There are many types of business entities available in Malaysia. To name a few:

However, the most preferred type of business entity in Malaysia is the Private Limited Company or otherwise known as Sendirian Berhad (Sdn. Bhd.). This type of entity forms an important part of the business scene in Malaysia through a large amount of revenue which they cumulatively generate as well as the opportunities for employment such entity provides.  

There are some occasions where shareholders deem it necessary or advantageous for them to sell off their shares; partially or fully. However, before such transfer occurs, there are a few information that shareholders must know to have a clearer picture on the impact such decision made.

What is a Private Limited Company (Sdn. Bhd.)?

As one of the prime destinations in Asia for foreign investors to invest or explore the market for business opportunities, the government has revised the Company Act 2016 to ease such entity to be solely owned by foreigner without the need to appoint a local nominee director.

A Private Limited Company (Sdn. Bhd.) is basically a small medium sized enterprise which the registration process can be done by either 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.

Such an entity is preferred by most entrepreneurs, local and foreign alike 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.

When is it beneficial for a shareholder to transfer their shares?

There are various reasons for shareholders within a Private Limited Company (Sdn. Bhd.) to plan or initiate a share transfer either to existing shareholders or to potential new investor, such as:

To raise new capital from potential new investors

As the business grow, the board of directors may suggest to the Company shareholders to raise the capital in order to expand the business further. From this suggestion, the existing shareholders might deem it beneficial for them to either invest more capital injection in the Company or sell off their shares to existing shareholders or new investors who offers a high consideration sum in return.  

For shareholders who wishes to step down from being a shareholder within a Company, the consideration sum offered to purchase the shares will be deemed as an income if the price is higher than the value, they initially injected.  

For example: The share initially injected by Ali is MYR 10,000 during incorporation stage. After 2 years of business operation, the business has decided to expand and there is an offer from a potential investor by the name Michael to purchase the share with consideration amount of MYR 30,000. After much consideration, Ali has decided to sell and transfer partial of his shares amounting MYR 5,000 to Michael with a consideration sum of MYR 15,000. Michael agreed and the share transfer takes place.

To re-organise the Company structure

Differing from the situation above, when a Company did not manage to achieve its target revenue after a few years of operating, the board of directors and members might deem it necessary to re-organise its structure and rewrite its business plan and goals. In this situation, the board of directors and members might plan to sell off the business or offer merging between two or more corporations to become one corporation. This way, the merged businesses may share their existing clients and secure more potential clients to ensure the corporation generate revenue. 

In terms of shareholders, some shareholders might decide to step down from being a shareholder by selling off their shares to the new investor. It might also occur where the existing shareholder within a corporation purchases those shares at a considerable amount, hence making him the biggest shareholder within the merged corporation. 

For example: ABCD Sdn. Bhd. has decided to merge with WXYZ Sdn. Bhd. due to the pandemic. Ali, one of the major shareholders in ABCD Sdn. Bhd. has offered Michael, the sole shareholder in WXYZ Sdn. Bhd. to purchase his shares of 1,000 units at MYR 2,000. After consideration and estimating the value of his Company, Michael decided that it is best to sell off his shares fully to Ali while it is still worth it. Michael is not willing to bargain there are another potential investor willing to offer such amount so long as the pandemic is still around.

To attract new investor with specialised skills or fresh ideas

This situation is the combination of scenarios one and two stated above. Normally, a Company that has run for the last 5 years will normally plan to expand their business and at the same time attract new investors to keep the business fresh with new ideas and purpose. The board of directors either plan to restructure or increase capital injection via new investors.  

By restructuring, the board of directors might scout potential Companies who are unable to survive during a pandemic hit but has the potential to bloom with the right planning and actions taken. Hence, buying off the Company over and merge it with their Company is the best way to do so.  

By planning an increase of capital, the board of directors might suggest:

  • Take up loan from the bank in order expand the business

  • Existing shareholders may inject more fund into the Company, and in return, more dividends will be issued once the Company achieve its target

  • Attract investors with additional skills to improve the Company aim and products

ADVISE: Whatever the reasons of transferring or selling your shares to another investor or stakeholder, do carefully consider the repercussions that could take place. 

How can the transfer of shares take place?

The one who can execute the share transfer is the appointed Company Secretary. However, there are several steps for the shareholders to take before the share transfer occur:

Step 1:

The Members of the Company may request for the board of Directors to carry out a meeting for them to inform such information to relevant parties of the decision made. If there is a new shareholder, then the existing shareholder will need the stakeholder approval before such action is taken. A director has the right to reject such proposal as it is part of their rights as enacted in the Company Act 2016.

Step 2:

Once the board of directors and members agree of the proposal, then the appointed Company Secretary must be notified for him to prepare the resolutions and documentations accordingly to file with SSM. Documents needed are:

  • Latest financial statement (audited or unaudited) must be completed and signed

  • Directors’ resolution to transfer share as per Section 212 of the Company Act 2016 must be signed completely

  • New shareholder passport/ NRIC and proof of residential address (if any)

  • Section 105 – Form of transfer of securities must be filled up and signed accordingly

Step 3:

Once the documents above are signed and ready, the appointed Company Secretary will then lodge the share transfer via MyCoid and retrieve the latest Section 51 – Register of Member.  

Next, the Company Secretary will then need to submit the documents above to Inland Revenue Board (LHDN) for validation purposes. Within 1 to 3 weeks’ time, LHDN will then issue how much stamp duty must the shareholder pay before they can issue the notice of assessment (NOA).

Step 4:

Once a notice of assessment (NOA) and stamp certificate is generated by LHDN, the share transfer is deemed successful and completed. The Company Secretary can now issue a new share certificate and update the Company’s register book for the new shareholder.  

Once a share transfer is done, the Company Secretary will be able to furnish these documents as proof the share transfer is done and successful:

  • Latest company profile

  • Section 51 – Updated register of members

  • Section 78 – Update particular of shares and shareholders

Whether you are interested in setting a new company in Malaysia or are looking to appoint a Corporate Secretary, we’re here to help! Reach out to us for company incorporation, taxation, auditing, accounting, corporate secretarial services, and more.

whatsapp us
contact us

FAQs

Can shares be transferred to previous owner of the same shares?2021-06-07T20:07:10+08:00

There are no restrictions regarding the ownership of shares by someone who has previously owned the same shares of the same Sdn Bhd company. Therefore, shares of a Sdn Bhd company can be transferred to a previous owner of those same shares. Of course, the final outcome of such a share transfer, as is the case with any other share transfer, is dependent on the consent of the existing owner of the share.

What are the restrictions governing the identity of those to receive transferred shares?2020-04-29T11:06:56+08:00

In Malaysia, certain restrictions regarding who is allowed to receive Sdn Bhd company shares which have been transferred exist. The first of these is that the person who is to transfer any shares is to inform the company in writing. After the company has been informed of this matter, the company has two months to find a member who is willing to purchase the shares. If this member accepts the shares and purchases them, the transfer of the shares in question will proceed. However, if the company is not able to find a purchasing member within the aforementioned two-month period, the person who is transferring the shares will have the right to sell and transfer the shares in question to any person and for any price.

Is there a limit to how many shares can be transferred at once?2021-06-07T20:02:14+08:00

A shareholder cannot transfer an unlimited number of shares. This is because there must be a limit to how many shares are available to be purchased. When any company in Malaysia first commences its business operations, it will issue a certain number of shares. Therefore, the number of shares transferred by the shareholder can exceed neither the number of shares held by the individual who is transferring the shares or the company.

Share This Story, Choose Your Platform!

Just keep reading…

Join our PHP Community MY Forum - Expert Tips & Resources

Join the discussions

2 Discussions

  1. Pang February 4, 2021 at 10:09 am - Reply

    can a preference shares be transferred to another person ?

Go to Top