified the Convention.

How are the documents of a Labuan company legalised?

The most common is back-to-back legalisation. For example if a certificate of incorporation needs to be legalised and used say, in the UK, a copy of the certificate must be certified as a true copy by a Notary Public. Then the copy is sent to the Malaysian Consular Office in Putrajaya where a Consular Officer confirms that the signature appearing on the copy is that of the Notary Public. The copy is next brought to the British High Commission in Kuala Lumpur where an officer confirms the signature of the Malaysian Consular Officer.

What are the common documents and information required for banking purpose?

The most common documents are 1) Form 7-Certificate of Incorporation, 2) Form 14-Allotment of Shares, 3) Form 20-Notice of Situation of Registered Office, 4) Form 22-Particulars of Directors & Officers, 5) Memorandum & Articles of Associations, 6) Letter of Information or Letter of Good Standing, 6) bank reference, 7) business profile, 8) resume of directors, 9) and sometimes qualified intermediary certificate or letter of introduction from the trust company.

Which courts adjudicate legal matters involving Labuan offshore companies?

Here, ‘Court’ means a High Court or a judge thereof. The court adjudicating legal matters involving Labuan offshore companies is the High Court of Sabah & Sarawak, sitting in Labuan.

Who is the company registrar in Labuan?

The Registrar of Companies is LOFSA

What is the procedure to wind up a Labuan offshore company?

An offshore company may be wound up voluntarily or by the court. The actual wind up process must be conducted by a liquidator approved by the Registrar. The OCA 1990 does not provide for winding up procedures but winding up procedures in the Companies Act 1965 are adopted in full. This process takes at least six months or longer.

How long does it take to reserve a name?

One day or less.

How long does it take to register a Labuan offshore company?

One to two days.

Can a tax resident certificate be obtained in Labuan?

Yes, by making an application to the Inland Revenue Board, Labuan branch, and by submitting among others, Memorandum & Articles of Association, minutes of directors’ meeting indicating where meetings are held and what decisions in relation to “management & control” were taken, and photocopies of the director’s travel documents showing his entry into and exit from Malaysia.

What is proof of residence and when is it normally required?

Proof of residence tells where a person normally lives and this can be in the form of a bank statement, credit card statement and utility bills. Proof of residence is commonly required by a trust company before entering into a business relation with a client and by a bank before an account can be opened.

What is re-domiciliation?

Re-domiciliation is the transfer of one company from another as if the transferred company has been incorporated in the other country.

Can a Labuan company re-domicile?

Yes, by obtaining approval from the Registrar and thereafter apply for an instrument transferring the offshore company to another country.

Is there a standard table for M&A?

No. Most trust companies use their own standard M&A versions although variations may be made.

Is stamp duty payable?

Stamp duty is exempted. All instruments which are executed by an offshore company in connection with an offshore business activity shall be exempted from stamp duty which would otherwise be chargeable under the Stamp Act 1949.

Can a Labuan offshore company deal with a resident?

Generally no but an exemption was recently given allowing a Labuan offshore company to deal with a resident provided i) the LOC send notice (in a prescribed form) to LOFSA not later than 10 days from the date of transaction with the non-resident took place, and ii) the transaction undertaken by the LOC and the resident (where applicable) has obtained necessary approval from relevant domestic regulatory authorities like BNM, SEC, FIC, etc. The notice should at least specify a) s of the transaction/investment, b) the rationale and advantage of the transaction using an LOC including tax benefits, etc, and c) total amount and source of funding in the transaction or investment.

Can a Labuan offshore company open a Ringgit bank account?

Yes, it is permitted pursuant to the non-declaration status granted by BNM and ECM 15 where such account is solely for the purpose of defraying administrative expenses.

Can a Labuan offshore company open a bank account with a domestic bank?

Yes, both Ringgit account and foreign currency accounts.

What is the maximum authorised capital fee payable?

There are three bands of authorised capital fees in Labuan. 1) RM1,000 for an offshore company with authorised capital not exceeding the equivalent of RM50,000 in foreign currency; RM2,000 for an offshore company with authorised capital exceeding the equivalent of RM50,000 but less than the equivalent of RM1million in foreign currency and RM5,000 for an offshore company with authorised capital exceeding the equivalent of RM1million.

Is a Labuan company required to hold its first AGM within 18 months?

There is no equivalent provision in the OCA 1990 so there is no need to hold the first AGM within 18 months and thereafter within 15 months.

Can a secretary other than a resident secretary be appointed?

Provided the first secretary is a resident secretary (who is an officer of a trust company) any number of additional company secretaries may be appointed.

Can strike off be applied?

A Labuan offshore company may apply for strike off voluntarily or get its name struck off from the register due to non-payment of the annual fee. It is possible to re-instate a company after being struck off and there is no time limit for re-instatement.

When is audit not required?

When an offshore company is carrying on offshore business activity which is a non-trading activity. This usually applies to passive businesses like investment holdings.

When is audit required?

When an offshore company chooses to pay 3% tax or is licensed.

What is an offshore non-trading company?

This is a misnomer and an over simplification which is often used when describing an “offshore company carrying on an offshore business activity which is an offshore non-trading activity.” Offshore non-trading activity means an activity relating to the holding of investments in securities, stock, shares, loans, deposits and immovable properties by an offshore company on its own behalf.

What is an offshore trading company?

This is a misnomer and an over simplification which is often used when describing an “offshore company carrying on an offshore business activity which is an offshore trading activity.” Offshore trading activity includes banking, insurance, trading, management, licensing or any other activity which is not an offshore non-trading activity.

When must a Labuan offshore company file its tax return?

LOBATA provides that an offshore company must file its return of profit within a period of three months from the commencement of a year of assessment. Year of assessment means calendar year. Therefore the deadline to file is 31^st May every year. However from 31^st of March 2006, the Inland Revenue had agreed to grant all Labuan offshore companies a standard extension to file tax returns up to 31^st May every year.