The principal legislation through which Malaysian corporate law is enforced is the Malaysian Companies Act 1965. The Companies Commission of Malaysia is the regulatory body to enforce the law related to forming a company in Malaysia, and governs companies, businesses and certified public accountants.

When forming a company in Malaysia, foreign investors should note the government policy of giving business privileges and preference to ethnic Malays (bumiputra). For example:

i) When bidding for state contracts after forming a company in Malaysia, foreign investors often find that Malay-owned companies get an unfair advantage when submitting tenders. For example, a Malay-owned company may fall short of the bid requirements, but still win the contract;

ii) A company with greater than 30% foreign shareholding requires foreign investment approval. Foreign investors find this inconvenient and time consuming;

iii) Any company wishing to list on the Kuala Lumpur Stock Exchange is required to reserve at least 30% of its initial public offering for purchase by bumiputra investors;

iv) Hiring foreign staff – employing skilled foreign staff in the country after forming a company in Malaysia is difficult thanks to the preference given to bumiputra employees. For example, to recruit an expatriate employee, a company is required to demonstrate to the Malaysian government that it cannot fill the role with a qualified bumiputra. Furthermore, the company must prove in writing that it is actively training bumiputra staff to eventually fill the role taken by the expatriate staff. Thus, foreign investors may spend valuable time and expense on hiring suitable staff in Malaysia.  

Furthermore, non-Malaysian citizens are normally required to lodge a deposit before pursuing a case in Malaysian courts, the deposit amount varying on a case-by-case basis. Consequently, foreign individuals and multinationals forming a company in Malaysia sometimes prefer to litigate their disputes in Singapore.

Despite the above, Malaysia's corporate governance standards are improving. For example, in 2006 the Malaysia Securities Commission tightened listing requirements on the Kuala Lumpur Stock Exchange (Bursa Malaysia), rejecting 28 listing applications out of 46 submissions, with reasons for rejection made available to the public.

After forming a company in Malaysia, it is necessary to prepare annual financial statements complying with Malaysian Financial Accounting Standards. The financial statements accompany an annual corporate tax return submitted to the Inland Revenue Board of Malaysia by 31 December each year. The Malaysian Companies Act 1965 also requires a company to appoint an external auditor.

Although it is based on UK common law, Malaysia’s legal system suffers a poor international reputation. Malaysia’s political and legal system is negatively ranked the world’s 56th least corrupt in Transparency International's 2009 Corruption Perceptions Index. As a result, foreign investors are more nervous of forming a company in Malaysia and receiving fair legal protection, for example from intellectual property rights (IPR) infringements.

To highlight this, cases relating to IPR infringements take up to 6 years to be heard by Malaysian courts. Malaysia also has a poor IPR protection record - the International Intellectual Property Association (IIPA) estimates that 60% of all business software sold in Malaysia is pirated.

Malaysia is negatively ranked as the world’s 59th-freest economy in the 2010 Index of Economic Freedom by The Heritage Foundation. The index ranks a country for its financial freedom, protection of property rights, labour freedom, business licensing requirements and freedom from corrupt practices.