Understanding Berhad (BHD): A Comprehensive Guide to Malaysia’s Public Limited Companies

What is a Berhad (BHD) Company?

A Berhad (BHD) company is a type of public limited company in Malaysia. The term “Berhad” translates to “limited” in English and is equivalent to “PLC” in the UK or “Inc.” in the US. This designation signifies that the company’s liability is limited to the amount unpaid on its shares, providing a layer of protection for shareholders.

Key Characteristics of Berhad Companies

Limited Liability

One of the most significant advantages of a Berhad company is limited liability. Shareholders’ personal assets are protected from company debts, as their liability is restricted to the amount they have invested in the company.

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Ownership and Share Transferability

Unlike private limited companies (Sdn Bhd), shares in Berhad companies can be freely transferred. This flexibility makes it easier for investors to buy and sell shares, enhancing market liquidity.

Governance

Berhad companies are required to have a board of directors who oversee the management of the company. They must comply with various statutory obligations, including holding annual general meetings (AGMs) and producing audited financial statements. This ensures that the company is run transparently and in accordance with legal requirements.

Public Disclosure

Transparency is a cornerstone of Berhad companies. They are mandated to make full disclosure of their financial information, which helps build investor confidence and trust.

Formation of a Berhad Company

Name Reservation

The process begins with name reservation through the Companies Commission of Malaysia (SSM). This ensures that the chosen name is unique and compliant with regulatory guidelines.

Submission of Documents

Several documents must be submitted to SSM, including the company constitution, statutory declaration of compliance, and particulars of directors and shareholders. These documents provide essential information about the company’s structure and operations.

Incorporation Process

After submitting the necessary documents, the company goes through an incorporation process that culminates in the issuance of a Certificate of Incorporation by SSM. This certificate officially recognizes the company as a legal entity.

Capital Requirement

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There are specific capital requirements for Berhad companies, especially if they plan to list on the stock exchange. These requirements ensure that the company has sufficient funds to operate effectively.

Regulatory Bodies and Compliance

Companies Commission of Malaysia (SSM)

The SSM plays a critical role in incorporating, registering, and ensuring compliance with statutory obligations for all companies in Malaysia, including Berhad companies.

Securities Commission Malaysia (SC)

The SC regulates securities and futures markets in Malaysia. For Berhad companies, this means adhering to strict guidelines related to public offerings and trading on the stock exchange.

Bursa Malaysia

Bursa Malaysia is the primary stock exchange where Berhad companies trade their shares. Listing on Bursa Malaysia provides access to public equity and debt financing but comes with stringent compliance requirements.

Financial Reporting and Compliance

Berhad companies must submit annual reports, hold AGMs, and provide periodic financial reports to maintain transparency. These reports are scrutinized by regulatory bodies to ensure compliance with legal standards.

Financial Reporting and Transparency

Annual Reports

Berhad companies are required to produce audited financial statements along with director and management reports. These reports include details on corporate governance practices, ensuring that stakeholders have a clear picture of the company’s performance.

Annual General Meetings (AGMs)

AGMs are crucial for shareholder democracy and decision-making. During these meetings, shareholders can discuss company performance, vote on important matters, and hold directors accountable.

Periodic Reporting

In addition to annual reports, Berhad companies must submit quarterly and annual financial reports to Bursa Malaysia and the Securities Commission. This periodic reporting helps maintain transparency and keeps stakeholders informed about the company’s financial health.

Comparative Analysis with Sdn Bhd Companies

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While both Berhad and Sdn Bhd companies are types of limited liability companies in Malaysia, there are significant differences between them:

• Share Transferability: Shares in Berhad companies can be freely transferred, whereas Sdn Bhd companies have restrictions on share transfers.

• Public Disclosure: Berhad companies must make full public disclosure of their financial information, which is not required for Sdn Bhd companies.

• Access to Capital: Berhad companies can list on the stock exchange, providing access to public equity and debt financing, which is not an option for Sdn Bhd companies.

Sdn Bhd companies also face restrictions such as limits on the number of shareholders and prohibitions on public share subscriptions.

Listing on the Stock Exchange

Berhad companies have the option to list on Bursa Malaysia. This listing process involves an initial public offering (IPO) and compliance with Securities Commission guidelines. Listing on the stock exchange offers several benefits:

• Access to Public Equity: Companies can raise capital from a wide range of investors.

• Debt Financing: Listed companies often find it easier to secure debt financing due to their transparent financial records.

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