# Company Limited by Guarantee (CLBG): Malaysia's Non-Profit Company Structure > How a company limited by guarantee works under the Companies Act 2016 — no share capital, a fixed list of permitted objects, fit-and-proper director vetting, and the RM1 million rule for dropping 'Berhad' from the name. - Category: business - Language: en - Status: published - Updated: 2026-08-07 - Canonical: https://negaraku.md/en/business/company-limited-by-guarantee-malaysia --- A foundation, a professional institute, a chamber of commerce and a social enterprise can all wear the same legal skin in Malaysia — the company limited by guarantee. It is the vehicle the law reserves for organisations that exist to do something useful rather than to pay out profit, and it comes with rules that a normal Sdn Bhd never sees. ## What makes a CLBG different from a Sdn Bhd? A company limited by guarantee (CLBG) is a **public company** incorporated under **section 45 of the Companies Act 2016**. Unlike a company limited by shares, it has **no share capital and no shareholders**. Instead it has members, and each member's liability is limited by the company's constitution to the amount they undertake to contribute to the company's assets if it is ever wound up. That structural difference drives everything else. A CLBG's money is not there to be distributed — SSM's guidelines require that its financial resources be **used solely to carry out its objects**, and it must not depart from the purposes it was set up for. It is incorporated by lodging an application together with a constitution with the Registrar, and for incorporation it must adopt **Part A of the model constitution** prepared by the Registrar. ## What can a CLBG actually be formed to do? A CLBG can only be formed for a fixed list of objects, and nothing outside this list qualifies: - providing recreation or amusement - promoting commerce and industry - promoting art - promoting science - promoting religion - promoting charity - promoting pension or superannuation schemes - promoting any other object useful to the community or country, such as environment, health, education, research, social causes or sports SSM's guidelines add that, for the avoidance of doubt, **no other type of company may be formed for these purposes**. Read in context this concerns bodies set up to *promote* commerce, science, charity and the like — a chamber of commerce or a research foundation, say — rather than an ordinary Sdn Bhd that simply carries on a commercial business. This is why chambers of commerce, professional bodies, religious trusts and charitable foundations so often take the CLBG form. ## How do you drop "Berhad" from the name? There are two kinds of CLBG: those that carry "Berhad" / "Bhd" and those that don't. To omit the word, the CLBG needs a **licence from the Minister under section 45(3)**. The gate is money. A **newly incorporated** CLBG must obtain an **initial fund of RM1 million** — pledged in cash and actually collected **within six months** of incorporation — a sum meant to sustain its first two years of operation. SSM allows **no exemption**: if you can't meet it, you simply keep "Berhad" in the name. An **existing** CLBG can apply once it has been incorporated for at least **two years** and can show **RM1 million cash** in the bank in its latest financial statements. ## Who can be a director, and what can't a CLBG do? Every promoter (founder member) and director must be **fit and proper** and not disqualified under the Act. The Registrar weighs their experience, reputation and integrity and can run a **security vetting through the Royal Malaysian Police** before approving them. Because of the money-laundering and terrorism-financing risks in this sector, a CLBG is heavily fenced. Without the Registrar's prior approval, it may not appoint new directors, pay directors any fees or salaries, **solicit donations or collect money from the public**, hold a subsidiary, or amend its constitution. Holding or dealing in land or property needs a separate Ministerial licence under **section 45(4)**. ## What's next If a CLBG fits your purpose, the practical starting point is engaging a company secretary and preparing a constitution built on SSM's Part A model. Decide early whether you will pursue the "Berhad"-free name, because the RM1 million fund and its six-month deadline shape your fundraising plan from day one. For the full checklists, model constitution and worked examples, read the SSM Guidelines on Company Limited by Guarantee (27 September 2021) linked in the sources. ## Sources - Guidelines on Company Limited by Guarantee (27 September 2021) — https://www.ssm.com.my/Pages/Legal_Framework/Document/GUIDELINES-ON-COMPANY-LIMITED-BY-GUARANTEE-270921-Final.pdf (Companies Commission of Malaysia (SSM)) - Malaysia — Understanding Companies Limited by Guarantee: Legal Framework & Key Features — https://conventuslaw.com/report/malaysia-understanding-companies-limited-by-guarantee-legal-framework-key-features/ (Conventus Law) --- Source of truth: https://github.com/negaraku-md/NegaraKu.md License: CC BY-SA 4.0