If you write code before your Sdn Bhd exists, or your co-founder or early developer writes it without a signed agreement, the company does not automatically own that code. Under Malaysian law, software is protected as a literary work under the Copyright Act 1987, and ownership sits with whoever created it, unless a written assignment moves that ownership to someone else. Incorporating your company with the Companies Commission of Malaysia (SSM) does not transfer any intellectual property (IP) to the new entity. That has to happen through a separate, signed contract. Skip this step and your “company asset” might legally still belong to an individual, which is a serious problem the moment an investor or buyer starts asking questions.
🔔 TL;DR
- SSM incorporation documents do not assign IP to your Sdn Bhd. You need a separate written agreement.
- The Copyright Act 1987, Section 27(3), requires any copyright assignment to be in writing to be legally valid.
- Section 26 of the same Act defaults ownership of commissioned or employment-based work to the employer or commissioner, but only under specific conditions, so relying on “default rules” is risky.
- Founders, early employees, and contractors should all sign an IP assignment clause or a standalone assignment of inventions agreement before (or immediately after) incorporation.
- Missing or poorly drafted IP assignment clauses are a common reason deals fall apart during investor due diligence.
📌 Why doesn’t incorporating a Sdn Bhd automatically transfer IP ownership?
Incorporation and IP ownership are two completely separate legal processes in Malaysia. When you register a Sdn Bhd through SSM, you are creating a legal entity, a company that can own assets, sign contracts, and be sued in its own name. But creating that entity does not reach back in time and claim ownership of code, designs, or inventions that already exist. The Companies Act 2016 and SSM’s regulations govern company formation and statutory compliance. They say nothing about who owns your software. That is governed entirely by the Copyright Act 1987.
Incorporation creates a new legal entity, but it does not automatically claim ownership of code, designs, or inventions created before the company existed. Your Sdn Bhd is a separate legal person, distinct from you and any co-founders. Your software is a separate asset. Each item needs its own transfer document.
📌 Who legally owns code written before the company existed?
Generally, the person who wrote the code owns it, unless a written agreement says otherwise. This is the default rule under copyright law, and it catches a lot of first-time founders off guard.
- Solo founder coding before incorporation: you personally own the code until you assign it to the company in writing.
- Co-founders building together pre-incorporation: ownership may be shared or unclear, which is worse, because it is harder to untangle later.
- Freelancer or contractor hired to build an MVP: copyright in commissioned work is generally treated as transferred to whoever commissioned it, unless your agreement excludes or limits that transfer [Copyright Act 1987, Section 26(2)]. The catch: if you commissioned it personally before the company existed, the code moves to you, not to your Sdn Bhd.
- Employee writing code as part of their job: Section 26 of the Copyright Act 1987 can place ownership with the employer by default, but this depends on the terms of employment and whether the work falls within the scope of that employment. It is not automatic in every situation.
Because the “default rules” have conditions attached, relying on them is risky. A written intellectual property assignment clause removes the guesswork.
📌 What does a valid IP assignment clause actually need to say?
An intellectual property assignment clause is a provision, usually inside an employment contract, founders’ agreement, or contractor agreement, that transfers ownership of IP created during the engagement to the company. Section 27(3) of the Copyright Act 1987 requires that any assignment of copyright be in writing. A verbal agreement or an implied understanding does not satisfy this requirement, though a written record such as an email or a message can count as “in writing” as long as it is accessible and can be referred to later [Electronic Commerce Act 2006, Section 8].
A solid clause should cover:
- Present and future assignment: it should assign IP already created and IP created in the future during the engagement, not just a one-time snapshot.
- Scope of work covered: code, documentation, designs, inventions, trade secrets, and any related rights, not just “the app.”
- Moral rights waiver, where applicable: so the creator cannot later object to how the work is modified or used.
- Clear identification of the assignee: the Sdn Bhd by its full registered name and company number, not a founder personally.
- Consideration: something of value exchanged, such as salary, equity, or a fee, to support the validity of the agreement.
Many startups formalise this through a standalone assignment of inventions agreement, sometimes bundled with confidentiality terms into what is commonly called a Proprietary Information and Inventions Assignment Agreement (PIIAA). This single document asks every founder, employee, and contractor to assign IP created during their time with the company and to keep company information confidential.
📌 Where do founders usually get this wrong?
Building on the point above, the mistakes are rarely about bad intentions. They are about timing and templates.
- Coding before incorporation, assigning after: the gap in between is exactly when disputes happen, especially if a co-founder leaves on bad terms.
- Using a generic ip assignment agreement template from another country: templates built for other jurisdictions may not reference the Copyright Act 1987 correctly or may miss the written-assignment requirement under Section 27(3).
- Forgetting contractors and freelancers: founders often get their own agreements signed but skip this for the freelancer who built the first prototype.
- Assuming “I paid for it, so the company owns it”: commissioning the work can move copyright to whoever commissioned it [Section 26(2)], but that may be you personally rather than your Sdn Bhd, and the contract can exclude the transfer. A written assignment to the company settles it.
- No agreement with a departing co-founder: if someone leaves before signing an IP assignment, their contribution to the codebase can remain legally theirs.
📌 What happens if investors find an IP gap during due diligence?
This is where the paperwork stops being theoretical. If IP assignment clauses are missing or improperly executed, individual founders or developers legally retain ownership of the code and inventions, which means the startup cannot claim clean title to its core assets. During due diligence, investors specifically check whether all IP sits cleanly inside the company. A gap here frequently kills deals, because it exposes the company to potential disputes and makes lenders or investors reluctant to treat the IP as collateral or as a sound basis for valuation. For tech and AI startups pursuing Malaysia Digital status and the grants or tax incentives that come with it, a clean IP position is also something reviewers and funding bodies expect to see documented.
📌 Frequently Asked Questions
Does SSM check IP ownership when I incorporate a Sdn Bhd?
No. SSM’s incorporation process focuses on company registration requirements under the Companies Act 2016. It does not review or require IP assignment documents.
Can I use a free ip assignment agreement template I found online?
You can use one as a starting point, but it should be reviewed to make sure it meets Malaysia’s written-assignment requirement under Section 27(3) of the Copyright Act 1987 and properly names your Sdn Bhd as the assignee.
Do I need a separate assignment of inventions agreement if I already have an employment contract?
If your employment contract already contains a clear, written IP assignment clause covering present and future work, a separate agreement may not be necessary. Many companies still use a standalone document for clarity, especially for contractors who are not employees.
What if my co-founder refuses to sign an IP assignment after the company is incorporated?
This is a legal dispute that should go through a lawyer, since the co-founder may have a legitimate ownership claim over work they created before signing. It is far easier to get agreements signed before any code is written.
Is verbal agreement enough if we trust each other?
No. Section 27(3) of the Copyright Act 1987 requires copyright assignment to be in writing. Trust does not satisfy a legal requirement, and verbal agreements are very hard to enforce if a relationship sours later.
Does appointing a company secretary help with IP assignment?
A qualified company secretary in Malaysia supports statutory registers, resolutions, and SSM filings under the Companies Act 2016, but IP assignment is a separate contractual matter handled through the Copyright Act 1987. It is worth raising with a lawyer alongside your company secretarial setup, not instead of it.
ABOUT BOSS BOLEH
Boss Boleh is a licensed company secretary and online incorporation platform built for first-time entrepreneurs setting up their first Sdn Bhd. Beyond company secretarial work, it also offers a one-stop compliance solution for entrepreneurs, including accounting, tax planning and tax filing services. We help founders incorporate their Sdn Bhd in 2 working days, fully online with digital signatures and eKYC, so you can focus on getting your IP assignment agreements signed with co-founders, employees and contractors. We also support company bank account opening online, without a branch visit, and handle annual compliance filings like Annual Returns and Beneficial Owner submissions to SSM.
References
Copyright Act 1987 (Act 332), sections 3 (computer programs as literary works), 26 and 27(3)
Electronic Commerce Act 2006 (Act 658), section 8
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