A Guide to Acquiring Malaysian Companies: What to Look Out For When Buying Shares?

Looking to acquire shares in a private Malaysian company? What is the process, and what are the risks?

Here is a breakdown of the key points regarding share acquisitions 👇

1️⃣ Share Purchase Agreement (SPA)

The core document outlining payment terms:

10% upon signing, 90% upon completion (most common)

Full payment upon completion

Held in a lawyer’s escrow account

2️⃣ What is “Completion”?

Conditions precedent met → Share transfer form signed → Stamped by LHDM → Registered with SSM → Buyer pays full amount

The shares are only officially transferred once completion takes place.

3️⃣ Warranties: The Buyer’s “Umbrella”

The seller provides assurances regarding facts about the company. If these prove untrue, the buyer can claim damages (monetary compensation).

⚠️ Generally, one cannot demand a “refund and return of shares”; only compensation for losses can be claimed.

4️⃣ Disclosure Letter: The Seller’s “Shield”

The seller uses this to disclose specific facts and limit the scope of warranties.

The buyer cannot make a claim regarding matters that have already been disclosed.

5️⃣ Conditions Precedent: Prerequisites for the Transaction

Common conditions:
✔ Regulatory approvals
✔ Internal company resolutions
✔ Resolution of existing litigation

If conditions are not met, the buyer may terminate the transaction or waive the conditions.

6️⃣ What if the company is involved in a lawsuit or under investigation?

Require the seller to disclose all litigation documents and legal opinions.

If the company is under investigation by government authorities, it is advisable to wait until the investigation concludes before finalizing the transaction.

7️⃣ Backing out after signing? There are consequences.

Agreements typically include clauses regarding compensation for breach of contract.

Common scenarios: forfeiture of the deposit (e.g., a 10% down payment) or an agreement on higher compensation.

8️⃣ Buying a company vs. buying a house

Compare	Buy shares	Buying real estate
Bank Loan	Difficult (high stock price volatility)	easy
Collateral	Banks generally do not accept it.	Real estate can be directly mortgaged.

3 Tips for Buyers

1️⃣ Engage a lawyer early (starting from the Letter of Intent stage).
2️⃣ Conduct thorough due diligence (assets, liabilities, and litigation).
3️⃣ Ensure warranty clauses are clearly drafted (basis for claims).

Acquiring a company is a major undertaking; the assistance of a professional lawyer is essential.

⚠️ Disclaimer: This content provides general information on Malaysian law and is for reference purposes only.

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