Incorporating a social enterprise in Malaysia

There is no specific legal structure for social enterprise in Malaysia. However, it is possible to incorporate a company and modify the company articles to emulate the structure of social enterprises or social enterprise-like organisations in other countries.

Our friends at Arkitrek, the ecotourism social enterprise, have done just this. Here’s how they emulated the social enterprise structure in Malaysia:

Complementary to the philosophical ideals of a Social Enterprise are the practical and legal considerations of corporate structure. Arkitrek bases its Social Enterprise structure on the UK Community Interest Company (CIC) regulation the gist of which is:

1. There must be a genuine Social Objective (Community Interest Test), against which success can be measured.

2. The business is for-profit and profits are another measure of success and are essential to the sustainability of the business.

3. The business must have an asset lock. This means that in the event that the company is wound up, the companies’ assets cannot be distributed amongst the owners for their personal gain. Instead the companies’ assets should be transferred to another asset-locked body or not-for-profit organisation.

4. Returns to owners in the form of dividends are capped at a rate which encourages investment in the company but which precludes profiteering or excessive personal gain for the owners.

Legality of Social Enterprise in Malaysia

As there is no legally recognised structure for a Social Enterprise in Malaysia, Arkitrek has incorporated as a Private Company Limited by Shares and has modified the Object Clause of the Memorandum of Association and Regulations of Table ‘A’ with the above Social Enterprise clauses. Click the links to see the Resolutions approved by the Registrar of Companies, Malaysia.

You can read their full blog post on setting up the legal structure for a social enterprise in Malaysia here.