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Shareholders of Sdn Bhd Companies

7 min read|Last Updated: August 31, 2022|
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What is the difference between a Private Limited Company (Sdn. Bhd.) and a Public Limited Company (Berhad)?

In terms of registration, there are not many differences for Private Limited Company (Sdn. Bhd.) and Public Limited Company (Berhad). The registration can be done either by an individual via over the SSM counter registration or by online submission done by an appointed Company Secretary. The cost is only MYR 1,060.

However, a Private Limited Company (Sdn. Bhd.) is basically a small medium enterprise (SME) whereby a Public Limited Company (Berhad) is commonly used for large scale businesses.

The compliance is more complex for a Public Limited Company (Berhad) compared to a Private Limited Company (Sdn. Bhd.) which is more straightforward and cheaper to maintain.

Both types of entities are preferred by local and foreign entrepreneurs due to its structure as a “legal person” which can own assets and liable to the debts accumulated by the business on its own without directly impact the stakeholder personal wealth.

The term “limited company” has indicated that such entity will have owners who are legally responsible towards the debts accumulated by the business only to the extent of the amount capital they initially invested. These owners are known as “Members of the Company” or “Shareholders”.

Malaysia Incorporation Specialist Suey

Why is Shareholders or Members important for a Limited Company?

For those who are not familiar with businesses, they might think that the Board of Directors are the most important person within an entity because they are normally responsible for the operations and day-to-day decision making.

However, what these people do not realise is that the actual owner behind an entity is actually the shareholders – people who invest in an entity for it to run its business and attain its goal. The Company is also liable to repay these people dividends for the capital injected.

For SMEs, the director and shareholder are normally the same person. Hence, the misinterpretation amongst non-business owners. Despite being the same person, their roles and function within a Company is different. In laymen’s term, directors are those who manage the business operation whilst a shareholder is the owner of said business and own the profit earned by the Company.

A shareholder is an important part of an entity because:

Business operations

Even though board of directors are appointed by the shareholders to manage the business and make a decision on a daily basis, shareholders have the ultimate power to object a decision made if they feel such proposal is not profitable for the Company in the long run.

Hence, the board of directors are normally under constant pressure to ensure all decisions made meet the targeted profit for the quarter or year.

Financing the Company

As the owner, shareholders are liable to inject capital into the business whenever board directors deemed it necessary. The board of directors may write up a proposal on why there is a need to increase such capital and how the injected capital will in return generate into profit.

The profit generated will then be issued as dividends to pay back the shareholders according to the percentage of their shares within the Company.

Control over the business entity

Shareholders have the power to appoint who they deemed skilful and knowledgeable to be in charge of the Company’s operation activities. If the person in charge made a blunt and result to decline in profit, the shareholder will also be liable towards the result. Other shareholders have the right to raise comments and questions during quarter or annual meetings.

Malaysia Incorporation Specialist Suey

What rights does shareholders or members has in a Company?

As enacted in Section 195 of Company Act 2016 – Member’s rights for management review, the shareholders have the rights to:

  • Question, discuss, comment, or make recommendation on the management of the Company
  • Pass resolutions under this section which makes recommendations to the Board on the matters affecting the management of the Company
  • Inspect and request a copy of contracts proposed by the Board of Director
  • Inspect and request a copy on payments made by the Board of Director based on contracts signed
  • Prevent a re-appointment of an auditor they deemed unworthy
  • Receive written resolution and entitled to vote on the circulation date of the resolution

Malaysia Incorporation Specialist Suey

Who can become a shareholder in a Private Limited Company (Sdn. Bhd.)?

As enacted in Company Act 2016, a member is a person, or a Company who owns’ at least one share unit within a Company. As the initial owners of a Company, they are entitled to dividends whenever a Company generate profit for the year. However, if a Company generate loss, then the share value will drop, resulting the owners to lose their money.

As the Company grows, potential investors can become a shareholder via share transfer or increase of shares within a Company.

Share transfer – A situation where an existing shareholder wishes to step down or sell off partial of his share to a potential investor, a share transfer will occur. The Company Secretary will prepare the documents such as Section 105 to ensure the share transfer occur successfully and as per required by the Company Act 2016.

Increase of shares – A situation where a new investor wishes to invest part of his personal wealth into a Company. He is liable to inject the funds into the Company corporate account, showing the proof to the Company Secretary before he updates in MyCoid the Section 78 – return of allotment of shares.

A Corporate shareholder will normally nominate a corporate representative which has the power to make a decision on behalf of the corporate shareholder. A corporate representative is also normally appointed as one of the directors within a Private Limited Company (Sdn. Bhd.). This is to protect the investment made by said corporate shareholder as well as to ensure the decisions made by the Board of Director will not jeopardise the investment directly.

The advantages in becoming shareholders within a Private Limited Company (Sdn. Bhd.) in Malaysia

Protection of personal wealth

As the owner of a Private Limited Company (Sdn. Bhd.), they are only liable towards the debt accumulated by said entity to the extent of which they initially invested. For example, Ali invested MYR 10,000 into ABCD Sdn. Bhd during incorporation. After 5 years of operations, the business met with a huge loss due to the pandemic hit. The debt accumulated throughout the years is MYR 50,000. However, Ali is only liable at MYR 10,000 of the loss accumulated instead of the whole sum.

Continuous of Company existence

As a “legal person”, if there is a change of stakeholder within the Company, it will not directly impact the existence of said entity. If a shareholder deemed it necessary to withdraw from the Company, they are allowed to sell of their shares to existing shareholders within the Company or to a new potential investor. Such situations will not interrupt the existence of the entity and will only cease to exist if it is legally dissolved.

Ability to transfer ownership

The shareholders are at liberty to purchase, sell or transfer their shares to other existing shareholders or potential investors. If the Company has the potential to grow, shareholders can mark up the price of their shares.

Interested in setting up a company in Malaysia? Reach out to us for incorporation services, corporate secretarial services, and more!

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What is a Hostile Takeover?2020-04-28T17:44:39+08:00

A hostile takeover is an occurrence in which an acquiring company acquires a target company through the company’s shareholders or management. It is referred to as a hostile takeover because in such instances, the management of the target company opposes the takeover of the company.

How many Shareholders may a Sdn Bhd Company Have at any Given Time?2020-04-28T17:44:02+08:00

Every Sdn Bhd company in Malaysia must have between two and 50 shareholders at any given time. This is an important law which can never be violated.

What is Public Equity?2020-04-28T17:43:15+08:00

Public equity refers to the shares of a public company. Access to public equity allows a company to gain more revenue. In Malaysia, only Bhd companies are allowed to access public equity.

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Join the discussions

  1. IronMan March 3, 2021 at 10:31 am - Reply

    In case of SDN BHD, if one of the shareholder (Mr. A) wish to sell off all his shares (about 25%) to 3 remaining shareholders (Mr. B, Mr. C & Mr. D), but all of them don’t want to buy it. What can/should Mr. A do?

    Mr. A: Wish to quit / end the partnership with them.
    This SDN BHD company already invested few shop lots, factories and lands.
    Before proceed the private discussing, please advise some options or possible ways here. Thank you.

  2. Mel February 6, 2021 at 5:44 pm - Reply

    Can a foreigner be one of the shareholder of a SDN BHD which is owned by Malaysian? Does the Malaysian have to be the majority of the shares in his company? or it can be equal with the rest of the shareholders?

  3. Tiwi September 28, 2020 at 9:51 am - Reply

    Hi Ng,

    Yes. It’s possible.

    Please contact us via Paul Hype Page to discuss further.


  4. Ms Tan July 15, 2020 at 2:53 pm - Reply

    can a sdn bhd buy back its own shares from shareholders who want to sell? To hold under its own name.

    • Tiwi July 22, 2020 at 11:23 am

      Hi Ms Tan

      Yes, it is possible for the sdn bhd to buy back it’s shares. Please contact us via Paul Hype Page to discuss further.

      Thank you for your question.

      Warm regards

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