The directors of a new Malaysian company must prepare its first financial statements within eighteen months from the date of incorporation, under s.248(1)(a) of the Companies Act 2016. Every set after that is due within six months of the financial year end. The eighteen months is an outer limit, not a recommendation — a long first period is a single financial year that stays in the audit exemption three-year lookback, tested against thresholds set by the date the period commenced.
- First financial statements within eighteen months of incorporation under s.248(1)(a), then within six months of each year end under s.248(1)(b)
- Circulation follows at six months from year end (s.258), and lodgement thirty days after circulation (s.259) — the same sequential clock as every other year
- An eighteen-month first period is one financial year, and it counts as one of the three in the audit exemption lookback
- Practice Directive 10/2024 sets the thresholds by the date a financial period commences, so a long first period is tested against the phase it started in, not the phase it ends in
- Eighteen months of revenue measured against a threshold calibrated for twelve months is the mechanism that quietly costs companies the exemption
- No annual return is due in the calendar year of incorporation (s.68(2)), and the first one is due thirty days after the first incorporation anniversary
Who this applies to: Directors of a newly incorporated Sdn Bhd choosing a first financial year end.
On this page
Every new Sdn Bhd is told it has eighteen months before its first accounts are due, and it is presented as a concession — more runway, one fewer thing to pay for in year one.
What nobody adds is that those eighteen months are a single financial year, and that financial year does not go away. It sits in the audit exemption test for the two years after it, carrying eighteen months of revenue against a threshold written for twelve.
What is actually due, and when
Section 248(1)(a) requires the directors of every company to prepare financial statements within eighteen months from the date of incorporation. Thereafter, s.248(1)(b) requires them within six months of each financial year end. A director who contravenes s.248 is liable to a fine up to RM500,000 or imprisonment up to one year, or both, under s.248(3) — the liability is personal, not corporate.
Preparation is not filing. Once prepared, the ordinary sequential clock takes over: circulate within six months of year end under s.258(1)(a), then lodge within thirty days of circulation under s.259(1)(a) — see financial reporting deadlines.
Two first-year items sit on a different clock. The annual return runs from the incorporation anniversary under s.68, and s.68(2) means none is due in the calendar year of incorporation. Accounting entries must be made within sixty days of each transaction under s.245(2) — from the first transaction, not the first year end.
Why a long first period can cost you audit exemption
Practice Directive 10/2024 paragraph 5 grants audit exemption to a private company meeting at least two of three criteria — revenue, total assets, employee count — in the current financial year and the immediate past two financial years. Paragraph 9 then sets the thresholds by the date the financial period commences:
| Financial period commencing | Revenue | Assets | Employees |
|---|---|---|---|
| 1 Jan 2025 to 31 Dec 2025 | RM1,000,000 | RM1,000,000 | 10 |
| 1 Jan 2026 to 31 Dec 2026 | RM2,000,000 | RM2,000,000 | 20 |
| On or after 1 Jan 2027 | RM3,000,000 | RM3,000,000 | 30 |
Put the two paragraphs together and the cost of a long first period becomes arithmetic.
The threshold is annual; your period is not. Paragraph 6(a) defines annual revenue as revenue received and receivable during the year, with no pro-rating for a period that is not twelve months long. An eighteen-month first period commencing in 2026 is measured against RM2,000,000 — with six extra months of trading in the numerator. A company turning over RM130,000 a month clears the test comfortably over twelve months and fails it over eighteen.
The phase is fixed by the commencement date, not the end date. A period commencing 1 December 2026 sits in the RM2,000,000 phase for its entire length, even if it runs to 31 May 2028. Waiting a month to incorporate, or trimming the first period so the second commences after 1 January 2027, moves the whole period into the RM3,000,000 phase.
And it contaminates the next two years. Because paragraph 5 looks back across the current year and the immediate past two, a first period that fails the test is not a one-year problem. It is carried in the lookback for the two financial years that follow it — which is how six months of extra runway turns into roughly three years of statutory audit fees.
Paragraph 13 offers no relief here. It protects exemption already validly taken; it does not repair a year that failed.
Common mistakes
- Treating eighteen months as advice rather than an outer limit. It is the point at which a director commits an offence, not the recommended length.
- Assuming a long period is pro-rated for the revenue threshold. Paragraph 6(a) says revenue during the year, full stop.
- Reading the phase off the year end. Paragraph 9 keys it to the commencement date of the period.
- Forgetting the period stays in the lookback for the two financial years after it.
- Waiting until month seventeen to appoint a bookkeeper. Section 245(2) required entries within sixty days of each transaction all along.
- Expecting an annual return in year one. Section 68(2) says otherwise.
What’s next
Before fixing a first year end, write down two candidate periods — one running about twelve months, one running to the eighteen-month limit — and for each, note the commencement date, the PD 10/2024 phase that date falls in, and your best revenue estimate for the whole period. If the longer period crosses a threshold the shorter one clears, the extra runway is being paid for in audit fees three times over.
The following are deliberately unstated or described only qualitatively until confirmed by a subject-matter expert:
- Practice Directive 10/2024 does not address how the current-and-immediate-past-two-financial-years test applies to a company that has fewer than three financial years, and the SSM audit exemption FAQ does not either — confirm the treatment with SSM or your auditor before relying on exemption in the first or second year
- Confirm the SSM lodgement fee for financial statements and the annual return before budgeting, as the Companies Regulations 2017 table of fees is amended from time to time
Sources
- Companies Act 2016 (Act 777), updated text as at 1 August 2022 — SSM
- Practice Directive No. 10/2024 — Qualifying Criteria for Audit Exemption for Certain Private Companies in Malaysia — SSM
- Practice Note No. 3/2018 — Clarification on Application for Extension of Time under the Companies Act 2016 — SSM
Change history
| Version | Date | Change | By |
|---|---|---|---|
| 01.00 | 20 Jul 2026 | Approved and published. | — |