While many startup founders are passionate about their products, customers and their industries as a whole, they are seldom aware of the laws that are in place to protect them and the ones around them.
After all, regardless of what startup founders intend to do through their units of business, they are still bound by the laws of the land and they have no choice but to comply with them.
Fareez Shah is a local advocate who runs his own law firm targeted towards startups, SMEs, SEs and businesses called Fareez Shah & Partners. He frequently deals with many startups and businesses in general, and he’s well versed with the corporate, commercial, employment, incorporation, compliance, and dispute resolution aspects of the law.
In order to help startups better understand the legal landscape around them, he shared with Vulcan Post 5 key laws that every startup founder should be aware of when they’re operating a startup in Malaysia.
1. Labour Law
These are the set of laws that govern the way startups and businesses in general interact with their employees and vice versa. They’re required to comply with:
a. Minimum Wage Law
The minimum wage that businesses are expected to pay employees in Peninsular Malaysia and in Sabah and Sarawak is RM900 and RM800, respectively. Alternatively, Fareez recommends that startups could consider hiring interns if they’re looking to save a couple of bucks.
b. Industrial Relations Law
This is essentially an act that’s been put in place to promote and maintain industrial harmony and to also regulate the relations between employers and workmen and their trade unions. The act also handles the prevention and settlement of differences or disputes that may arise between these relationships and it also outlines the way they should be dealt with.
The most important takeaway from this is that all dismissal must be with just cause or excuse. Just causes or excuses are primarily misconduct, poor performance and retrenchment. It’s also important to note that there are procedures in place that you have to follow to ensure fair treatment of your employees.
c. SOCSO & EPF Contribution Rate
Compliance with both these requirements will essentially form part of your employment cost. The Employees’ Provident Fund (EPF) essentially manages the compulsory savings plan and retirement planning for private sector workers in Malaysia. You can refer to the table below to understand how much you have to contribute for each employee as an employer.
SOCSO on the other hand is only applicable to employees with salary below RM3000, however once the employee is under the SOCSO scheme (even from previous employment), the employer is required to still continue contributing towards it regardless of salary.
d. Minimum Retirement Age
The minimum retirement age for your employees would be 60 years old.
e. Employment Act 1955:
This act sets out the minimum terms that should be present in an employment contract. Fareez said, “If the employment contract is silent or if the contract sets term below the minimum standard set by Employment Act, the terms in the EA will prevail.”
Employees with salaries below RM2000 and other employees set out in Schedule 2 of the Employment Act are eligible to be protected under this act.
“For employees with salary above RM2000 the employment contract is ‘free to negotiate’ anything (by anything, I mean anything),” Fareez added.
2. Personal Data Protection Law
This is one key law that startups providing a service and startups that collect user data should take note of. Essentially this law protects individual personal data from non-consensual and/or illegal data mining activity.
Fareez summarised this principle by saying, “In short it means you cannot sell personal data you collect from providing your services without consent of the user.”
He also highlighted that startups should ensure that their privacy policies are written in both English and in Bahasa Malaysia.
3. Corporate Law
This law essentially governs the nitty-gritty of how you operate your company as a startup founder. You may choose to operate it as a private limited, limited or as another corporate entity. This law essentially governs how decisions are made in a company and it outlines the separation of power between Shareholders, Directors and the Management of the company.
Fareez highlighted that you should be aware of the statutory requirements and documents that need to be presented and he also suggested that founders should be aware of the difference between a subscription transfer and a sale.
4. Intellectual Property Protection
Startups that are being innovative and disruptive can make use of this law to protect their newly found discoveries. The Intellectual Property Protection protects the following elements.
- Trademark—Protects your logo, brand name, etc.
- Copyright—Protects your source code, website, music and etc.
- Patent—Protects your inventions
- Industrial Design—Protects the ornamental and aesthetic aspect of design. For example, the shape of an iPhone, design of the Apple Watch, etc.
- Geographical Indication—This identifies products as having been originated from a particular location. For example, Tuscany (Olive Oil), Darjeeling (Tea), etc.
- Layout Design—This refers to the elements and the interconnections of an integrated circuit.
5. Commercial/Contract Law
This law essentially protects the agreement between startups and vendors/suppliers, distributors, business partners (Joint Ventures), among others. It also legally binds contracts that are not legally binding per se. For example, this law classifies a website’s Terms of Service as a contract between a startup and a user.
Since the legal code is quite extensive and explicit when it comes to the way business should be conducted in Malaysia, it’s quite impossible to list out each and every important act here. However for this list, I worked alongside Fareez Shah who is more than capable of providing you with legal assistance and you can drop him a message here.