Nationality and Residency Requirements for Directors across ASEAN – Part One

By: Dezan Shira & Associates
Editor: Steven Elsinga

Directors are a crucial part of every company. Appointed by the shareholders, they are charged with running the company and deciding its day-to-day affairs. They often have the capacity to bind the company as well.

Given the important role that directors have in a company, some countries have chosen to attach nationality or residency requirements to being a director in companies registered within their territory. These differ strongly among ASEAN nations, with the more liberal member states not imposing any requirements, while stricter ones require half the board to be resident in the country.

This two-part article discusses the requirements imposed on directorship in each ASEAN state. Some ASEAN member states follow a two-tier board system. Where relevant, we will discuss these additional institutions as well.

Indonesia

Indonesian companies need to have two boards: the Board of Directors and the Board of Commissioners. Directors are in charge of running the company. Commissioners supervise and advise the board, and in normal circumstances do not have an executive role. The only exception is when there are temporarily no directors.

The Board of Directors must have at least one director. There are generally no nationality requirements for directors, nor does the law require one or more directors to be resident in Indonesia. All of the directors may be foreigners, with the exception of the personnel director or other positions of authority over human resources.

However, for practical reasons it is advisable to have at least one director resident in Indonesia. Foreign individuals working in Indonesia need to have both a residence permit and a work permit. For non-resident directors and commissioners, a residence permit is not required, but a work permit is.

Foreign investors should note that in certain industries, the Negative List might impose nationality requirements on one or more directors as a condition for investment.

 RELATED: Corporate Establishment Services from Dezan Shira & Associates

Malaysia

Malaysian company law requires a minimum of two directors and two shareholders for a company. At least two directors need to have their principle or only place of residence in Malaysia. Also, at least two individuals need to be nominated as the promoters of the company before it is incorporated. When the company is officially incorporated, at least one of the promoters must become a director or a shareholder.

When a foreign company sets up a subsidiary in Malaysia, it must upon incorporation state the powers that the directors resident in Malaysia have.

In principle, there are no nationality requirements for directors. However, directors of a company must be natural persons (i.e. individuals). A company or other legal entity cannot be a director.

Malaysian companies must also have a locally resident Company Secretary. The company secretary has to be a natural person who is either member of a professional organization prescribed by the Ministry of Domestic Trade Cooperative and Consumerism or licensed by the Companies Commission of Malaysia. Usually this is an individual engaged with a professional services firm.

The Company Secretary is considered an officer of the company. Their responsibilities include keeping secretarial records, articles of association, the memorandum and lodging statutory forms with government agencies.

RELATED: The Guide to Corporate Establishment in Indonesia

Brunei

Like in Malaysia, Brunei companies must have at least two directors and two shareholders. If the company has two directors, at least one of them must be ordinarily resident in Brunei. Directors need to apply for Ordinary Resident status with the Ministry of Finance. This can be done simultaneously with the setting up of a company.

Where the company has more than two directors, at least two must be resident in Brunei. There are no nationality requirements.

Singapore

Singapore companies need to have a minimum of one director and one shareholder. Also, at least one director has to be ordinarily resident in Singapore. This is regardless of nationality. The local director can be a Singapore citizen, permanent resident or a foreigner holding a valid residence permit. Only natural persons can be directors.

Within six months, the company must appoint a Company Secretary, similar to Malaysia. The Company Secretary too must be locally resident, but may not be the sole director of the company. Company Secretaries are responsible for the statutorily defined reporting and administrative duties. In smaller companies, these typically only include tax and other regulatory filing, and record keeping.

Ultimately, the responsibility for record filing and compliance lies with the directors, who are liable in the event of non-compliance. The Company Secretary has an assisting role.

For public companies, there are additional, more clearly defined requirements on the Company Secretary.

The 2015 Asia Tax Comparator
In this issue, we compare and contrast the most relevant tax laws applicable for businesses with a presence in Asia. We analyze the different tax rates of 13 jurisdictions in the region, including India, China, Hong Kong, and the 10 member states of ASEAN. We also take a look at some of the most important compliance issues that businesses should be aware of, and conclude by discussing some of the most important tax and finance concerns companies will face when entering Asia.

Manufacturing Hubs Across Emerging Asia In this issue of Asia Briefing Magazine, we explore several of the region’s most competitive and promising manufacturing locales including India, Indonesia, Malaysia, Singapore, Thailand and Vietnam. Exploring a wide variety of factors such as key industries, investment regulations, and labor, shipping, and operational costs, we delineate the cost competitiveness and ease of investment in each while highlighting Indonesia, Vietnam and India’s exceptional potential as the manufacturing leaders of the future.

An Introduction to Tax Treaties Throughout Asia
In this issue of Asia Briefing Magazine, we take a look at the various types of trade and tax treaties that exist between Asian nations. These include bilateral investment treaties, double tax treaties and free trade agreements – all of which directly affect businesses operating in Asia.

• Previous Article The Guide to Corporate Establishment in Indonesia
• Next Article ASEAN Regulatory Brief: Cambodian Labor Law, Thai Worker Restrictions, and Indonesian Pay Increases