Ever wondered what’s the difference between a sendirian berhad (sdn bhd) and a berhad (bhd) company? In essence they are just different types of limited companies.
As their name suggests, a sendirian bread (sdn bhd) is a private limited company (Pte Ltd) while a berhad company is a public company which usually ends with Ltd. Usually, public companies are also publicly listed on a stock exchange, making them public listed companies such as Malayan Banking Group Bhd or Genting Bhd.
Here are their main differences.
#1 Financial Reporting Standards
One of the main differences between the two types of companies would lie in the financial reporting standards required of them. Since public companies have to publicly disclose their financials, a higher financial reporting standard is usually expected from them.
#2 Maximum Number Of Shareholders
Private limited companies (sdn bhd) can only have a maximum of 50 shareholders whereas public companies (bhd) can have an unlimited amount of shareholders.
#3 Publicly Available Financial Information
Public companies (bhd) are required to make their financial information publicly available for the public to access. If they are a public listed company, they would also be required to hold quarterly earning calls and answer any questions that their public shareholders might have for them.
#4 Publicly Available Shares
Lastly, the public can freely subscribe to shares of public companies (bhd) while public individuals can only own shares in a private limited company through a shareholders’ agreement with the approval of existing shareholders of the private company.
Not All Limited Companies Are Listed
It is important to note that not all public companies (bhd) are listed on a stock exchange. It is possible for a company to be a public company but not a public listed company.
Although such instances are rare, such companies do exist. They are usually companies that are in transition to becoming a public listed company or companies that have grown to have too many shareholders but are not ready to be listed on a stock exchange yet.
Reasons For Choosing Each Entity
The distinction between private limited companies (sdn bhd) and public companies (bhd) exists so business owners can incorporate their businesses in the right form to serve the needs of the business at each stage of the company’s corporate journey.
Most small to medium enterprises (SMEs) will choose to incorporate as a private limited company (sdn bhd) once the scale and needs of their business outgrows that of a sole-proprietorship or a partnership.
Reasons for doing so include the need to protect shareholders from personal liability and the need to raise funding form external investors.
Sometimes, large companies would choose to remain private so that they can move faster and carry out reforms away from the scrutiny of the public eye or, in the case of family businesses, to ensure that control of the company stays within the family.
On the other hand, companies usually go public and get listed on a stock exchange either to raise further funding from public markets or so that founders and existing investors can cash in on all or part of their stakes via an initial public offering.
There are many reasons why some companies choose to remain private while others choose to go public. The choice would depend on the needs of the business, company and shareholders at that particular time.
DollarsAndSense is a website that aims to help people make better financial decisions, one interesting bite-sized article at a time. Like us on Facebook to stay in touch with our latest article.
DollarsAndSense Malaysia is a website that aims to help people make better financial decisions, one interesting, bite-sized article at a time. Like us on Facebook to stay in touch with our latest articles.