INCORPORATION

-Difference between Company Limited by Share and by Guarantee

i) BY SHARES
- It refers to a company in which the liability of its members is limited to the amount (if
any) unpaid on the shares held by them. The directors of a company limited by shares are
also not liable for the debts of the company. They become personally liable only if they
engage in activities that are contrary to their office and their legal obligations. The limited
liability of these companies means that the personal assets of members are not at risk
when they invest in the company. If the company experiences financial difficulties, its
debts do not typically become the debts of the shareholders.
- The company limited by shares may be incorporated as a private company (Sendirian
Berhad or Sdn. Bhd.) or public company (Berhad or Bhd.
- Foreigners are not allowed to incorporate public companies limited by shares or
companies limited by guarantee.
- A private company may convert to a public company, and vice versa, by passing a special
resolution and lodging a notice of conversion with the Companies Commission of
Malaysia.
- If private the limits of shareholders is 50, if public no cap. SEC 42 OF CA
- PROCEDURE:
a) Appoint director, if private company SEC 196 said is one while public is two.
- Director must be a natural person sec 196(2)
- Must not fall under Sec198 disqualification of director)
- submit together with the statement of director confirming his consent to
act as promoter and first director.
b) Appoint company secretary
- Secretaries must be appointed within 30 days from the company’s
incorporation date. The person to be appointed as the company secretary
must consent in writing to be appointed as the secretary.
- It is possible for a single director to act as a company secretary. However,
section 242 of the Companies Act prohibits a person from acting in a dual
capacity, such as a situation that requires both a director and secretary or
an act that must be executed by two different persons.
- Section 239 of the Companies Act, the board may remove a secretary
through a board resolution office
- Register company secretary license in SSM RM350
- Once secretary has been appointed, SEC 58 and Sec 236(2) is required to
filed within 14 days
c) A name search must be made to ensure that the proposed name is available.(SEC
27) There are two ways to apply for a name of a company which are application
 for the name and incorporation of a company (Direct Incorporation); or name
reservation.
- 1) Direct incorporation (a combination of name reservation and
incorporation process).The applicant must complete the information
during the application for the name and incorporation of a company via
online and incorporation fees of RM1,000.00; and if the proposed name is
approved by SSM, the application to incorporate the company would be
directly sent to the officer to be processed.
- 2) Name reservation. The applicant must complete the information for the
name of the company online and the fee is RM50.00 for each name
applied. Incorporation of company is a separate process; and If the name is
approved by SSM, the name is reserved for 30 days or any longer date as
allowed by the Registrar (maximum 180 days) from the date of approval.
The applicant can then apply for incorporation with a fee of RM1,000.00.
d) Particulars required to incorporate a company (SUPERFORM)
- Section 14(1) of the Companies Act 2016, the applicant must complete the
information required proposed name of the company, status of private or
public company,proposed type of business, address of registered office,
business address, Complete detail of director(s) and promoter(s),
Declaration from the director (bankrupt or not or have conviction or not)
e) Declaration of Compliance
This declaration states that the applicant has complied with all requirements of the
Companies Act 2016. The declaration should be made by the individual who is
responsible for the incorporation.
f) Incorporation Fee
​ (i) Company limited by shares - RM1,000
g) Verification of Incorporation
If the Registrar is satisfied then a notice of approval and registration will be
issued; and a certificate of incorporation will only be issued by SSM upon request
together with the prescribed fee. (SEC 15)
h) Post Incorporation
​ (a) The company shall appoint a company secretary within 30 days after
incorporation. The company secretary shall be registered with SSM and possessed
a valid practising certificate issued by SSM. (SEC 17)
​ (b) If required by the company, it may file the constitution of the company after
the incorporation of the company.
​ - Certificate is optional, Notice of Registration is suffice to prove incorporation.
​ - Shareholder agreement: set out rights and duties and responsibilities of
shresholdreds.
​ - Constitution : to reflect the terms of agreement.
II) BY GUARANTEE

- A company limited by guarantee (CLBG) is a public company incorporated with the

principal liability of its members limited by the constitution to such amount as the
members undertake to contribute to the assets of the company if the company is wound
up.
- This type of company is only suitable for ‘not for profit’ or charitable types of company.
It is typically registered by people wanting to start a charity, club, association, or other
business that will re-invest profits for the good of the business, not the owners. This
company has no shares so it cannot distribute profit to shareholders.
- Unlike any other company, a company limited by guarantee is required to have a
constitution (kena ada name, objective, amount of member contribute)
- In the end, have Berhad or Bhd or Yayasan
- Incorporation fees: Company limited by guarantee - RM3,000

III) COMPANY SECRETARY

- Secretaries must be appointed within 30 days from the company’s incorporation date. The
person to be appointed as the company secretary must consent in writing to be appointed
as the secretary.
- It is possible for a single director to act as a company secretary. However, section 242 of
the Companies Act prohibits a person from acting in a dual capacity, such as a situation
that requires both a director and secretary or an act that must be executed by two different
persons.
- Section 239 of the Companies Act, the board may remove a secretary through a board
resolution office

iv) CONSTITUTION VS CA 2016

- If a company has a Constitution, the company, its directors and each member of the
company shall also have the rights, powers, duties and obligations set out in the Act,
except to the extent that such rights, powers, duties and obligations are permitted to be
modified in accordance with the Act, and are so modified by the Constitution of the
company. Regardless, any provision in the Constitution that contravenes the Act is
invalid. For an existing company, the existing M&A will become the company’s
Constitution until the company acts on the following:-
 a) Abolish its existing M&A - A company that opts to abolish the existing M&A
will not have a Constitution, and is required to comply with the provisions in the
Act; or
b) Amend its existing M&A or adopt a new Constitution that is aligned with the Act

VI) APPOINTMENT OF DIRECTOR

- (PRVIATE COMPANY) at least 1 resident director, passing thru a written solution under
Section 297 of Companies Act
- (PUBLIC COMPANY) at least 2 resident director, done at general meeting thru separate
resolution unless member agreed to appoint by single resolution under Section 203
SHARES

- Sec 105, any shareholder may transfer his shares by a duly executed and stamped
instrument of transfer.
- Companies issue shares to raise money from investors who tend to invest their money.
This money is then used by companies for the development and growth of their
businesses.
- According to section 97 of the Companies Act, a company is not required to issue a share
certificate unless an application by the shareholder for a certificate relating to the
shareholder’s share has been received or provided by its constitution.
- Within 60 days from receiving the receipt of an application, the company must send a
share certificate of the shareholder, including the following information:
● The name of the company
the class of shares held by that person
● The number of shares held by that person

a) REDUCTION OF SHARES:
- There are two methods a company can reduce its shares:
1. Special resolution and confirmation by the court (section 116)
2. Special resolution supported by a solvency statement (section 117 )
- Ways that a company can reduce its share capital are:

i) By exhausting or reducing the liability on any of the shares of the company in

respect of unpaid share capital (shares yang tak di bayar)

ii) By cancelling any paid-up share capital which is lost or unrepresented by

available assets

iii) By returning to the shareholders any paid-up share capital which is in excess
of the needs of the company

b) TRANSFER OF SHARES (S105 of CA)

- Before shares can be transferred, the shareholder must inform the company director. Once the
director acknowledges the transfer, the shareholder is required to complete Form 32A.

● Company name
● Details of the transferor(s) and transferee(s)
● Number of transferred shares
● Value of transferred shares
 ● Signature of shareholders and witness

- At the request of the directors, the company secretary must prepare a board resolution for the
directors to approve the transfer and sign Form 32A. Once completed, the shares may be
transferred. The original share certificate is returned to the company secretary for cancellation.

- The next step is submitting Form 32A to the Inland Revenue Board for assessment and paying
stamp duty to validate the transfer. If less than 18 months, need to bring along Form 32A, Form
DS1 & a copy of certificate of incorporation. If more than 18 months, extra relevant pages from
latest audited financial statement.

- The company secretary must then enter the new shareholder’s name into the register book, and
a new share certificate will be issued to the new shareholder to complete the share transfer
process.

- Transmitting transfer is when a share transfer takes place because the original holder has passed
away, has become insane, or is insolvent at that time. Only require written notice.

-Transfer of share is involved with executed duly stamp Form 32A.

-Restriction of transfer of shares:

i) Pre-emption rights: ask the existing shareholders first.

ii) Discretionary rights: Director can retain the transfer but must provide reasons

c) HOW TO BE A SHAREHOLDER?
1) Promoter
- Promoters” denotes those persons that were instrumental at the time of
establishing the company and those who are in control of the company, for
example through shareholdings and/or their management position
2) Subscription
- Subscription shares are shares that investors subscribe to for a purchase price in
exchange for equity in the company
3) Share acquisition
- You bought a shares from an existing shareholder (Transfer of share thru Form
32A)
4) Operation of law
- Received shares upon transmission (owner died)
- You did not pay for the shares but receive as gift or inherited
JOINT-VENTURE
● Meaning: a business arrangement in which two or more companies combine resources on
a project or service to share their business expertise, resources, and experience to work on
a joint project or achieve a common business goal.
● Difference between JV and Partnership:

i) a joint venture is limited to one particular venture while a partnership is not.

ii) Joint ventures can also include corporations or entities, while partnerships are only
between two or more persons.

iii) Joint ventures are also formed for a specific amount of time while partnerships are
usually built for the long term.

● Types of JV

i) incorporated joint ventures

- The main difference between the two is that an incorporated joint venture
involves the formation of a new legal entity.
- Establish Special Purpose Vehicle company (SPV)
- An incorporated joint venture is characteristically evident whereby a separate
legal entity has been established and incorporated for the sole purpose of
undertaking a specific project or business activity..
- Example: Perodua JV between UMW corporation and Daihatsu Motor co.
MMC-Gamuda JV between MMC Corporation and Gamuda to undertake
construction of Klang MRT project.

ii) unincorporated joint ventures.

- In contrast, parties to an unincorporated joint venture are not required to form or

incorporate a new legal entity.
- An unincorporated joint venture is usually created by members of the joint
venture agreeing to cooperate in relation to a business activity or project
undertaking in accordance with a contract. An unincorporated joint venture will
not create a separate legal entity.
- Consortium: a group of companies with the same goal and usually formed by a
collaboration agreement or mou.
- One example of an unincorporated joint venture in Malaysia is the joint venture
between Ho Hup Construction Co Berhad and DSE Construction Sdn Bhd, where
Ho Hup Construction Co Berhad has an 80.7% “profit-share” in the
unincorporated joint venture. The unincorporated joint venture was awarded a
 RM221.4 million contract under the project to rehabilitate Sungai Besut in
Terengganu. The term of the unincorporated joint was said to be three years.
● Difference between UJV and partnership:
- Members of a joint venture will hold their interests, liabilities, and entitlements in
the joint venture separately. In a partnership, the interests, liabilities, and
entitlements are held jointly by the partners.
- Furthermore, another difference between these business structures is often the
purpose for the creation of them. A partnership comes with many legal and
fiduciary obligations so it is often the case that people choosing to form a joint
venture are choosing this on the basis to avoid the creation of a partnership.

● How to register a JVA?

- Draft an agreement that outlines the terms and conditions of the joint venture.
This includes the purpose, structure, and distribution of profits and losses.
- Legal reviewed by a lawyer to ensure that it complies with all relevant laws and
regulations.
- Signature: Once the joint venture has been finalized, all parties involved must
sign the document, indicating their agreement to the terms outlined in it.
- The joint venture must then be filed with the relevant government agencies, such
as the Registrar of Companies or the Ministry of Commerce, to make it legally
binding.
- Apply for a license if needed.
- Commencement of operation.

● Procedure of Joint Venture Company:

a) Make an application for name search and reserve name with SSM
b) If proposed name is approved by SSM, application will be sent to officer
c) Approval time is 180 days, upon the approval, the relevant document need to
submit to SSM which are i) application for incorporation via e-form in Schedule
A of MycoID and ii) company constitution (only compulsory for public company
by guarantee) and iii) statement of promoted and director of their consent and that
they are not bankrupt
d) Then payment and resigtra will issue notice of registration of the joint enture
company

● Advantage of JVA:

- acquisition of (shared) resources without an (excessive) outlay of capital

- highly flexible. Those who participate don’t need to form a new business entity to
create the venture’s collaborative product.
 - The partners are also not bound to one another after the expiration of the initial
partnership contract

● Risk of JVA

- All parties will be held accountable even if your contribution is little.

- Limit opportunities like if you enter JVA with a party and that party restricts you
from dealing with another party.

● Key terms in JVA: Business Information, Member Names and Address, Joint Venture
Type, Purpose of the Agreement, Duties and Obligations, Voting and Formal Meeting
Requirements, Percentage of Ownership Assignment, Intellectual Property Rights, Profit
or Loss Allocation, Dissolution Terms, Non Compete and Confidential Agreements,
Signatures of Members
PARTNERSHIP (PARTNERSHIP ACT 1961)
- S3 : more than 2 person that carry a business in the same common with a view of profit
- S11: every partner is jointly liable with other partners for all debts of the firm incurred
while he or she is a partner.
- S 12, 13 and 14 : that every partner is jointly and severally liable for any wrongful act or
omission committed or misapplication of money by a partner acting in the ordinary
course of business
- No separate legal entity
- Generally, a partner cannot transfer his status as partner to someone else without the
consent of all the other partners.
- SEC 47: Minimum 2, Maximum 20
- QUALIFICATION: Any person who is of sound mind, not a minor, not an undercharged
insolvent, and not disqualified from entering into a contract by law can become a partner
in a partnership firm. Minor can but risky as they are only liable for their necessaries and
not debt.
- Dissolution of partnership: agreement, operation of law, death, charging on shares, court
order (due to insanity or permanent incapacity), supervening illegality. (Sec 35)
- Benefit of Partnership compare to LLP: lower cost, easy to establish
- Disadvantage: the liability of the partners for the debts of the business is unlimited, each
partner is ‘jointly and severally’ liable for the partnership’s debts, there is a risk of
disagreements and friction among partners and management

LIMITED LIABILITY PARTNERSHIP

● Difference between LLP and Partnership:
- LLP is also a form of partnership, where the liability of partners is limited as well as any
partner will not be held liable for the acts of other partners. General Partnership, on the
other hand, brings unlimited liabilities to the partners concerned and so they are jointly or
severally liable for the debts.
- Partnership cannot enter into contract in its name but LLP can sue and be sued in its
name.
- 20 maximum partners for partnership, LLP has no limit
- Partnership govern under Partnership Act 1961, LLP govern under LLP Act 2012.
● S3(1): LLP is a body corporate and its separate legal entity from its partner
● S6: two or more persons, whether individuals or bodies corporate, associated for carrying
on any lawful business with a view to profit may form a limited liability partnership in
accordance with the terms of a limited liability partnership agreement (must be in the
profession)
● S13 : requires the name of a limited liability partnership to end with the expression
‘Perkongsian Liabiliti Terhad’ or the abbreviation ‘PLT
● S27: Must have at least one compliance officer (CO: an employee of a company that
ensures the firm is in compliance with its outside regulatory and legal requirements as
well as internal policies and bylaws.)
● CO either the partner or any qualified person to be secretary
● S9(2): in the LLP agreement must includes name of LLP, nature of business, amount of
capital and partners to the LLP.
● PROCEDURE OF LLP:
a) Letter of engagement, quotation fees. 10% of disbursement
b) Write a letter ask for details information, Ic, name of proposed compliance officer,
letter of consent from the compliance officer
c) Conduct bankruptcy search to ensure CO did not bankrupt (RM10)
d) CO create account in MyLLP. Received email user registration notification.
e) Go to the nearest SSM to validate by show IC, email and company secretary
license if any.
f) Search and reserve name (RM30) valid for 30 days
g) Ask client to come and confirm and vet the LLP agreement
h) Client confirm the name and LLP agreement
i) Stamp the LLP agreement (RM10)
j) Register proposed name in My LLP and pay RM500
k) Received notice of successful LLP.
l) Apply for certificate RM20
m) Registrar will create a business profile for your LLP after the registration process
is completed. RM20
n) Apply for personal involvement partners & compliance officer Report issued by
SSM RM100
o) Email client of the successful registration and send bil of cost

● CONVERSION : S29
- Shareholders must remain the same after conversion.
- There are no subsisting security interests in the Company’s assets.
- The private company is able to pay its debts. S31(2)
- All outstanding statutory fees to government agencies has been settled.
- The company has advertised at least in a newspaper widely circulated in Malaysia
and published a notification in the Gazette for its intention to convert into a
limited liability partnership.
- All creditors of the company are agreed to the above conversion
REGULATIONS FOR PUBLIC COMPANIES
- A public company can sell its registered shares to the general public. A private company
can sell its own, privately held shares to a few willing investors
- Listed companies: a public company. It has issued shares of its stock through an
exchange, with each share representing a sliver of ownership of the company. Those
shares can then be bought and sold by investors, rising or falling in value according to
demand.
- IPO: an initial public offering (IPO) refers to the process of offering shares of a private
corporation to the public in a new stock issuance for the first time. An IPO allows a
company to raise equity capital from public investors. It provides the company with
access to raising a lot of money. The companies must comply with the requirements of
the capital market regulator, the security commission.
- Post IPO : The company will need to issue a minimum of 25% of the company's shares to
the public.
- Listing requirements: a set of conditions which a firm must meet before listing a security
on one of the organized stock exchanges
- Relevant regulatory bodies for public companies
1) Companies Commision of Malaysia (SSM)
- SSM is a government agency that controls and monitors corporate and
business affairs in Malaysia
- The main activity of SSM is to serve as an agency to incorporate
companies and register businesses as well as to provide company and
business information to the public.
2) Securities Commission of Malaysia
- a statutory body reporting to the Minister of Finance, was established
under the Securities Commission Act 1993. It is the sole regulatory agency
for the regulation and development of capital markets. (CAPITAL
MARKET is financial markets that bring buyers and sellers together to
trade stocks, bonds, currencies, and other financial assets)
- SC is the body that supervises and monitors Bursa Malaysia with regards
to its listing, trading, clearing, settlement and depository operations to
ensure Bursa Malaysia performs its regulatory duties and obligations in an
effective manner.
- The SC administers the following acts:
i) Securities Commission Act 1993;
ii) Capital Markets and Services Act 2007; and
iii) Securities Industry (Central Depositories) Act 1991.
- Develop the overall capital market and its market segments, Licensing and
supervising all licensed persons; Supervising exchanges, clearing houses
 and central depositories; Encouraging self-regulation; and. Ensuring
proper conduct of market institutions and licensed persons. (Function :
SEC 15 OF SECURITIES COMMISION ACT)
3) Bursa Malaysia
- Bursa Malaysia is the frontline regulator of the Malaysian capital market
and has the duty to maintain a fair and orderly market in the securities and
derivatives that are traded through its facilities
- Bursa Malaysia operates through three markets:
i) Main Market is the primary market for larger companies with strong
operating and profit track records, with a minimum required market
capitalization of RM500 million upon listing, among other things. The
company must issue 25% of its total shares to the public.
ii) The ACE Market is a sponsor-driven alternative market designed for
smaller companies that exhibit strong growth potential. No minimum
profit or operating track record is required for listing.
iii) The LEAP Market is a fundraising platform for what are perceived as
underserved SMEs, which do not need to demonstrate any operating or
financial track record. This adviser-driven market is only available to
sophisticated investors.
- Function: maintain fair and orderly market through its facilities, submit
proposed rules to SC, shall act in public interest by protecting investors,
notify SC if any person is inconsistent with CMSA

​
-
PROSPECTUS & DUE DILIGENCE
● PROSPECTUS
- A prospectus is an essential disclosure document that a company has to issue at
the time of issuing investment securities to the public. These formal documents
provide detailed information to prospective investors about mutual funds, bonds,
stocks, and other investment offerings to the public.
- A public company can issue the prospectus to offer its shares and debentures,
whereas a private company cannot issue a prospectus.
- The main objective of issuing a prospectus is to inform the investors about the
company's business, financial position, capital structure, future prospects, and
management.
- SEC 158 OF CA: invitation for public to deposit can only be allowed if the
prospectus to that invitation has been registered
- SEC 232 CMSA 2007: must register the prospectus with security commissions if
wished to invite to subscribe for purchase and lodge with the SSM registrar.
● DUE DILIGENCE
- Corporate due diligence is the process of investigating a company's business
practices and financial condition in order to determine its suitability as a business
partner.
- The objectives of corporate due diligence vary depending on the circumstances,
but they typically include assessing the company’s financial health, understanding
its business model, and evaluating its competitive position.
- In many cases, corporate due diligence is conducted prior to entering into a formal
business relationship, such as an acquisition or joint venture. However, it can also
be conducted on an ongoing basis in order to monitor a company’s performance
and identify any potential problems. It is an important tool for mitigating risk and
ensuring that businesses make sound investments.
- legal due diligence is usually conducted in a structured and coordinated manner.
The scope of legal due diligence revolves around several factors such as the size
and complexity of the transaction, the confidentiality of the deal, the industry in
which the business is in and the friendliness of the parties. In Malaysia, lawyers
are typically appointed to conduct the legal due diligence process on behalf of
their clients
COMPANY CHARGES
- A debenture is a document that lays down the terms and conditions of a loan, and
provides clarity and security to lenders if the borrowing company becomes insolvent.
- A charge is a form of security over an asset which gives the charge-holder (typically a
lender) the right to have the asset and its proceeds of sale appropriated to discharge the
debt.
- Chargor is the company, chargee is the bank.
- TYPES OF CHARGES:

i) A fixed charge

- attaches to specific identifiable assets of the company such as motor vehicles,

plant or equipment. The chargor retains ownership of the assets however if the
chargor defaults, the chargee has the right to recover the loan through proceeds of
the sale of those assets.
- Assets subject to a fixed charge cannot be dealt with (transferred, sold,
mortgaged) by the company without it first obtaining the chargee’s consent.

ii) A floating charge

- The assets are non-specific in that they may change over the duration of the
charge, for example, stock in trade or accounts receivable.
- ‘Crystallisation’ :- if a company fails to repay the loan or enters liquidation, the
floating charge becomes crystallized or frozen into a fixed charge. With a fixed
charge, the assets become fixed by the lender so the company cannot use the
assets or sell them.
- Under an automatic crystallisation clause, no intervention is required on the part
of the chargee to crystallise the charge. Crystallisation occurs automatically on the
occurrence of events specified in the floating charge.
- A negative pledge clause is a part of a loan contract that prevents the borrower from
pledging their assets to another lender. Preventing any further charges over the same asset
unless consent by other chargee.
- Negative pledge clauses help lenders or bondholders protect their investments. When a
bond indenture includes a negative pledge clause, it prevents the bond issuer from taking
on future debt that could compromise its ability to meet obligations to existing
bondholders
- Double Negative Pledge: this type of agreement is frequently used by banks or other
lenders to ensure that they have a priority claim to a borrower's assets if they declare
bankruptcy
- Difference between fixed and floating charge: in terms of flexibility and priorities over
security interests. A floating charge gives greater flexibility to the company borrowing
 funds as assets may be dealt with without the lender’s consent. From a lender’s
perspective, a fixed charge is more effective as it secures the loan over a specific asset or
assets and the lender is likely to receive priority in the event of a dispute. Compare this
with a floating charge where other creditors may also have interests in assets which may
restrict the chargee’s recourse to repayment or the amount available to satisfy the
security.
- REGISTRATION OF CHARGE:
● Section 352 states that a company that creates charges over its property or any of
its undertakings shall register with the ROC within 30 days after the creation of
the charge. If it is not registered, it is void against the liquidator and any creditor
of the company.
● Section 357(3), certificate of registration is a conclusive evidence that all
requirement for registration has been complied with. This certificate is known as
Form 34
- EFFECT OF NON-REGISTRATION CHARGE
● Effect on the Chargee (the Lender):-

-S352(2): the charge shall be void against the liquidator and any creditor of the company, chargee
becomes an unsecured creditor and has no priority over the proceeds from the sale of the charged
assets.

● Effect on the Chargor (the Borrower)

>s352(3): when a charge becomes void under this section, the money secured shall immediately
become payable.
>Although a charge becomes void due to its non-registration, the contract or obligation for
repayment of the loan is still valid and enforceable.
>The repayment of the money secured by the charge becomes immediately payable.
>If that (unregistered) charge instrument allows for the loan to be repaid in installments, this will
no longer be allowed as the loan has to be paid immediately.
>The chargor might face financial difficulty in repaying the loan at once
>Besides, failure to register a charge is an offence under S198 of CA 2016
MERGER AND ACQUISITION

The term Mergers and Acquisitions (“M&A”) generally refers to the consolidation of companies
or assets through different types of transactions.

● Merger

- 2 Entities combine becoming a new entity

- A purchase deal will also be called a merger when both CEOs agree that joining
together is in the best interest of both of their companie

● Acquisition

- No new entity, it is just one entity taking over another entity. Became the new
owner of the entity.

- a larger organization buys a smaller business entity for expansion.

● In Malaysia, the most common type of merger and acquisition is by way of share
purchase.

● Public merger and acquisition transactions in Malaysia are primarily governed by the
Capital Markets and Services Act 2007 (“CMSA”) and the Malaysian Code on
Take-Overs and Mergers 2016 (issued by the Securities Commission and enacted
pursuant to the CMSA). Both private and public merger and acquisition transactions are
generally governed under the Companies Act 2016.

● CMSA 2007 -regulate matters relating to the activities, markets and intermediaries in the
capital markets. SEC 216: take over means an offer made to acquire all or part of voting
shares.

● MALAYSIAN CODE ON TAKE-OVERS AND MERGERS 2016: 12 general principles

of process of takeovers in malaysia.

● Public takeovers and mergers in Malaysia are heavily regulated by regulatory bodies such
Bursa Malaysia Berhad (Bursa), Bank Negara, Securities Commission and SSM.
 - Bursa is the main stock exchange in Malaysia and regulates listed companies.
Therefore all listing requirements, rules and regulations issued by Bursa are to be
followed by public companies undertaking a merger or acquisition transaction.
- Central Bank of Malaysia (Bank Negara Malaysia), Merger and Acquisition
transactions which involve the financial sector in Malaysia will involve Bank
Negara and its regulations.
- Securities Commission Malaysia (SC), The SC regulates mergers and acquisitions
of companies and has enforcement scope of works towards compliance with its
securities laws.
- Companies Commission of Malaysia (SSM), SSM’s main role is to monitor,
handle company incorporation and business registration.
● TYPES OF OFFER TO TAKE OVER
- Voluntary offer – This is where an offer is made voluntarily and simultaneously to
all the shareholders of the target to acquire their shares in the target.
- Mandatory offer – This occurs when an acquirer is entitled to exercise control or
meets certain takeover thresholds. Typically, the bidder signs a share purchase
agreement to purchase a block of shares which, in turn, triggers the general
requirement for an announcement.
- Scheme of arrangement – The company collaborates with the bidder for the
bidder to take over the target. The target's shareholders will then vote on a
takeover proposal put to them by the collaborating parties. The target's assets or
shares are transferred to the bidder under a statutory court process (section 366,
Companies Act) or other relevant applicable legislation. This method is
commonly used by financial institutions and insurance companies to transfer
obligations owed to account and policyholders. A scheme of arrangement is now
included within the definition of a takeover under the Rules.
- Acquisition of assets and liabilities – The target sells its assets and liabilities to
the bidder through an ordinary resolution of the target's shareholders (requiring an
approval of over 50%, unless it is a major disposal or as otherwise set out in the
company's constitution). This controversial method has led to certain public-listed
entities being taken over and privatized.
● PUBLIC ACQUISITION (INVOLVED BID BID)
- Share acquisition transactions which involve a target company that is public listed
will have to comply with several regulatory bodies rules and regulations. All
 forms, resolutions and contracts are to be submitted to the SC & Bursa to obtain
necessary approvals.
- Process:
a) Pre-bid

- Before a bid is made to acquire shares in a Target Company, the

bidder will conduct a due-diligence enquiry on the Target
Company.

- This due-diligence enquiry will be limited to information that is

made public such as information lodged with SSM and information
lodged with Bursa pursuant to its listing requirements.

- If requested, the Target Company must provide the same

documents which are publicly available to all potential interested
bidders.

b) Bid (Notice)

- A bidder must make a written notice of the bid to the Target

Company and its shareholders under the format, rules and
regulations governed by SC.

- The bidder’s intention must then be made known by way of brief

press announcement (written) and published in newspapers and
sent to SC & Bursa (“the Notice Announcement”).

c) Takeover Offer

- If a bidder makes an offer to the target company, it is required to

forward the offer to the Board of the Target Company first before
announcing its takeover offer to the public within two months from
the Notice announcement.

- The offer should include the relevant offer conditions and must
include the information as set out in the SC guidelines.

- The offer period commences on the date of the press notice and
expires either upon close of the offer, the date when offer lapses or
upon withdrawal of the offer.
 d) Due-Diligence

- Preparation of due-diligence checklist and exercise will be carried

out by the bidder/offeror wherein financial advisors, project
managers and lawyers will be consulted on to prepare a
comprehensive due-diligence report which more often is included
as condition precedents to be fulfilled in the definitive/ Share Sale
Agreement.

- Financial, legal, tax and/or technical due-diligence and disclosure

are required to be satisfactory to the bidder/buyer.

e) Acceptance and Agreement

- If the Target Company accepts the bidders offer, the relevant Share
Sale Agreement is to be entered into with the Shareholders of the
Target Company within the offer period.

- Condition precedents to be met will be set out in the Share Sale

Agreement documents and are to be fulfilled by the parties
together with all approvals and consents before the unconditional
date.

f) Transfer of Sale Shares

- Once the unconditional date is met under the Share Sale

Agreement and all company documents and resolutions have been
prepared and executed, the transfer of the Sale Shares is to be
effected.
● PRIVATE ACQUISITION (NO BID PROCESS, TERUS SHARE SALE AGREEMENT)

- Step 1 – Execution of Preliminary Agreements (LOI & NDA);

- Step 2 – Due-diligence exercise stage;
- Step 3 – Negotiation and drafting stage of Share Sale Agreement;
- Step 4 – Execution of Share Sale Agreement;
- Step 5 – Conditions precedents stage (company resolutions and disclosure letters);
- Step 6 – Attaining Unconditional Date & Completion (lodging share transfer form
and issuance of share certificate)