Shareholders Agreement (Malaysia)
SHAREHOLDERS AGREEMENT
Companies Act 2016 (Malaysia) | Contracts Act 1950 | Capital Markets and Services Act 2007
THIS SHAREHOLDERS AGREEMENT is entered into on [Agreement Date]
BETWEEN:
(1) [Company Name], incorporated under the Companies Act 2016, registered address at [Company Address] (the "Company");
(2) [Shareholder One Name], holding [Shareholder One Shares] ("Shareholder 1"); AND
(3) [Shareholder Two Name], holding [Shareholder Two Shares] ("Shareholder 2").
1. BOARD OF DIRECTORS AND GOVERNANCE
1.1 The Board of Directors shall comprise [Board Size] directors. Each Shareholder holding 25% or more of the issued shares shall be entitled to nominate one director to the Board. Directors shall be appointed and removed in accordance with Section 196 and Section 206 of the Companies Act 2016.
1.2 The following matters shall require approval of shareholders holding at least [Reserved Matters Threshold]% of the issued shares ("Reserved Matters"): amendment of the company's constitution; issuance of new shares or other securities; change of the Company's principal business; disposal of assets representing more than 25% of the Company's total assets; incurring debt exceeding RM 500,000; entering into related-party transactions; and any merger, acquisition, or reconstruction.
2. DIVIDEND POLICY
2.1 The Shareholders agree to the following dividend policy for the Company: [Dividend Policy]. Dividends shall be paid proportionally to each Shareholder's percentage shareholding and shall be subject to income tax under the Income Tax Act 1967.
3. SHARE TRANSFERS AND PRE-EMPTION
3.1 No Shareholder may transfer any shares to a third party without first offering those shares to the other Shareholders on a pro-rata basis at the same price and on the same terms as the proposed third-party transfer (the "Right of First Refusal").
3.2 The non-transferring Shareholders shall have [Pre-Emption Period] days to accept the offer. If they decline or do not respond within this period, the transferring Shareholder may proceed with the transfer to the third party on no more favourable terms, subject to the third party executing a Deed of Adherence to this Agreement.
4. TAG-ALONG AND DRAG-ALONG RIGHTS
4.1 Tag-Along: If a majority Shareholder proposes to transfer shares representing 50% or more of the total issued shares to a third party, each minority Shareholder shall have the right to require the third party to acquire the minority Shareholder's shares on the same price and terms (tag-along right).
4.2 Drag-Along: If Shareholders collectively holding at least 75% of the issued shares propose to sell all their shares to a bona fide third party acquirer, those Shareholders may require all remaining Shareholders to sell their shares to the same acquirer at the same price and on the same terms (drag-along right). The drag-along mechanism facilitates a clean 100% acquisition as contemplated under [Tag/Drag Rights].
5. DEADLOCK RESOLUTION
5.1 If the Shareholders are unable to reach agreement on a Reserved Matter after two consecutive Board meetings and one Shareholder meeting, a deadlock shall be deemed to have occurred. The Shareholders shall first attempt to resolve the deadlock by negotiation within 30 days.
5.2 If negotiation fails, the deadlock shall be resolved by the following mechanism: [Deadlock Mechanism]. For a buy-sell mechanism, either Shareholder may give written notice specifying a price per share; the receiving Shareholder must then elect within 30 days whether to buy the offering Shareholder's shares or sell their own shares at that price.
6. GOVERNING LAW AND DISPUTE RESOLUTION
6.1 This Agreement is governed by the laws of Malaysia, including the Companies Act 2016 and the Contracts Act 1950. The Parties submit to the non-exclusive jurisdiction of the courts of Malaysia.
6.2 Disputes that cannot be resolved by negotiation shall be referred to arbitration under the Arbitration Act 2005 before the Asian International Arbitration Centre (AIAC) in Kuala Lumpur.
Company (authorised signatory)
________________
Signature
Shareholder 1
________________
Signature
Shareholder 2
________________
Signature
What Is a Shareholders Agreement (Malaysia)?
A Shareholders Agreement (SHA) in Malaysia is a private contract between the shareholders of a company incorporated under the Companies Act 2016 that governs their relationship, rights, and obligations in relation to the company. The Companies Act 2016 (CA 2016), which replaced the Companies Act 1965, provides the statutory framework for companies registered with the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia, SSM), while the Shareholders Agreement supplements the company's constitution and imposes additional contractual obligations on the shareholders.
The Companies Act 2016 introduced significant reforms to Malaysian company law, including the optional constitution (a company may now incorporate without a constitution under Section 35), the single-director single-shareholder company, and enhanced solvency requirements. A Shareholders Agreement operates as a private contract binding only the signatories — unlike the company's constitution, which is a public document filed with SSM and binding on all current and future shareholders. The Shareholders Agreement therefore provides confidentiality and flexibility that the public constitution cannot.
Malaysian courts enforce Shareholders Agreements as binding contracts under the Contracts Act 1950. The Court of Appeal and the High Court of Malaya have affirmed that Shareholders Agreements are enforceable and that breaches may be remedied by specific performance under the Specific Relief Act 1950, injunctions under Order 29 of the Rules of Court 2012, or damages under Section 74 of the Contracts Act 1950. The landmark case of Tan Ghee Hock v Sim Ah Ba & Ors [2015] demonstrates Malaysian courts' willingness to enforce SHA provisions and grant injunctions to prevent breaches.
For private companies (Sdn Bhd) incorporated under Section 14 of the Companies Act 2016, Shareholders Agreements typically address management rights, transfer restrictions, pre-emption rights, and exit mechanisms including buy-sell provisions. For companies listed on Bursa Malaysia, the Capital Markets and Services Act 2007 and the Bursa Malaysia Listing Requirements impose additional disclosure and governance obligations that supplement the Shareholders Agreement.
Foreign investment in Malaysian companies is subject to the Malaysia Investment Development Authority (MIDA) guidelines and sector-specific equity requirements. Certain strategic sectors restrict foreign ownership — for example, banking and insurance under the Financial Services Act 2013 and the Islamic Financial Services Act 2013 require Bank Negara Malaysia (BNM) approval for ownership changes. The Shareholders Agreement must be consistent with the applicable equity guidelines and obtain necessary regulatory approvals before the agreed shareholding structure becomes effective.
The legal framework governing the Shareholders Agreement (Malaysia) in Malaysia draws on several key statutes and regulatory bodies. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Parties executing a Shareholders Agreement (Malaysia) in Malaysia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Companies Act 2016 (Act 777) sets the foundational requirements.
When Do You Need a Shareholders Agreement (Malaysia)?
A Shareholders Agreement in Malaysia is needed whenever a company has two or more shareholders who wish to regulate their relationship and protect their respective interests beyond the company's public constitution.
A Shareholders Agreement is required when founders of a Malaysian startup incorporated under the Companies Act 2016 need to formalise their equity split, vesting schedules, responsibilities, and what happens if a founder leaves the company. Without an SHA, the departure of a founding shareholder may leave the remaining founders unable to acquire the leaver's shares.
A Shareholders Agreement is needed when a private equity firm or venture capital fund acquires a minority stake in a Malaysian company. The investor requires SHA protections — board representation rights, information rights, anti-dilution protection, pro-rata participation rights in future funding rounds, and exit mechanisms (drag-along, IPO or trade sale rights) — that cannot be achieved through the public constitution alone.
A Shareholders Agreement is required when a joint venture between two or more companies is structured through a special purpose vehicle (SPV) incorporated under the Companies Act 2016. The SHA governs the joint venture parties' respective contributions, management rights, profit sharing, and exit rights.
A Shareholders Agreement is needed when a family business undergoes generational succession — the SHA establishes share transfer restrictions that prevent company shares from passing to non-family members without the consent of existing shareholders, protecting the family's control.
A Shareholders Agreement is required when a foreign company takes a minority equity stake in a Malaysian company under MIDA's investment facilitation framework, to protect the foreign investor's rights in a structure where the local partner holds the majority stake for regulatory compliance with Bumiputera equity requirements in certain sectors.
A Shareholders Agreement is needed when a company undertakes a pre-IPO financing round, requiring the parties to agree on the rights of pre-IPO investors, lock-up periods, and the IPO trigger mechanism under the Capital Markets and Services Act 2007 and Bursa Malaysia rules.
What to Include in Your Shareholders Agreement (Malaysia)
A Shareholders Agreement in Malaysia under the Companies Act 2016 should contain the following essential elements.
Parties and Shareholding: Full legal names, NRIC numbers (for individual shareholders) or SSM registration numbers (for corporate shareholders), and the number and class of shares held by each shareholder. The SHA should attach a cap table showing the fully diluted shareholding structure.
Board Composition and Management: The composition of the board of directors, nomination rights of each shareholder (based on proportionate shareholding), quorum requirements, and the role of independent directors. Section 196 of the Companies Act 2016 governs director qualifications and the management powers of the board.
Voting Rights and Reserved Matters: Matters requiring unanimous shareholder approval or a super-majority (e.g., 75%) — including amendments to the company's constitution, issuance of new shares, change of business, disposal of major assets, incurring debt above a threshold, and related-party transactions. Reserved matters protect minority shareholders from being overridden by majority shareholders.
Dividend Policy: The company's dividend distribution policy — whether profits shall be distributed at a specified percentage, at the board's discretion, or subject to a minimum distribution. Income tax under the Income Tax Act 1967 applies to dividends received by shareholders, and the SHA may need to address tax efficiency.
Share Transfer Restrictions and Pre-emption Rights: Restrictions on the transfer of shares to third parties without first offering them to existing shareholders (right of first refusal or pre-emption right). Pre-emption procedures must comply with any provisions in the company's constitution and Section 105 of the Companies Act 2016.
Tag-Along and Drag-Along Rights: Tag-along rights entitle minority shareholders to sell their shares on the same terms as a majority shareholder transferring to a third party. Drag-along rights allow the majority shareholder to compel minority shareholders to sell their shares in a trade sale on the same terms. These rights support clean exit transactions.
Deadlock Provisions: Mechanisms to resolve deadlock — a situation where shareholders cannot agree on a material decision. Deadlock resolution mechanisms include: mediation (referring disputes to the Asian International Arbitration Centre, AIAC), the 'shotgun' or buy-sell mechanism (either party may offer to buy or sell at a specified price), or third-party valuation.
Exit Mechanisms: IPO provisions (requiring all shareholders to support an initial public offering on Bursa Malaysia under the Capital Markets and Services Act 2007), drag-along sale rights, and put/call option mechanisms. Section 85 of the Companies Act 2016 enables companies to issue shares with attached put or call options.
Governing Law: Malaysian law governs. Disputes are referred to the High Court of Malaya or to arbitration under the Arbitration Act 2005 before the Asian International Arbitration Centre (AIAC) in Kuala Lumpur.
Additional compliance elements for a Shareholders Agreement (Malaysia) used in Malaysia include: Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Forms-legal.com provides this template as a starting point for Malaysia-compliant documentation.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Shareholders Agreement (Malaysia) (Malaysia) [Legal document template]. Forms Legal. https://forms-legal.com/malaysia/business/corporate/shareholders-agreement-malaysia
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title = {Shareholders Agreement (Malaysia) (Malaysia)},
year = {2026},
howpublished = {\url{https://forms-legal.com/malaysia/business/corporate/shareholders-agreement-malaysia}},
note = {Free legal document template. Based on Companies Act 2016 (Act 777)}
}
Frequently Asked Questions
A Shareholders Agreement is legally binding in Malaysia as a contract under the Contracts Act 1950, provided it meets the requirements of Section 10 — offer, acceptance, consideration, and capacity. The SHA binds the signatories and their successors and assigns (where assignment is permitted). Unlike the company's constitution filed with SSM, the SHA is a private document and does not bind future shareholders who have not signed it — unless the SHA requires new shareholders to execute a deed of adherence as a condition of receiving shares. Malaysian courts, including the High Court of Malaya and the Court of Appeal, have enforced SHA provisions and granted injunctions to prevent breaches. In the event of conflict between the SHA and the company's constitution, the SHA prevails as between the parties to it, while the constitution governs the company's dealings with the outside world.
A Shareholders Agreement does not need to be filed with the Companies Commission of Malaysia (SSM) and is not a public document. The Companies Act 2016 requires the company's constitution (if any) to be lodged with SSM under Section 35, but the Shareholders Agreement remains entirely private between the parties. This privacy is one of the primary advantages of a Shareholders Agreement over the constitution — sensitive commercial terms about management rights, dividend policy, and exit mechanisms are not disclosed to the public, competitors, or regulatory bodies. Certain regulatory filings may be triggered by the shareholding structure agreed in the SHA — for example, acquisition of 5% or more of a listed company's shares requires disclosure under Section 137 of the Capital Markets and Services Act 2007, and acquisition of 33% or more triggers a Mandatory General Offer obligation under the Securities Commission Malaysia Takeover Code.
Exit mechanisms for a shareholder in a Malaysian Shareholders Agreement depend on the provisions agreed by the parties. Common mechanisms include: (1) Right of First Refusal — the exiting shareholder must first offer their shares to existing shareholders at the same price and on the same terms as any third-party offer; (2) Tag-along rights — minority shareholders can require the acquirer to purchase their shares on the same terms as the majority shareholder's exit; (3) Drag-along rights — the majority shareholder can compel minority shareholders to sell their shares in a trade sale; (4) Buy-sell or 'shotgun' mechanism — either party may make an offer to buy the other's shares or sell their own at a specified price, and the other party must elect to buy or sell; (5) IPO — all shareholders support a listing on Bursa Malaysia under the Capital Markets and Services Act 2007. Valuation disputes are typically resolved by an independent chartered accountant from the Malaysian Institute of Accountants (MIA).
Pre-emption rights in a Malaysian Shareholders Agreement are contractual rights that give existing shareholders the first opportunity to purchase shares before they can be transferred to a third party. A pre-emption right (also called a right of first refusal) works as follows: a selling shareholder who receives a third-party offer must first offer their shares to existing shareholders at the same price and on the same terms. Existing shareholders then have a specified period (typically 30 to 60 days) to accept or decline. If existing shareholders decline, the selling shareholder may proceed to sell to the third party on no more favourable terms. Pre-emption rights protect existing shareholders from having their equity diluted by the entry of unwanted third parties. Under the Companies Act 2016, Section 105 gives existing shareholders pre-emption rights on new share issuances unless the constitution or a shareholder resolution provides otherwise — the SHA typically addresses pre-emption rights for secondary share transfers separately.
Disputes between shareholders in Malaysia can be resolved through several mechanisms. The Shareholders Agreement typically provides for: (1) internal negotiation between the parties; (2) mediation before the Asian International Arbitration Centre (AIAC) or the Malaysian Mediation Centre; (3) arbitration under the Arbitration Act 2005 at the AIAC in Kuala Lumpur; or (4) litigation in the High Court of Malaya (Commercial Division). The Companies Act 2016 also provides statutory remedies for minority shareholders — Section 346 allows a shareholder to petition the court for relief against oppression or unfairly prejudicial conduct of the company's affairs. Section 348 allows a statutory derivative action on behalf of the company. The High Court of Malaya can order a buy-out of the minority shareholder's shares at fair value as a remedy for oppression. Deadlock provisions in the SHA (buy-sell mechanisms, third-party valuation) are the first line of resolution before court proceedings are commenced.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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