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Ways of Establishing a Foundation in Malaysia


Philanthropic pursuits are popular amongst society now-a-days as more people are fuelled with the desire to contribute to the inclination and promotion of well-being and welfare of others.

A charitable foundation is a time-honoured concept and is also one of the instruments available in helping people pursue their charitable passion. Charity in the broadest sense includes whatever proceeds from a sense of moral duty or from humane feelings towards others, uninfluenced by one’s own advantage or pleasure[1].

The Islamic parallel of a foundation is known as waqf. Waqf is a Muslim endowment, recognised as an institution that has been able to provide public services and infrastructure for the advancement of the community since early Muslim civilisation.[2] A waqf is created by a living person who owns certain property and perpetually dedicates the usufructs or benefits derived from such property for the use of any charitable purpose according to Islamic law. In Malaysia, waqf is not included as a trust defined under the Trustee Act 1949.


Characteristics of Foundation

The paramount characteristic of a foundation is that it should be established for philanthropic purposes. Other general characteristics of a foundation are:

  1. non-profit oriented;
  2. for the benefits of certain causes;
  3. office bearers do not serve on commercial terms but on considerate basis;
  4. transparent and stringent financial reporting requirements to relevant government authorities;
  5. may own, acquire and dispose moveable and immoveable property, subject to approval from the relevant authorities (if any);
  6. may be entitled to tax benefits or exemptions.


Three Categories of Foundation

In Malaysia, a foundation can be established under three distinct statutes.

(1) Companies Act 2016 (“CA 2016”)

A foundation may be established under Companies Act 2016 as a company limited by guarantee (“CLBG”).

CLBG is a public company[3] incorporated with the principal liability of its members limited by the constitution to such amount as the members undertake to contribute to the assets of the company if the company is wound up.[4]

CLBG is divided into two type, those with the word ‘Berhad’ or ‘Bhd’, and those without such word. An example of a foundation incorporated as a CLBG is the Yayasan Putra Business School.5 Based on CA 2016 and its guidelines, a CLBG is required to comply with the requirements tabulated below table. (Table 1)


(2) Trustee (Incorporation) Act 1952 (“TIA 1952”)

Another method available to establish a foundation is provided under TIA 1952, which is under the purview of the Prime Minister’s Department, unlike the CLBG for which the responsible regulatory authority is the Companies Commission of Malaysia. It is interesting to note that TIA 1952 only applies to Peninsular Malaysia.[13]

In order to establish a foundation under the TIA 1952, the trustees appointed by any body or association of persons established for any religious, educational, literary, scientific, social or charitable purpose have to apply for a certificate of registration of the trustees as a body corporate (“Certificate”) from the Minister.[14]

Upon the grant of such Certificate, the incorporated trustees will become a body corporate and have a perpetual succession. Additionally, it shall enjoy, among others, the power to acquire, dispose, charge, sell, and assign moveable and immoveable properties, subject to the conditions and directions contained in the Certificate.[15]

The application for incorporation should be submitted to the Legal Affairs Division (BHEUU) of the Prime Minister’s Department. The documents required to be submitted are[16]: –

(a) Application Form;

(b) Certified true copy of Identity Card for each trustee;

(c) A copy of bankruptcy search result from the Malaysia Department of Insolvency for each trustee;

(d) A copy of Statutory Declaration for each trustee;

(e) Revenue Stamp RM30 (RM10 x 3 copies) to be attached to the application form;

(f) Three original copies of the Trust Deed stamped by the Inland Revenue Bureau;

(g) Curriculum Vitae for each trustee;

(h) Letter of appointment of trustees by the said body or association of persons;

(i) Common Seal Design;

(j) Rules or regulations drafted by the said body or association of persons; and

(k) Background, the establishment of the foundation’s objectives, vision, mission, financial resources, the activities to be undertaken, the power to appoint the members of the board of trustees, the composition of board of trustees.

Once incorporated under TIA 1952, the foundation has the responsibility to record all proofs of payments and receipts for expenditure and to submit the audited financial statement to the Minister.[17]


(3) Societies Act 1966 (“SA 1966”)

A foundation may also be incorporated as a society under SA 1966, wherein there are no requirements of specific objects of society imposed on the applicant. This means that, unlike the establishment of CLBG, there are no specific objects required from a society. Nevertheless, every registered societies shall act in accordance with the provisions of the Federal and State Constitutions.[18]

The process to establish a society is fairly straightforward and is divided into two stages as Table 2[19]. Once successfully registered, the society has the duty to furnish information to the Registrar of Society, such as, information on its accounts of the last financial year and the description of any pecuniary benefit or advantage such as money or property received from entity outside of Malaysia.[20]


Special Category of Foundation

Apart from the above, a foundation can also be established under specific statute of Parliament. As an example, the Financial Reporting Foundation (“FRF”) was established pursuant to the Financial Reporting Act 1997. Among the functions of the FRF is to oversee the functions of the Malaysian Accounting Standards Board. The FRF is also required to keep and audit proper accounts of its fund.[21] Other examples of foundations established under acts of Parliament are Tunku Abdul Rahman Foundation Fund, and Tun Razak Foundation, as established under Tunku Abdul Rahman Foundation Fund Act 1966 and Tun Razak Foundation Act 1976 respectively.


Modern Trends

Other than the four categories of foundation mentioned above, another way to establish a foundation is through the establishment of Labuan foundation or offshore foundation. A Labuan foundation is a separate legal entity and is registered as a body corporate with the capacity of holding and managing assets in favour of a group of beneficiaries for any lawful purpose. Moreover, properties held by a Labuan foundation can be located within or outside of Malaysia and such properties are for the sole purpose and objects as stated in the charter of the foundation.

Besides the above, among the perks available to Labuan foundation are tax incentives under the Labuan Business Activity Tax Act 1990 which allows for a more simplistic and straight forward tax approach, and the element of confidentiality as stringent rules are imposed to protect against wrongful disclosure of information. Examples of established Labuan foundation are AirAsia (L) Foundation and Pink Ribbon Wellness (L) Foundation.



In Malaysia, a foundation can be established under various statutes, and the procedure applicable to it is adequately simple and straightforward. The key issue to determine under which statutes should the foundation be established, depends on the requirements provided under each statute. Future and existing foundations should leverage the financial reporting requirement imposed on foundations to preserve and increase the donors’ confidence in the foundations.


  1. Doyle v Lyun, 19 Am Rep 431.
  2. Examining The Fiduciary Duties Of The Waqf Trustee: Benchmarking With The Law Of Trusts And Islam [2018] 1 ShLR i.
  3. Section 11(2) of CA 2016.
  4. Section 10(3) & Section 192(2)(b) of CA 2016 and Guidelines on Company Limited by Guarantee issued by the Companies Commission of Malaysia dated on 8 January 2019 (“CLBG Guidelines”).
  5. Accessible at on 11 July 2019.
  6. Section 45(1) of CA 2016.
  7. Section 12 of CA 2016.
  8. Section 38 of CA 2016 and CLBG Guidelines.
  9. CLBG Guidelines.
  10. CLBG Guidelines.
  11. Not applicable to CLBG with word ‘Berhad’ incorporated prior to 31 January 2017 in which its existing constitution does not provides similar restriction.
  12. Section 45(3) and (4) of CA 2016.
  13. Section 1(2) of TIA 1952.
  14. Section 2(1) of TIA 1952.
  15. Section 2(3) of TIA 1952.
  16. Accessible at on 11 July 2019.
  17. Section 15 of TIA 1952.
  18. Section 2A(1) of SA 1966.
  19. Panduan Permohonan Pendaftaran Pertubuhan accessible at on 11 July 2019.
  20. Section 14(1) of SA 1966.
  21. Section 24 of Financial Reporting Act 1997.


Written by:

Shameer Othman & Nur Izzatie Azlan (