Berhad (BHD)

Berhad is a suffix used in Malaysia to denote a publicly limited company and stands for “Berhad” in Malay, meaning “limited” as in “limited liability”. It is similar to the suffixes “PLC” (Public Limited Company) in the United Kingdom and “Inc.” (Incorporated) in the United States. Companies that have “Berhad” at the end of their name are typically listed on the Bursa Malaysia, Malaysia’s primary stock exchange, and are subject to strict regulatory prerequisites and reporting guidelines.

Understanding Berhad Companies

A “Berhad” or BHD company is a type of corporation in Malaysia where the shareholders’ liability is limited to the amount of their investment. The formation and operational structure of Berhad companies are governed by the Companies Act 2016, which stipulates various requirements pertaining to capital, governance, and disclosure.

Key characteristics of Berhad entities include:

1. Limited Liability: Shareholders are only liable up to the amount unpaid on their shares, protecting personal assets from company debts.

2. Ownership and Share Transferability: Shares in Berhad companies can be freely transferred, unlike in private limited companies (Sdn Bhd).

3. Governance: Berhad companies are required to appoint a board of directors and comply with rigorous statutory obligations. They must also hold annual general meetings (AGMs) and produce audited financial statements.

4. Public Disclosure: Full disclosure of financial information is mandatory, enhancing transparency and investor confidence.

Formation of a Berhad Company

To establish a Berhad company in Malaysia, the following steps are typically followed:

1. Name Reservation: The proposed company name must be reserved and approved by the Companies Commission of Malaysia (SSM).

2. Submission of Necessary Documents: Documents such as the company constitution, statutory declaration of compliance, and particulars of directors and shareholders must be submitted to the SSM.

3. Incorporation Process: Upon approval, the company will receive a Certificate of Incorporation indicating that it is legally recognized as a Berhad entity.

4. Capital Requirement: Generally, there is no minimum paid-up capital requirement; however, companies intending to list on the stock exchange may need to meet specific criteria (e.g., RM500,000 paid-up capital for a listing on the ACE Market).

Key Regulatory Bodies

Berhad companies in Malaysia are primarily overseen by the following authorities:

• Companies Commission of Malaysia (SSM): Responsible for the incorporation process, companies’ registration, and ensuring compliance with statutory obligations.

• Securities Commission Malaysia (SC): Regulates securities and future markets, fostering fair and transparent financial markets.

• Bursa Malaysia: The country’s principal stock exchange, where publicly listed Berhad companies trade their shares.

Examples of Notable Berhad Companies

1. Petroliam Nasional Berhad (Petronas): Malaysia’s state-owned oil and gas company, one of the largest corporations in the world. Petronas

2. Tenaga Nasional Berhad (TNB): The largest electricity utility company in Malaysia, responsible for generating and distributing electricity across the country. TNB

3. Malayan Banking Berhad (Maybank): One of the largest banks in Southeast Asia, providing a wide range of financial services and products. Maybank

4. Axiata Group Berhad: A major telecommunications company operating across Asia, providing mobile and digital services. Axiata

5. Sime Darby Berhad: A diversified multinational involved in sectors such as plantations, industrial equipment, logistics, and healthcare. Sime Darby

Financial Reporting and Compliance

Berhad companies are obligated to adhere to stringent reporting standards to ensure transparency and provide investors with reliable information for decision-making. Annual reports must include comprehensive financial statements audited by external auditors, director and management reports, and details on corporate governance practices.

• Annual General Meetings (AGMs): These meetings are vital for shareholder democracy, allowing investors to vote on crucial issues such as the appointment of directors and auditors and approval of financial statements.

• Periodic Reporting: Companies must also submit quarterly and annual financial reports to Bursa Malaysia and the Securities Commission, maintaining up-to-date transparency.

Corporate Governance

Good corporate governance is fundamental to the integrity and efficiency of Berhad companies. The Malaysian Code on Corporate Governance (MCCG) provides guidelines and best practices, urging companies to act in the interests of shareholders and other stakeholders. Aspects covered include:

• Board Structure and Effectiveness: It emphasizes the importance of a balanced board with a mix of independence, diversity, and expertise.

• Risk Management and Internal Control: Companies should establish robust risk management frameworks to identify, assess, and mitigate potential risks.

• Shareholder Rights and Engagement: Ensuring equitable treatment of all shareholders and encouraging active participation in company meetings.

Listing on Bursa Malaysia

For a Berhad company to be listed on Bursa Malaysia, it must satisfy specific requirements pertaining to financial performance, governance, and disclosure. There are two main markets for listing:

1. Main Market: Suited for established companies with a proven track record of financial performance and strong governance.

2. ACE Market: Designed for emerging companies with growth potential, providing a platform to raise capital and gain market visibility.

Steps to Listing

1. Initial Public Offering (IPO): Companies looking to go public must undergo the IPO process, where they issue new shares to the public for the first time.

2. Due Diligence and Compliance: Rigorous due diligence is conducted by underwriters, auditors, and legal advisors to ensure compliance with listing requirements.

3. Submission of Application: The application for listing, along with relevant documentation such as the prospectus, should be submitted to Bursa Malaysia.

4. Approval and Listing: Upon approval, the company’s shares are listed and traded on the stock exchange, providing liquidity and investment opportunities for shareholders.

Challenges and Opportunities

Challenges

1. Regulatory Compliance: Meeting stringent regulatory requirements can be challenging and resource-intensive, particularly for smaller companies.

2. Market Volatility: Berhad companies are exposed to market risks and economic fluctuations, which can impact share prices and investor confidence.

3. Transparency Issues: Failure to maintain high transparency levels and integrity can result in reputational damage and loss of investor trust.

Opportunities

1. Capital Access: Listing as a Berhad company provides access to a broader pool of capital, supporting growth expansion and innovation initiatives.

2. Market Visibility: Public listing enhances corporate visibility and credibility, attracting potential business partnerships and customer trust.

3. Investor Confidence: Robust governance and compliance practices foster investor confidence, potentially leading to a higher valuation and better financial performance.

Conclusion

Berhad companies play a vital role in Malaysia’s economy, contributing significantly to various sectors such as finance, energy, telecommunications, and beyond. Their structure, governed by regulations and best practices, ensures a balance between growth opportunities and shareholder protection. By adhering to high standards of governance and transparency, Berhad companies build investor trust, promote market stability, and drive sustainable economic development.