Kuala Lumpur, Malaysia

The most common for-profit organizational forms used by Enterprises operating a trade or a business in Malaysia are as follows:

1. the public companies, locally known as Berhad (“Berhad”),
2. the private limited companies, locally known as Sendirian Berhads (“Sdn. Bhd.”); and
3. a Partnership; or
4. a Limited Liability Partnership (“LLP”).

The regulator for all the above entities is the Companies Commission of Malaysia (“CCM”). However, as they are publicly listed, Berhad companies are additionally governed by the rules and regulations of Bursa Malaysia Securities Berhad (“the Exchange”) and the Securities Commission (“SC”) of Malaysia. Typically, these Berhad companies are listed on the Exchange, however they may also opt to remain unlisted. While both listed and unlisted Berhad companies would still be regulated by the Exchange and the SC they are subject to different rules and regulations.

• The Berhad and the Sdn. Bhd. companies are similar in nature in that they are both incorporated and may be limited by shares. A Berhad company may also be limited by guarantee however this organizational form is typically available for non-profit organizations, which will be further discussed below.
• The main difference between a Berhad and an Sdn. Bhd. is that the former is a public company and as such would have a wider range of reporting and compliance obligations. Naturally, its shares are also traded on the Malaysian Stock Exchange (“Bursa Malaysia”).
• The Partnership organizational form consists of at least two partners with a maximum limit of 20 partners who share the liabilities towards the business and pay taxes through personal income taxes. It is noted that a partnership must be renewed annually. On the other hand, the Limited Liability Partnership (LLP) structures resemble a combination of an Sdn. Bhd. and a Partnership whereby the debts, liabilities and obligations of the partners are limited and there is no maximum number of partners permitted in an LLP. The nature of a Partnership and an LLP is typically governed by a partnership agreement entered into between the respective partners which sets out the terms on which the entity operates.

Whilst there are other organizational forms that exist such as trusts, societies and cooperative societies, etc. those set out above, namely the Berhad, Sdn. Bhd, Partnerships and LLPs are the most common and well-known forms of organizations that are set up in Kuala Lumpur, Malaysia for the purpose of operating a trade or business for-profit.

a. Enterprises that seek financing from investors which will have multiple owners tend to incorporate a company limited by shares. This is usually in the form of the Sdn. Bhd., and if such an enterprise wishes to raise further capital it may consider going public and becoming a Berhad company. This is because capital can easily be raised by the issuance of new shares and more owners can be introduced by the allotment of those newly issued shares to other shareholders, whereas it is more difficult for Partnership and/ or an LLP to procure outside investment in the same way as it is not able to raise finances by way of issuing and allotment of new shares.

Further, it is well noted that any entity that wishes to be considered as “doing business” in Malaysia would typically have to be registered as a company with CCM as an Sdn. Bhd. and not an LLP. This is because registration with CCM is necessary to prove that the business is final, valid and certified by law to conduct contracts with banks, government agencies and non-government agencies. Further, depending on the type of business being carried out, they may be a requirement for certain industry licenses to be obtained from different government agencies, and in certain circumstances only an Sdn. Bhd. can obtain such licenses.

b. There are no specific for-profit organizational forms designed solely for Social Enterprises in Malaysia. Often Social Enterprises will take the shape of a traditional organizational form i.e., a private limited company or a partnership, etc. and modify its articles or partnership agreement to be aligned with that of a Social Enterprise organization, insofar as Social Enterprises are understood from a globally accepted definition. Some other organizational forms that a Social Enterprise may take include, trusts, societies, cooperative societies, company limited by guarantee. However, such organization forms are commonly used for non-profit structures which will be further discussed in Question 5 below.

The Berhad and Sdn. Bhd. companies are limited by shares – These companies are primarily governed by the provisions of the Malaysian Companies Act 2016 (“CA 2016”) wherein there are no express requirements for the Board of Directors or Managers to prioritize the interest of stakeholders, other than shareholders. This is largely because the beneficial owners of these companies are essentially the members/ shareholders and as such their interest are afforded priority in decision making. However, the members of such companies may opt to alter its constitution including provisions which require the company to take into consideration other stakeholder interest, although there is no requirement to do so.

Partnerships and LLP – Partnerships are governed by the Partnership Act 1961 (“PA 1961”) and LLPs are governed by Limited Liability Partnership Act 2012 (“LLPA 2012”). There are no provisions in the PA 1961 and the LLPA 2012 which require the partners in a Partnership or an LLP to consider other factors or stakeholder interests, beyond that which is specified in the partnership agreement. However, if so agreed upon by all partners, the said agreement may include the need to take into account such other consideration.

Notwithstanding the above, there are statutory obligations in place for the benefit and protection of employees which are applicable to all employers in Malaysia, irrespective of the organizational form operated. Such obligations include the duty to ensure the safety, health and welfare of its employees during the course of their employment, as well as strict adherence to Malaysian labour laws which include but is not limited to:

1. the payment of minimum wage;
2. the contribution to employees’ provided fund, which is a government-controlled pension scheme for all Malaysians;
3. the contributions to employees’ social security fund, for employees’ whose salary does not exceed RM3,000.00.

Further, there is also a general obligation on all employers to protect the personal data of its employees and any other personal data that comes into their possession during the course of operating its business.

None. There are no specific organizational forms designed solely for Social Enterprises. Social Enterprises in Malaysia is a business entity that is registered under any written law in Malaysia that proactively creates positive social or environmental impact in a way that is financially sustainable.

Yes. The common types of Non-Profits Organizations (“NPO”) that exist in Malaysia, and which are open for use by Social Enterprises, include:

1. companies limited by guarantee;
2. a society;
3. a co-operative society; and
4. a trust.

The treatment of, material benefits and/ or restrictions on NPOs in Malaysia are applicable in the same manner for all NPOs irrespective of whether the same is categorized as a Social Enterprises or otherwise.

Some of the main benefits of operating a Social Enterprise as an NPO are as follows: 

1. there is a creation of reliable sources of income to help maintain or grow operations;
2. independence and ability to utilize funding not earmarked for a specific purpose; and
3. there is funding available for NPOs to invest in products/ services for its beneficiaries, rather than having to raise finances by way of increasing a capital like traditional corporations; and
4. tax benefits. Please refer to Question 1 in Section III. Tax below.

Companies limited by guarantee (“CLG”)

• These companies are governed by the CA 2016 and are formed on the principle of having the liability of its members limited by a Memorandum of Association (“MOA”) wherein the limit of liability for each member depends on the members’ contribution to the asset of the company in the event of a winding up. The objects of a CLG are limited to those specified in the CA 2016 i.e., the promotion of charity, the promotion of objects useful for the community or country, etc.
• The reason CLGs are primarily utilized by NPOs is because all profit or other income generated by a CLG must be applied to achieving or promoting its object and a CLG is prohibited from making dividend payments to its members.

A Society

A Society includes any club, company, partnership, or association of seven or more persons for either a temporary or permeant objective and must be registered with the Registrar of Societies (ROS) in accordance with the provisions set out in the Societies Act 1966.

A Co-operative Society

• A Co-operative Society is an autonomous association of an unlimited number of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically controlled enterprises which is registered under the Malaysian Co-operatives Societies Act 1993 (“CSA 1993”).
• A Co-operative Society is not strictly an NPO because it aims to promote the economic interest of its members and in that endeavour may undertake activities that generate income and make dividend payments to its members. However, before the declaration of any dividend from its audited net profits, a Co-operative Society is required to maintain a “Statutory Reserve Fund” for an amount between 25% to 50% of its audited net profits of any particular year. Co-operative Societies are further discussed in Question 6 below.

A Trust

• A trust may be incorporated pursuant to the Malaysian Trustees (Incorporation) Act 1952, where any number of trustees are appointed by a body or association of person which is established for any religious, educational, literary, scientific, social or charitable purpose.
• Upon incorporation, the trustees become a body corporate and is a separate legal entity similar to that of a traditional company. As such, it enjoys similar benefits i.e., it has perpetual succession, it may hold and enjoy movable and immovable property, sell, convey, assign, surrender and yield up, mortgage, charge, demise, reassign, transfer or other dispose of movable and immovable property, etc. Typically, a trust is governed by a trust deed which sets out the number of trustees for that trust and the terms of that trust.
• Given that the funds in a trust would be managed for the sole purpose of the beneficiary which could be a society/ a charity/ an organization with a social or environmental aim, this would fall within the ambit of an NPO.
• Notwithstanding the above, a company that has already be incorporated as a private limited company may subsequently apply to be registered as a trust company under the Trust Companies Act 1949. However, this procedure is slightly more complex as more detailed documents need to be submitted to CCM prior to incorporation i.e., organization chart of the company, proposal of the main activity, biodata of the CEO/ Directors and names of shareholders and their shareholding.
• Another benefit that may be enjoyed by a trust is that if it qualifies as a public charity under the Malaysian Income Tax Act 1967, any incomed earned by that charitable trust may be tax exempt. See Question 1 in Section III. Tax below.

Yes. A Co-operative Society in Malaysia is governed by the CSA 1993 and must have as its object the promotion of the economic interest of its members in accordance with co-operative principles as stated in the CSA 1993. These co-operative principles include:

1. voluntary and open membership;
2. democratic member control
3. member economic participation;
4. autonomy and independence;
5. education, training and information;
6. co-operation among co-operative society; and
7. concern for community

Other features of a Co-operative Society include the requirement of a minimum of at least 50 individual persons and that the members have limited liability to the extent of the nominal value of any shares subscribed by that member.

The benefit of using a Co-operative Society is that it is exempted from tax for the first five years of registration if the total members’ fund is less than RM750,000.00. Further, upon registration, a Co-operative Society is deemed to be incorporated and as such enjoys the benefits similar to a traditional company i.e. it may hold movable and immovable property, enter into contracts, to institute and defend suits and it also has perpetual succession which means it can still survive in the event of any bankruptcy, death or exit of its members.

There are no reporting requirements unique to Social Enterprise. Given that each organization that operates as a Social Enterprise is established and governed under a particular written law in Malaysia, the compliance with reporting obligations of that organization is subject to those laws.

None. The concept of Social Enterprises has only started gaining traction in Malaysia within the last half-decade. Given that there are no legislations or written laws that specifically govern Social Enterprises, there is also an absence of a legal or statutory definition of what constitutes a Social Enterprise in Malaysia. There is no substantial jurisprudence or material discussion in relation to Social Enterprises.

Yes, this is applicable and mandatory for all Public Listed Companies i.e., Berhad companies in Malaysia.

It is a requirement for all companies listed in the Main Market and ACE Market in Malaysia, a.k.a. listed issuers, to include a Sustainability Statement when submitting their annual report. This is essentially a narrative statement of the company’s management on material, economic, environmental and social risks and opportunity (“material sustainability matters”) (“Sustainability Statement”).  Further Main Market Listed Issuers are required to include in their Sustainability Statement, matters relating to governance structure, the scope of the Sustainability Statement, material sustainability matters and management approach. To assist these listed issuers in preparing the Sustainability Statement, Bursa Malaysia issued a Sustainability Reporting Guide (“SRG”) which is to be adhered to as a matter of best practice and further to this SRG, listed issuers may also adopt a reporting approach in accordance with international sustainability reporting frameworks or guidelines such as the GRI Sustainability Reporting Guidelines.

Further in December 2014, Bursa Malaysia launched the ESG Index, known as the FTSE4Good Bursa Malaysia (“F4GBM”) Index. The F4GBM Index “was developed in collaboration with the Financial Times Stock Exchange (“FTSE”) as part of a globally benchmark FTSE4Good Index Series which is aligned with other leading global ESG frameworks such as the Global Reporting Initiative and the Carbon Disclosure Project”.

The purpose of the F4GBM Index is to measure the performance of companies that demonstrate strong ESG practices who must meet an internationally benchmarked criteria measured in a variety of ways, such as:

1. efforts in environmental conservation;
2. the impact of social responsibility initiatives on the community; and
3. the practice of good governance through responsible and ethical decision making.

None.

None.

As discussed in Question 9 in Section I. Enterprise Forms above, it is understood that there is a requirement for all Listed Companies, regardless of market capitalization, in Malaysia to comply with ESG requirements through the issuance of Sustainability Statements in its annual report. However, when it comes to investors, individual or institutional, there is no such mandatory requirement per se.

Nevertheless, a total of ten (10) key institutional investment managers and asset owners have signed the United Nations-backed Principles for Responsible Investment (“UNPRI”) wherein they have pledged their commitment towards ESG best practices and sustainable investing principles. This includes embedding ESG considerations into investment analysis and decision-making processes, as well as seeking appropriate ESG disclosures from investee companies. These signatories include, among others, the Malaysian Employees Provident Fund (“EPF”) the Retirement Fund (Incorporated)(“KWSP”), Khazanah Nasional Berhad (“Khazanah”) which are some of the largest listed issuers in Malaysia with governmental links.

In providing a response to this Question, the scope of "philanthropic funding” referred to excludes any governmental funding which is further discussed below.

Malaysia lacks in financial involvement from investors, banks, company CSR initiatives, and philanthropy. The development of most social enterprises in Malaysia is funded through grants or personal money. Rarely are social enterprises backed by investors. According to the national survey, 81% of social enterprises put in their personal money. Among those who put in their own money, 70% of them are fully funding their ventures themselves.

Notwithstanding the above there still exists a variety of support services from private sectors and civil societies do exist in Malaysia including organizations such as myHarapan, Tandemic, and Social Enterprise Alliance. Further, grant providers and competitions also exist in Malaysia, such as from:

• AirAsia Foundation
• The British Council & Arthur Guinness Fund’s Entrepreneurs for Good
• myHarapan Social Business Challenge
• Agensi Inovasi Malaysia’s Berbudi Berganda Challenge.

In the recent times, donations, charitable contributions, or grants are relied on to help social enterprises pilot or scale their ventures in Malaysia.

Other types of alternative funding that exist for Malaysian entrepreneurs in general include:

1. Cradle which is an agency established under the Ministry of Finance managing RM100,000,000 Investment Program to support entrepreneurs who focuses on technologies for the environment;
2. MAVCAP, a venture capital fund supported by the Government that invests in infant Information Computer Technologies (ICT) companies;
3. Grants such as the Business Start-up Fund by Malaysian Technology Development Corporation (MTDC) or the Creative Industry Fund by CENDANA's funding programmes specially created to increase the quality and opportunities of Malaysian works are also available; and
4. Pemangkin Usahawan Sosial Hebat (PUSH) offered by MaGIC which provides an opportunity for eligible Social Enterprises to secure a grant of up to RM100,000 for scale-up activities.

There are existing for-profit impact investments in Malaysia which are estimated to be fast growing as social ventures increasingly demonstrate their ability to deliver scalable impact with attractive financial returns.

Examples of for-profit impact investments in Malaysia include: 

1. Yayasan Hasanah (“YH”) is an impact-based foundation striving to create real and lasting positive social and environmental changes for Malaysia. YH work closely with ministries and public sector agencies as well as non-profit and grassroot organizations to deliver policies and programmes that support the overall social well-being of Malaysians, from national to local levels.
2. the creation of impact investment funds, which typically aim to invest in social purpose organizations (“SPO”) using equity and seeking financial returns for its investors. Examples of two (2) notable international impact investing firms operating in Malaysia are LeapFrog Investments and Omidyar Network.
3. Shell Malaysia runs a Sustainable Development Grants Programme which aims to accelerate the country’s sustainable development progress by empowering Malaysia-based NGOs, social enterprises, and other civil societies to initiate projects within the ambition of sustainable development.

Please refer to Question 7 below for further discussion on impact bonds that exist in Malaysia.

See Question 4 in Section IV. Governmental Infrastructure below.

None.

Please see Question 9 in Section I. Enterprise Forms above.

In 2014 the Malaysian Securities Commission (“SC”) had also launched a Sustainable Responsible Investment (“SRI”) Sukuk framework (“the SRI Framework”) which is aimed at facilitating the creation of an ecosystem which promotes sustainable and responsible investing for SRI investors and issuers and is aligned with the trend of green bonds and social impact bonds that have been introduced globally.

The way in which the SRI Framework operates is by facilitating the financing of projects that seek to benefit the environment and society

SRI Sukuk is where the sukuk proceeds will be applied exclusively for funding of any activities or transactions relating to eligible SRI projects. Such projects are required to meet the United Nations Sustainable Development Goals (SDGs). Eligible SRI projects include those related to the following areas: 

1. renewable energy;
2. energy efficiency;
3. pollution prevention and control;
4. environmentally sustainable management of living natural resources and land use;
5. terrestrial and aquatic biodiversity conservation;
6. clean transportation;
7. sustainable water and wastewater management;
8. climate change adaptation;
9. eco-efficient and/ or circular economy adapted products, production technologies and processes;
10. green buildings which meet regional, national or internationally recognized standards or certification;
11. affordable basic infrastructure;
12. access to essential services
13. affordable housing;
14. employment generation including the potential effect of SME financing and microfinancing;
15. food security;
16. socioeconomic advancement and empowerment; and
17. development of waqf properties or assets (Islamic properties dedicated for a specific social or charitable purpose).

“Sukuk” is the Arabic name for a financial certificate. It can be seen as an Islamic equivalent of a bond. According to the SC, sukuk refers to “certificates of equal value which evidence undivided ownership or investment in the assets using Shariah principles and concepts endorsed by the Shariah Advisory Council Malaysia (“SAC”)”.

The difference between SRI and Impact Investing

According to the explanations provided by the Assistant General Manager of the SC during the Proceedings of the SC-OCIS Roundtable 2019 discussion on “Impact Investing as an Extension to the Islamic Economy”, there was a key distinction drawn between the SRI Sukuk that exists in Malaysia and impact investing, in that while both are mission driven investment strategies which seek to generate positive impact through investments, SRI ultimately “applies to a set of negative or positive investment screens within investment analysis to avoid investing in companies with business practices that are not aligned with ESG criteria. In addition, it aims to direct investments towards companies with best ESG practices.”

Whereas impact investing “actively seek[s] to invest in companies whose core mission is to generate positive, measurable social and environmental impact. It places significant emphasis on the company’s intention, its corporate goal, and short and long-term impact of business operations in investment analysis. A key component of impact investing is impact measurement and reporting. Impact investors seek to communicate the impact of their investments on people and the environment, and further mobilise capital for the sustainable development agenda."

None.

Crowdfunding is legal in Malaysia. Malaysia was the first country in ASEAN to regulate the growing industry to support new ideas by providing a funding mechanism. In general, crowdfunding can be categorized as:

• investment-based (e.g. Equity Crowdfunding (ECF) and P2P lending); or
• non-investment-based (e.g. charity or reward-based crowdfunding).

The current methods of crowdfunding that are available in Malaysia are ECF, peer-to-peer lending (“P2P”) and Property Crowdfunding (“PCF”).

The current methods of crowdfunding that are available in Malaysia are ECF, peer-to-peer lending (“P2P”) and Property Crowdfunding (“PCF”). In Malaysia, ECF, P2P and PCF platforms are regulated by the SC through its Guidelines on Recognized Markets last revised as at 6 January 2021. Any person that operates an ECF, P2P and/or PCF platforms without prior authorization from the SC, may be held liable under the Capital Services and Market Act 2007(“CMSA 2007”)that carries a maximum fine of ten million ringgit and/or imprisonment term up to ten years.

To date, the SC has registered ten (10) ECF and eleven (11) P2P platforms. Examples of such ECF platforms include, among others, Ata Plus Sdn Bhd, Crowdo Malaysia Sdn Bhd, Eureeca SEA Sdn Bhd, Pitch Platforms (PitchIn) Sdn Bhd, Crowdplus Sdn Bhd and examples of such P2P platforms include, among others, B2B Finpal Sdn Bhd, Crowd Sense Sdn Bhd, MicroLEAP PLT.

In February 2015, the SC released the Guidelines on Regulation of Markets under the CMSA 2007 to regulate equity crowdfunding in Malaysia. This guideline sets out additional requirements on ECF operators which include:

1. an exhaustive list of obligations to adhere to which includes matters such as, among others, carrying out due diligence exercises on prospective issuers, verify the accuracy of the issuer’s disclosure documents lodged with the ECF operator, inform investors of material adverse changes to the issuer’s proposal.
2. the requirement to established and maintain a trust account;
3. the requirement to establish a framework to effectively and efficiently manage conflicts;
4. the limitation in relation to raising funds on ECF Platform;
5. the requirement to observe disclosure requirements; and
6. the limitation on investments.

In order for Social Enterprises and SMEs alike, to search for appropriate crowdfunding sites, the Malaysian Innovation and Creativity Century (MaGIC) has partnered with six (6) crowdfunding partners, namely GIVE.asia, LaunchGood, NGOhub, Sedunia, SimplyGiving and SocioBiz by Alliance Islamic Bank for the Social Impact Matching Grant (“SIM Grant”). The SIM grant totaling RM10,000,000 is a PENJANA initiative that was introduced to support social enterprises and social innovation in Malaysia. This fund aims to provide capital to social enterprises that were able to crowdsource contributions and donations to undertake social projects that addressed challenges faced by targeted communities. It is said that “For every ringgit earned through crowdfunding, SIM Grant will match that amount, in a 1:1 ratio.”

None.

a. There are no tax exemptions uniquely available for Social Enterprises, but non-profits organizations or institutions may apply for an approved status to enjoy tax exemption on the donations received.

b. Social Enterprises may opt to apply for the approved status if it falls within the “organizations” or “institutions” definition, provided that the Social Enterprises must be in a non-profits form.

c. To obtain the approved status, the following key requirements must be complied with:

1. The institution or organization shall not be established for profits.
2. The institution or organization must be in operation for at least 2 years.

Service or benefits are to be provided to Malaysians only.

None.

None.

None.

No. The current Regulatory Sandbox Framework established in Malaysia is only applicable to Financial Technology companies.

The SME Corporation Malaysia is the central coordinating agency under the Ministry of Entrepreneur Development and Cooperatives (MEDAC) which coordinates the implementation of development programs for small and medium enterprises, this would include businesses operating as startups and social enterprises. It provides two financing gateways for SMEs knowns as:

1. SME Co-Investment Partners (SCIP) Programme aimed to enhance access to financing for SMEs, particularly those in the early stages through the provision of risk capital financing. The SCIP Programme is a co-funding initiative between the Government and the private sector with the objective of crowding in private investors to invest in viable SMEs in the form of equity, debt or a hybrid of equity and debt; and
2. provide a platform for alternative fundraising such as Equity Crowdfunding and Peer-to-Peer (P2P) financing. Please refer to Question 9 under Section II. Funding above.

The SME Corporation Malaysia also carries out, among others, Outreach Programmes, Capacity Building Programmes, Global SME Masterclasses, Bumiputera Entrepreneur Programmes, for the benefit of SME businesses operating in Malaysia.

Further, based on the Malaysian Budget 2021 issued by the Ministry of Finance, there are two funds that have been allocated for Small-Medium Enterprises (SME) and Micro Enterprises, namely the Targeted Relief and Recovery Facility (TRRF) and the Micro Enterprise Facility (MEF) respectively.

The TRRF is aimed at assisting SMEs in the services sector and eligible SMEs may obtain financing for working capital purposes of up to RM500,000.00 for a tenure of up to seven years, including a repayment moratorium of at least six months. This TRRF can be obtained through participating financial institutions (PFIs) with a guarantee coverage by the Credit Guarantee Corporation (CGC) or Syarikat Jaminan Pembiayaan Perniagaan (SJPP).

The MEF is enhanced to improve access to credit for micro enterprises to include self-employed individuals, gig workers on digital platforms and participants of the iTEKAD. Eligible Micro Enterprises may obtain financing for working capital and capital expenditure purposes of up to RM50,000 through PFIs who may in turn seek guarantee coverage from CGC or SJPP.

iTEKAD is a social finance programme that was rolled out in accordance with the Malaysian government’s economic stimulus package that provides (i) structured training and mentorship on entrepreneurship and financial management; (ii) funding for the purchase of assets (from zakat, cash waqf and donation); and/or (iii) microfinancing. The programme seeks to support micro entrepreneurs from the B40 (Bottom 40%) segment to generate more sustainable income and contribute back to the community.

In addition to the above, the following stimulus, grants and/ or schemes applicable to SMEs and Micro Enterprises have also been initiated by the Malaysian government: 

1. SME Plus Stimulus package including a grant of RM3,000 to each eligible micro enterprise;
2. SME Digitalisation Grant;
3. SMART Automation Grant; and
4. Lestari Bumi Financing Facility Scheme (only for Malaysian residents with Bumiputera status).

None.

In 2014 the Ministry of Science, Technology and Innovation (MOSTI) had set up an agency known as the Malaysian Global Innovation & Creativity Centre (“MaGIC”) with a mandate to discover and empower technology startups and social innovators by developing a sustainable entrepreneurship ecosystem in Malaysia. Since its inception MaGIC has provided and continues to provide start-ups, investors and ecosystem players with capacity building programmes, market and funding opportunities and regulatory assistance.

Some examples of the operational support, resources, training, and/ or services made available by MaGIC include to Startups and Social Enterprises in Malaysia include: 

1. an immersion and pitching competition known as University Startup Challenge;
2. conducting Bootcamps;
3. the enrollment in a Digital Business Academy for startups;
4. the enrollment in a Global Accelerator Programme for startups;
5. conducting Mentorship programs;
6. conducing Scale-Up Programmes for Social Enterprise (PUSH) which includes personalized capacity building and skills development training;
7. providing Co-Working Spaces;
8. providing information about the products and services from over 180 organizations available for entrepreneurs; and
9. providing general information about how one would be able to begin a startup or social enterprise

Other resources provided by MaGIC include publications such as:

Malaysian Innovation Supercluster for Future Economies;

1. Information on Startup Life Cycle;
2. Legal Compass for Social Enterprises;
3. Malaysian Social Enterprise Blueprint for year 2015 – 2018; and
4. Malaysia Startup and Social Entrepreneurship Ecosystem Report published in 2016. 

None.

Upon submission of the necessary documentation to the relevant authorities the average time and filing fees for the respective Enterprises are as follows: 

There is no publicly available information in relation to the average time and filing fees for trusts, societies, and co-operative societies. We have made attempts to contact CCM and ROS for their comments on the same but have not received a response to-date.

The Social Enterprise Accreditation (“SE.A”) is a national certification issued by the Ministry of Entrepreneur Development (“MED”) which recognizes legitimate social enterprises and intends to certify the status of social enterprises in Malaysia to help them access greater support and opportunities to grow. The benefits afforded to accredited Social Enterprises includes:

1. getting listed on a public directory which enables potential customers to access information about Social Enterprises;
2. being included in the Buy-for-impact campaign to encourage public and private involvement in social procurement;
3. getting access to other funding and support – over time, the MED and other agencies will provide a range of additional support for accredited Social Enterprises subject to prescribed conditions; and
4. joining a network of Malaysia’ leading Social Enterprises – with events, networking and other opportunities to collaborate.

The three (3) mandatory criteria/ standards for a Social Enterprise to be eligible for SE.A are that the organization:

1. must have a clearly stated social or environmental goal;
2. must allocate a significant amount of resources towards their social or environmental goal; and
3. must earn more than half (50%) of total annual revenue i.e., by selling goods/ services to customers as opposed to contributions and grants. For start-ups, the organization has a credible plan to work towards this revenue model.

In addition, the Social Enterprise seeking to be accredited must also achieve one of the following criteria/ standards:

1. 51% of its workforce is from target beneficial groups;
2. 35% of the business cost is channeled towards providing income, training or subsidized goods or services to target beneficial groups;
3. 35% of the production raw materials or resources is spent on achieving the environmental mission; and/or
4. 51% of the profits is distributed towards solving the social mission.

Based on the Global Startup Ecosystem Report 2020 (GSER 2020) issued by Startup Genome*, Kuala Lumpur, Malaysia was ranked eleventh (11th) on the “Rankings 2020: Top 100 Emerging Ecosystems”

*Startup Genome is the world-leading policy advisory and research organization for governments and public-private partnerships which helps to accelerate the success of their startup ecosystem.

However, although Malaysia provides a favorable landscape for startups, it has also been reported that the failure of startups ranges anywhere between 50% - 90%, especially in emerging countries such as Malaysia, and that approximately 60% of startups fail within the first five (5) years of business. There are many reasons as to why a startup may not succeed. However, as above discussed, there is a range of resources available for startups and new SMEs/ Micro Enterprises in the form of training and development as well as funding, and more opportunities need to be created in order to raise the public’s awareness regarding such information and support.

However, it must be noted that the economic landscape for countries has drastically shifted due to the current global situation caused by the Coronavirus Pandemic (Covid-19 Pandemic) and Malaysia is no exception. Based on a survey conducted by MaGIC in March 2020, it was said that, at the time of reporting, some 40% of startups would fail if the Covid-19 Pandemic were to continue for a sustained period and in fact, only 2.9% of start-ups and Social Enterprises in Malaysia were confident in their survival beyond a twelve (12) month period.

Since early 2020 there have been less than one hundred (100) accredited Social Enterprises in Malaysia. Given that the concept of Social Enterprises is still at its infancy here, there is much room for shaping the direction and effectiveness of such enterprises. As Social Enterprises are set up in the same way as traditional organizations or NPO, it is not difficult for one to be formed.

As abovementioned due to the Covid-19 Pandemic, few startups and Social Enterprises were sure of their survival during this period.

However, it is noted that many Social Enterprises have also stepped up during this time and proven the effectiveness and efficiency of Social Enterprises in carrying out its social purposes. Some examples of initiatives carried out by Social Enterprises in the last year include:

• Masala Wheels, a social enterprise food truck and catering service that employs at-risk youths and underprivileged individuals, prepared over sixteen thousand (16,000) food packages to be sent to homes and frontlines in Malaysia; and
• Yellow House, a volunteering hostel that employees the homeless to conduct unique walking tours in Kuala Lumpur, raised over Eighty Thousand Ringgits (RM80,000) from the public which went to distributing groceries to hundreds of struggling family across the Selangor state in Malaysia.

None.

N/A

At present, there are no laws i.e., legislation or case laws, that have been established specifically for Social Enterprises in Malaysia. As such, the applicable laws are those which regulate traditional enterprises and NPO irrespective of whether such entities operate as Social Enterprises. The drawback of this is that there is a lack of definition and general awareness on what is a Social Enterprise.  Therefore, a crucial step forward that would be most beneficial to Social Enterprises, investors, and the public as a whole, would be for the Malaysian government to enact laws that exclusively target Social Enterprises.

The administration of these laws would not be too difficult to implement as Malaysia already has in place agencies i.e., MaGIC, SME Corporation Malaysia, etc. which assists the government ministries. i.e. MEDAC in dissemination information and carries out accreditation services.

It has been reported that due to the lack of institution and community support available for social entrepreneurs in  Malaysia, the sector struggles to attract and retain quality talent as the prospect of entrepreneurship is seen as a high-risk and non-viable career option for Malaysian youths. Without quality expertise, social enterprises would inevitably lack the capability to attract investment, scale or attract mergers and acquisitions. This is a major limiting factor for many Social Enterprises. As such recognition by the government is one positive step in growing this sector.

At present only listed issuers with Bursa Malaysia are required to provide a Sustainability Statement in their annual report regarding efforts made to in relation to environmental and social matters. One change would be to create ESG benchmarks and implement similar mandatory reporting for all Enterprises in Malaysia. Other change may include a provision of tax exemptions for an exhaustive list of social and environmental undertakings available to Enterprises.

In addition, creating an awareness on the various Social Enterprises that exist in Malaysia would be a good avenue for other Enterprises to get involved in social and environmental activities through investments,, collaboration, the provision of resources to support and assist Social Enterprises in carrying out their objectives.

None.