Transfer of Shares of a Malaysia Company
Unless otherwise indicated, the Malaysia company stated in this article refers to a private company limited by share(s) (identified through the words ‘Sendirian Berhad?or ‘Sdn. Bhd.? formed and incorporated in Malaysia in accordance with the Malaysia Companies Act 2016.
Shares in companies are moveable property and they are not of the nature of immovable property. They are therefore transferable and can be passed from one person to another in the manner provided by the constitution. However, a share does not consist of a tangible thing but of a collection of rights, it must be transferred by some documents, evidence and record and is transferable by mere delivery coupled with the intent to convey ownership.
In Malaysia, the Companies Act 2016 (CA 2016) recognises the distinction between “transfer?and “transmission?of shares. A share is said to be transferred when the legal ownership of the share changes by voluntary and active act of the former owner such as when he sells his shares to another person, or where he gives them away. A transmission of shares is a change of ownership not by agreement and voluntary action of the parties involved, but by operation of law and as a result of some other event such as the death or bankruptcy of the former owner.
In a transfer of share, there must be a transferor and a transferee. Pursuant to the CA 2016, the transferor may transfer all or any of his shares in the company by a duly executed and stamped instrument of transfer and shall lodge the transfer with the company, as prescribed under Section 105(1) of the CA 2016.
- Documentation for Transfer of Shares
(1)
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Directors?resolution approving the transfer of shares
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(2)
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Audited financial statement of not more than 18 months
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(3)
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Form of Transfer of Securities
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(4)
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Old Share Certificate(s) (if any)
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(5)
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Transferee’s identification document and proof of address
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(6)
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Share Transfer Agreement (if any)
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(7)
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Letter of waiver of pre-emptive rights (if any)
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- Procedure for Transfer of Shares
(1)
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The transferor wishing to sell his shares in a private company will first try to find a ‘willing buyer?(the transferee);
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(2)
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The transferor after having found the buyer desirous of buying his shares will execute a Form of Transfer of Securities by signing as transferor and he shall then deliver the transfer form together with the share certificate(s) (if any) for the said shares to the buyer in exchange for the payment of the share transfer;
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(3)
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The transferee shall then execute the transfer form by signing as transferee and present the transfer form for stamping within 30 days after execution. The stamp duty to be paid shall be computed at a rate of RM3 per RM1,000 or fractional part of RM1,000 on the price or the value of the shares on the date of the transfer, whichever is greater;
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(4)
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After the transfer form is duly stamped with the proper stamp certificate, it shall be presented to the company together with the share certificate(s) (if any) with a request for it to be registered;
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(5)
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The secretary will carefully scrutinise the transfer form and the share certificate(s) and verifying the details as well as to ensure that the transfer form was duly executed and appropriate stamp duty has been paid;
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(6)
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As soon as possible (in any case, shall not be later than 1 month after the transfer form was submitted to the company), the secretary shall present the transfer to the directors at a meeting of directors for approval. The board will decide whether to approve the transfer and a resolution will be made to that effect;
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(7)
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If approved, the secretary shall cancel the old share certificate(s) (if any) and update the register of members and register of transfers (if any). The secretary shall also notify the Companies Commission of Malaysia the changes to the register of members via MyCoID. A company is not required to issue share certificate unless an application by a shareholder for a certificate relating to the shareholder’s shares in a company has been received or otherwise provided by its constitution;
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(8)
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Subject to the constitution, in the case of refusal for registration of the transfer, the board will pass a resolution declining the registration of the transfer and set out in full the reason for refusing the registration within 30 days from the receipt of the transfer form. The notice of resolution has to be sent to the transferor and transferee within 7 days of the resolution being passed.
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- Pre-Emption Rights
The constitution of a private company may have provisions that contain a pre-emption clause. Notably, the existence of pre-emption rights will impact the process by which a company can issue shares or a shareholder can transfer shares. Pre-emption rights give a company’s existing shareholders the first opportunity to acquire shares of the company before they are offered elsewhere, either on an issue of new shares in a new funding or a share transfer by an existing shareholder, as prescribed under Section 85 of the CA 2016.
The directors must refuse to register the transfer to an outsider if the transferor has breached the constitution and/or shareholders?agreement by not offering them to the other members of the company first. A transfer in breach of a pre-emption right is invalid. Therefore, before any transfer of shares is proposed to be undertaken, the secretary has to check the company’s constitution and/or shareholders?agreement to determine whether the company shareholders have pre-emption rights.
Kaizen, together with its associate firms in Malaysia, can help the clients to perform these compliances formalities so as to maintain the Malaysia company in good standing. Please call and talk to our professional accountants in Kaizen for further clarification.
See also:
Malaysia Company Incorporation Basic Package
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