BHD (Berhad): Definition, What It Indicates and Example Companies

ByObeydul Haque Reading Time: 7 minutes

BHD stands for Berhad, a Malay word meaning “limited” or “incorporated.” In the context of Malaysian corporate law, Berhad is a suffix used in the names of public limited companies (PLCs) to indicate that they are incorporated entities with limited liability. The term is regulated under the Companies Act 2016 of Malaysia, which governs the formation, operation, and dissolution of companies in the country.

A Berhad company is typically a public company, meaning its shares can be traded on a stock exchange, such as Bursa Malaysia, or offered to the public through other means. The designation signifies that the company has met stringent regulatory requirements, including minimum capital thresholds, governance standards, and public disclosure obligations. It also indicates that the liability of its shareholders is limited to the amount they have invested in the company’s shares, protecting them from personal liability for the company’s debts or obligations.

There are two main types of Berhad companies in Malaysia:

  1. Public Limited Company (Berhad): These are companies listed on a stock exchange or those that have offered shares to the public. They are subject to rigorous oversight by regulatory bodies like the Securities Commission Malaysia and Bursa Malaysia.
  2. Unlisted Public Company (Berhad): These are public companies that have not listed their shares on a stock exchange but may still offer shares to the public under specific conditions. They are still subject to many of the same regulatory requirements as listed Berhad companies.

In contrast, private limited companies in Malaysia use the suffix Sdn Bhd (Sendirian Berhad), meaning “private limited,” which restricts share transfers and prohibits public offerings.

What BHD Indicates

The Berhad designation conveys several key pieces of information about a company’s structure, operations, and obligations. Below are the primary implications of a company being classified as a Berhad:

  1. Public Ownership and Share Trading
    A Berhad company is designed to raise capital from the public, either through stock exchange listings or private placements. This allows a wide range of investors, from individuals to institutional funds, to own shares in the company. For listed Berhad companies, their shares are traded on Bursa Malaysia, providing liquidity and enabling price discovery based on market dynamics.
  2. Limited Liability
    The Berhad suffix signals that the company operates under the principle of limited liability. Shareholders are not personally responsible for the company’s debts beyond their investment in shares. This is a critical feature that encourages investment by reducing financial risk for shareholders.
  3. Regulatory Compliance
    Berhad companies are subject to strict regulatory oversight. They must comply with the Companies Act 2016, as well as rules set by Bursa Malaysia (for listed companies) and the Securities Commission Malaysia. This includes requirements for financial reporting, corporate governance, and transparency. For instance, Berhad companies must publish audited financial statements annually and disclose significant developments that could affect share prices.
  4. Corporate Governance
    To protect shareholders and stakeholders, Berhad companies are required to adhere to high standards of corporate governance. This includes maintaining a board of directors with independent members, establishing audit committees, and ensuring fair treatment of all shareholders. These measures promote accountability and reduce the risk of mismanagement.
  5. Access to Capital
    The Berhad structure allows companies to tap into large pools of capital by issuing shares or bonds to the public. This makes it an attractive option for businesses looking to scale operations, invest in new projects, or expand internationally.
  6. Reputation and Credibility
    The Berhad designation often enhances a company’s reputation, as it signals compliance with rigorous legal and financial standards. For investors, customers, and partners, the Berhad status can inspire confidence in the company’s stability and professionalism.
  7. Tax and Legal Framework
    Berhad companies operate within Malaysia’s tax and legal framework, which includes corporate tax obligations and compliance with labor laws, environmental regulations, and other statutory requirements. The structure also allows for clear delineation of ownership, making it easier to manage mergers, acquisitions, or succession planning.

The Process of Becoming a Berhad Company

To understand the significance of the Berhad designation, it’s worth exploring how a company achieves this status. The process is governed by the Companies Commission of Malaysia (SSM) and involves several steps:

  1. Incorporation: The company must be incorporated as a public company under the Companies Act 2016. This involves submitting a memorandum and articles of association, appointing directors, and registering with the SSM.
  2. Minimum Capital Requirements: While the Companies Act 2016 removed the minimum paid-up capital requirement for public companies, listed Berhad companies must meet Bursa Malaysia’s requirements, which often include a minimum issued capital (e.g., RM40 million for the Main Market).
  3. Compliance with Bursa Malaysia: For listed Berhad companies, compliance with Bursa Malaysia’s listing rules is essential. This includes meeting profitability or revenue thresholds, maintaining a certain percentage of public shareholding, and appointing sponsors or underwriters for the listing process.
  4. Public Offering or Listing: The company may issue shares to the public through an Initial Public Offering (IPO) or other mechanisms. For listed companies, shares are then traded on Bursa Malaysia’s Main Market or ACE Market.
  5. Ongoing Obligations: Once established as a Berhad, the company must fulfill ongoing requirements, such as holding annual general meetings (AGMs), submitting financial reports, and disclosing material information to shareholders.

This rigorous process ensures that only well-prepared and financially sound companies achieve Berhad status, reinforcing its credibility in the eyes of investors and stakeholders.

Example Companies with BHD Designation

To illustrate the diversity and prominence of Berhad companies, let’s examine several well-known examples across different sectors in Malaysia. These companies showcase the versatility of the Berhad structure and its role in driving economic growth.

  1. Petronas (Petroliam Nasional Berhad)
    Industry: Oil and Gas
    Overview: Petronas is Malaysia’s state-owned oil and gas giant, established in 1974. As a Berhad company, it operates as a fully integrated energy corporation, with activities spanning exploration, production, refining, and distribution. While Petronas is not listed on Bursa Malaysia, its Berhad status reflects its public company structure and significant economic impact.
    Significance: Petronas is a cornerstone of Malaysia’s economy, contributing billions to government revenue through taxes and dividends. Its global operations, including projects in over 50 countries, highlight the scalability of the Berhad model.
  2. Maybank (Malayan Banking Berhad)
    Industry: Banking and Financial Services
    Overview: Maybank is Malaysia’s largest bank by assets and market capitalization, listed on Bursa Malaysia’s Main Market. Founded in 1960, it offers a wide range of financial services, including retail banking, investment banking, and insurance.
    Significance: As a listed Berhad, Maybank exemplifies how the structure facilitates access to capital markets, enabling expansion across Southeast Asia. Its robust governance and transparency make it a trusted institution for investors and customers alike.
  3. Sime Darby Berhad
    Industry: Conglomerate (Plantation, Property, Industrial)
    Overview: Sime Darby is one of Malaysia’s oldest and most diversified conglomerates, with roots dating back to 1910. Listed on Bursa Malaysia, it operates in plantation (palm oil), property development, and industrial equipment distribution.
    Significance: Sime Darby’s Berhad status underscores its ability to manage complex, multi-sector operations while maintaining shareholder confidence. Its global presence, including operations in Australia and China, demonstrates the international reach of Berhad companies.
  4. Axiata Group Berhad
    Industry: Telecommunications
    Overview: Axiata is a leading telecommunications provider in Asia, listed on Bursa Malaysia. Established in 2008, it operates mobile networks in countries like Malaysia (Celcom), Indonesia (XL Axiata), and Bangladesh (Robi).
    Significance: Axiata’s Berhad structure supports its rapid growth and investment in digital infrastructure. As a listed company, it benefits from public investment, which fuels innovation in 5G and digital services.
  5. Genting Berhad
    Industry: Gaming, Hospitality, and Entertainment
    Overview: Genting Berhad is the parent company of the Genting Group, known for its integrated resorts, casinos, and entertainment businesses. Listed on Bursa Malaysia, it operates properties like Resorts World Genting in Malaysia and Resorts World Las Vegas in the United States.
    Significance: Genting’s Berhad status reflects its ability to attract global investors to fund its capital-intensive projects. Its diversified portfolio showcases the flexibility of the Berhad model across industries.

The Role of Berhad Companies in Malaysia’s Economy

Berhad companies play a pivotal role in Malaysia’s economic development. They contribute to GDP growth, job creation, and foreign investment, while also driving innovation in key sectors like technology, finance, and manufacturing. The public nature of Berhad companies fosters a culture of transparency and accountability, which strengthens Malaysia’s reputation as a business-friendly destination.

Moreover, Berhad companies often serve as flagbearers for Malaysia on the global stage. Firms like Petronas, Maybank, and Axiata compete with international giants, showcasing Malaysia’s ability to nurture world-class enterprises. The capital raised through public offerings enables these companies to invest in infrastructure, research, and sustainability initiatives, aligning with Malaysia’s broader development goals, such as those outlined in the Shared Prosperity Vision 2030.

Challenges and Considerations

While the Berhad structure offers numerous advantages, it also comes with challenges. The regulatory burden can be significant, with listed companies facing intense scrutiny from shareholders, analysts, and regulators. Compliance costs, including audit fees and reporting requirements, can strain resources, particularly for smaller Berhad companies.

Additionally, market volatility can impact listed Berhad companies, as share prices are influenced by economic conditions, investor sentiment, and global trends. Maintaining shareholder value requires consistent performance and strategic foresight, which can be demanding in competitive industries.

For unlisted Berhad companies, raising capital without stock exchange access can be challenging, as they rely on private placements or debt financing. These companies must balance growth ambitions with regulatory compliance, often without the liquidity benefits of being listed.

Conclusion

The BHD (Berhad) designation is more than just a corporate suffix; it is a symbol of a company’s commitment to transparency, governance, and public accountability. By enabling access to capital markets, fostering limited liability, and upholding rigorous standards, the Berhad structure empowers businesses to thrive in Malaysia’s dynamic economy. Companies like Petronas, Maybank, Sime Darby, Axiata, and Genting exemplify the diversity and impact of Berhad companies, driving innovation, creating jobs, and elevating Malaysia’s global standing.

I (plan to) write about business, finance, SEO, WordPress, and whatever else interests me. You might find those interesting too. For now, find me on Twitter/ X.