# Companies That Can Never Claim Audit Exemption in Malaysia

> The four categories of company excluded from audit exemption under SSM Practice Directive 10/2024, and the exclusions that secondary sources routinely get wrong.

- Category: audit
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/audit/who-cannot-claim-audit-exemption

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Passing the thresholds is not the last gate. Paragraph 12 of Practice Directive
10/2024 shuts four categories of company out of audit exemption entirely — a
dormant, zero-revenue company in any of them still appoints an auditor.

Secondary sources garble this list more often than any other part of the
directive. Two errors recur: describing the exclusion as *subsidiaries of listed
companies* (it is public companies, a much wider class), and describing exempt
private companies as excluded outright (only those that lodge the section 260
certificate are).

## The four excluded categories

**1. An exempt private company that has opted to lodge a section 260 certificate.**
Under s.260 of the Companies Act 2016, an EPC may lodge a certificate as to its
EPC status with the Registrar *in lieu of* lodging financial statements. That
certificate must be signed by a director, an **auditor** and the secretary, and
must confirm that duly audited financial statements were circulated to members.
An audit is structurally built into it. So the exclusion is not about being an
EPC — it is about the lodgement route you choose. SSM confirms in its FAQ that an
EPC *is* eligible for audit exemption provided it satisfies the criteria and
lodges unaudited financial statements instead of the certificate. Being an EPC
therefore forces a choice, not a disqualification.

**2. A public company, including a listed company.**
This follows from where the exemption power sits. Section 267(1) requires a
*private* company to appoint an auditor and s.267(2) lets the Registrar exempt
private companies from that duty. Public company auditors are appointed under
s.271, which the directive does not touch.

**3. A private company that is a subsidiary of a public company.**
Note the word: **public**, not listed. Every listed company is a public company,
but a great many public companies are not listed — including public companies
limited by guarantee and unlisted Berhads. A small Sdn Bhd held by an unlisted
Berhad is excluded. A Sdn Bhd held by another Sdn Bhd is not.

**4. A foreign company.**
A company incorporated outside Malaysia and registered here under Division 2 of
Part IV cannot use the exemption.

## What is not an exclusion

- **Corporate shareholders.** SSM addresses this directly: a private company with
  corporate shareholders that fulfils the criteria can enjoy the exemption. Only
  a *public* company parent triggers the bar.
- **Having a foreign shareholder or foreign directors.** The exclusion is for
  foreign *companies* registered in Malaysia, not locally incorporated companies
  with foreign owners.
- **Being a holding company.** Nothing in paragraph 12 excludes a company for
  having subsidiaries, though consolidated figures and the assets test usually
  end the argument on the numbers.
- **Being an EPC.** See above.

## Two things that override eligibility

Even a company outside all four categories can be pulled back into audit.

Under paragraph 14, a qualifying company **must** audit its accounts if it
receives written notice during the financial year, but no later than one month
before the end of that year, from members holding at least 5% of the issued
shares or of any class of them, from at least 5% of the members eligible to vote,
or from the Registrar directing an audit.

And under paragraph 13, a company that ceases to qualify ceases to be exempt from
that point, though it stays exempt for the financial years in which it did
qualify.

## Common mistakes

- **Reading the subsidiary exclusion as *listed*.** It is any public company
  parent, listed or not.
- **Treating all exempt private companies as excluded.** Only those lodging the
  s.260 certificate are.
- **Confusing exclusion with failing the test.** A company that misses the
  two-of-three threshold is not excluded — it simply does not qualify this year
  and may qualify later.
- **Assuming a foreign shareholder disqualifies you.** It does not.
- **Forgetting the 5% notice window** closes one month before the financial year
  end, not at year end.

## What's next

If the company is not excluded but is trading at nil, the dormancy route is a
separate and simpler basis for exemption — with its own two-year test that is
shorter than the threshold one.

## Sources

- Practice Directive No. 10/2024 — Qualifying Criteria for Audit Exemption for Certain Private Companies in Malaysia — https://www.ssm.com.my/Pages/Legal_Framework/Document/PD10-2024-Qualifying-Criteria-for-Audit-Exemption-for-Certain-Categories-of-Private-Companies.pdf (SSM)
- FAQs on Companies Act 2016 and Transitional Issues — Part Q, Audit Exemption — https://www.ssm.com.my/Pages/Legal_Framework/Document/FAQ-AUDIT-EXEMPTION.pdf (SSM)
- Companies Act 2016 (Act 777), reprint as at 1 August 2022 — https://www.ssm.com.my/Pages/Legal_Framework/Document/Companies%20Act%202016_Akta%20777_BI%20(1.8.2022).pdf (SSM)

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Source of truth: https://github.com/negaraku-md/NegaraKu.md
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