Understanding Dormant Companies in Malaysia

A dormant company in Malaysia refers to a company that has ceased its business operations or remains inactive for a specific period. Such a status also impacts its compliance and reporting obligations under the law. In Malaysia, a company is considered dormant if it has no significant accounting transactions during a financial year, as outlined in the Companies Act 2016 and the Income Tax Act 1967.

Dormant status is typically chosen by companies that have temporarily halted operations, are in the process of restructuring, or are waiting for more favourable business conditions.

 

Criteria for Dormant Status

A company in Malaysia is classified as dormant if it:

• Has not conducted any business transactions;
• Has had no accounting transactions other than statutory obligations such as paying fees to the Companies Commission of Malaysia (SSM), maintaining a registered office, or filing annual returns.

Such companies may also apply to the Inland Revenue Board of Malaysia (LHDN) for dormancy recognition to streamline compliance requirements.

 

Reasons for Dormancy

Companies may choose to become dormant for various reasons, including:

Strategic Pause

Preparing for future business activities or awaiting favourable market conditions.

Cost Savings

Reducing operational expenses when business conditions are unfavourable.

Restructuring

Pausing activities while undergoing internal or legal restructuring processes.

 

Implications and Obligations of Dormancy

Although dormant companies are not actively trading, they must still meet certain regulatory obligations, including:

Annual Return Filing

Companies must file annual returns with SSM even when dormant.

Directors’ Responsibilities

Dormant companies must hold directors’ meetings and ensure compliance with corporate governance requirements.

Tax Reporting

Companies seeking dormancy status must notify LHDN and comply with reduced tax filing requirements. While dormant, the company may be exempted from filing tax returns, provided approval is obtained.

 

Reactivating or Dissolving a Dormant Company

A dormant company may resume its operations by notifying SSM and ensuring compliance with all reporting and tax obligations. Alternatively, if there are no plans to restart operations, the company may opt for voluntary winding-up. The Companies Act 2016 provides clear guidelines for both reactivation and dissolution processes.