The main differences between acquisitions involving private companies and those involving public companies lie in the level of regulatory oversight, disclosure obligations, and procedural requirements. Private company acquisitions are largely contractual in nature and governed by the Companies Act 2016. They allow greater flexibility in structuring, fewer disclosure obligations, and higher confidentiality throughout the process.
In contrast, acquisitions of public companies are subject to the Capital Markets and Services Act 2007 and the Malaysian Code on Take-Overs and Mergers 2016. Public deals involve strict compliance requirements, such as mandatory offers when control thresholds are triggered, public disclosures through Bursa Malaysia and approvals from the Securities Commission. These factors result in a more regulated and transparent process, with fixed timelines that limit negotiation flexibility.
In private transactions, the main documents include a Share Sale Agreement, which is the contract where a seller agrees to sell shares in a company and a purchaser agrees to buy them. It governs the terms of the sale, rights, obligations, and warranties and indemnities. A disclosure letter from the seller, board and shareholder resolutions and ancillary documents such as share transfer forms and regulatory filings are also common.
In public transactions, the documentation becomes more extensive. The offeror must prepare a Takeover Offer Document for submission to the Securities Commission for its clearance and dispatch to shareholders. The target company must appoint an independent adviser to prepare an Independent Advice Circular, advising shareholders on whether the takeover offer is fair and reasonable. Both the acquirer (offeror) and the target (offeree) are also required to make timely announcements to Bursa Malaysia throughout the offer process, including the launch, revisions, acceptances and outcome of the offer.
Under the Malaysian Code on Take-Overs and Mergers 2016, read together with the Rules on Take-Overs, Mergers and Compulsory Acquisitions, there are three main types of takeover offers. The first is a Mandatory General Offer, which is triggered when someone acquires more than 33% of a company’s voting rights or if they already hold between 33% and 50%, when they acquire more than an additional 2% within six months known as the creeping threshold. In these situations, the offer price in a Mandatory General Offer must not be lower than the highest price paid or agreed to be paid by the offeror or any person acting in concert with them for the target’s voting shares, during the offer period and within six months prior to the beginning of the offer period.
The second type is a Voluntary Offer, which is a take-over offer made for the voting shares or voting rights of a company by a person who has not incurred an obligation to make a mandatory offer. These offers must still comply with the applicable pricing and disclosure rules, where the offer price in a voluntary take-over offer cannot be less than the highest price paid or agreed to be paid by the offeror or any person acting in concert for the relevant voting shares or voting rights during the offer period and within three months prior to the beginning of the offer period, and any partial voluntary offer further requires the approval of the Securities Commission.
Finally, the Malaysian Code on Take-Overs and Mergers 2016, together with the Rules on Take-Overs, Mergers and Compulsory Acquisitions, also extends to Schemes of Arrangement, which are court-sanctioned corporate exercises such as mergers, amalgamations or compromises carried out under the Companies Act 2016. Where such schemes result in a change of control, they fall within the takeover framework and require consultation with the Securities Commission, ensuring that minority shareholders are afforded the same level of protection as in a conventional takeover offer.
To avoid dispute and controversy, what constitutes a “material fact” is normally contractually agreed and defined in private transactions. Materiality remains important under general disclosure requirements for public company transactions that are regulated. In private transactions, disclosure is governed by contract, so material facts typically include key business contracts, financial performance, litigation risks, intellectual property, and warranties and indemnities identified according to agreed monetary thresholds.
For public company acquisitions, the disclosure obligations are far broader and are governed by the Capital Markets and Services Act 2007, Bursa Malaysia’s Listing Requirements and the Securities Commission guidelines on submissions.
Under Malaysian law, a mandatory general offer must be made when an acquirer obtains more than 33% of the voting shares in a public company or if the acquirer holds between 33% and 50%, when it acquires an additional 2% or more in any six-month period known as the creeping threshold. Once triggered, the acquirer must make an offer to purchase the remaining shares on equal terms. The offer price must not be lower than the highest price paid or agreed to be paid by the offeror or any person acting in concert with them for the target’s voting shares, during the offer period and within six months prior to the beginning of the offer period. The process requires Securities Commission approval of the offer document before it is sent to shareholders.
M&A transactions in Malaysia typically adopt one of several structures, including share acquisitions, asset acquisitions, mergers or court sanctioned schemes of arrangement. Shares or assets may be acquired using a special purpose vehicle or entity ultimately controlled by the acquiror. In capital markets fund raising exercises Special Purpose Acquisition Companies (SPACs) may be used. A share acquisition is the most common approach, where the buyer acquires shares of the target company, thereby assuming ownership of the business along with all its assets and liabilities. Asset acquisitions allow the buyer to cherry-pick specific assets and liabilities but require third-party consents and re-registration of licenses, making them administratively more complex. Mergers are implemented through court-approved schemes under the Companies Act 2016, requiring approval from at least 75% of shareholders in value and a sanction from the High Court. SPACs, while permitted under Bursa Malaysia’s framework, remain uncommon compared to other markets because they are subject to very specific and stringent requirements Bursa Malaysia’s listing criteria.
The structuring of the purchase price in Malaysian M&A transactions often involves mechanisms such as locked-box, completion accounts (true-up) and earn-out provisions. True-up mechanisms through completion accounts are the most commonly adopted structure, as they allow the purchase price to be adjusted after closing to reflect the target’s actual financial position at completion, giving buyers comfort that they are paying a fair value. Locked-box structures, which fix the price by reference to a historical balance sheet and prevent sellers from extracting value between the locked-box date and completion. Earn-out provisions are where part of the purchase price is deferred and made conditional on the future performance of the target company. Instead of being paid upfront, this portion of the consideration is only payable if the business achieves certain agreed performance targets set out in the transaction documents.
In Malaysia, regulatory approvals often constitute key conditions precedent for closing an M&A transaction particularly where entities are in a strategic industry or operate under government license. For public takeovers, clearance from the Securities Commission is mandatory and compliance with Bursa Malaysia’s Listing Requirements. If the target company operates in regulated sectors, approvals must also be obtained from the relevant authorities. For example, acquisitions of financial institutions or insurance companies require consent from Bank Negara Malaysia, while telecommunications companies fall under the purview of the Malaysian Communications and Multimedia Commission. In the energy sector, the Energy Commission’s approval is necessary. Additionally, if the transaction involves foreign investment in restricted sectors such as telecommunications, oil and gas, or distribution trade, specific approvals under foreign investment guidelines may apply. These approvals must be satisfied before completion to avoid breaches of regulatory laws.
In private M&A transactions, conditions precedent are usually more bespoke but still include regulatory approvals where relevant. For example, acquisitions of companies in regulated industries often require Bank Negara Malaysia’s consent for insurance and banking or the Malaysian Investment Development Authority for foreign investment approvals. Beyond regulatory consents, private deals typically also include conditions precedent such as obtaining third-party contractual consents. For example, novation or assignment of material contracts, landlord consents under leases, third party lender consents and shareholder approvals.
Apart from regulatory consents, M&A agreements in Malaysia typically include contractual conditions such as Material Adverse Change (MAC) clauses. These clauses enable the buyer to terminate the agreement if significant adverse changes occur between signing and completion, such as severe financial downturns or regulatory actions against the target. Break-up fees are permitted but not common in Malaysia. In private deals, they sometimes feature in bespoke arrangements (often framed as deposits). In practice, sellers often require a potential buyer to place a deposit as part of the transaction, which may be forfeited if the buyer withdraws from the deal without completing it. Other provisions may include obtaining third-party consents for key contracts and ensuring that no litigation or injunction prevents completion, regulatory approvals and shareholders approvals.
Representations and warranties are often subject to knowledge and materiality qualifiers to balance risk between the buyer and seller. A knowledge qualifier limits a warranty to matters within the seller’s actual knowledge, usually defined in the agreement by reference to specific individuals such as directors or senior management. A materiality qualifier, on the other hand, narrows the scope of warranties so that only breaches or issues deemed “material” will trigger liability. Importantly, there is no statutory definition of “materiality” or “knowledge” under Malaysian law for these purposes. Their meaning is therefore determined by contract.
It is common practice in private M&A transactions for representations and warranties to be repeated, or “brought down,” at completion. This ensures that the buyer is protected if the target’s circumstances change between signing and closing.
Sandbagging provisions are where a buyer seeks to preserve its right to claim for breach of warranty even if it knew of the breach before closing are not expressly addressed under statute. Their enforceability therefore depends on the parties’ contractual agreement. In practice, sellers often negotiate for “anti-sandbagging” clauses to prevent buyers from claiming in respect of issues of which they were already aware prior to completion, while buyers may push for pro-sandbagging provisions to preserve flexibility in enforcing warranties. As the law is silent, the key consideration is how clearly the parties draft the relevant provisions in the transaction documents.
Guarantees for payment of the purchase price are uncommon for private deals but not impossible. A more practical and common method of ensuring payment would be to establish proof of funds before the transaction closes or prior to completion of documentation. This may take the form of corporate guarantees or personal guarantees from key shareholders. Bank guarantees and standby letters of credit are also common mechanisms to secure the purchase price.
In public M&A however, separate contractual guarantees are generally unnecessary, as the Malaysian Code on Take-Overs and Mergers 2016 requires the offeror to obtain a financial adviser’s confirmation that sufficient financial resources are available to satisfy full acceptance of the offer, effectively guaranteeing payment to shareholders without additional security.
Indemnification is commonly used to protect buyers against breaches of representations and warranties, covenants, and known risks identified during due diligence. A “my watch – your watch” approach is typical, where the seller covers pre-completion liabilities while the buyer assumes responsibility after completion.
Indemnification obligations are commonly subject to contractual limitations designed to balance risk between buyers and sellers. The most typical limitation is a cap on liability, usually expressed as a percentage of the purchase price. Another standard feature is a de minimis threshold, which excludes very small claims from being brought, and a basket or deductible mechanism. Under a deductible, the seller is only liable for losses exceeding a specified threshold, while under a basket, once the threshold is crossed, the seller is liable for the full amount of claims, not just the excess.
In Malaysian private M&A, the main post-completion liabilities typically arise from breaches of representations and warranties, tax liabilities, employee-related obligations, litigation or regulatory issues and contractual obligations assumed under the acquisition. For breaches of warranties, liability is usually governed by the terms of the share sale agreement, with survival periods negotiated between the parties.
In Malaysian private M&A transactions, the parties are generally free to choose the governing law and dispute resolution forum under the contract, subject to certain limitations. It is common for the parties to select Malaysian law to govern the share sale agreement for a Malaysian target company, particularly where the target is incorporated in Malaysia, to ensure certainty regarding corporate, tax, and regulatory matters.
Foreign law may be chosen where the transaction involves foreign investors or cross-border elements, such as a foreign purchaser or seller. However, Malaysian courts will only recognise foreign law to the extent it is not contrary to Malaysian public policy, and foreign law cannot override mandatory provisions of the Companies Act 2016, Capital Markets and Services Act 2007, or other applicable Malaysian legislation.
In Malaysian M&A transactions, parties may choose to resolve disputes through either the courts or arbitration, each having distinct advantages and limitations. Court proceedings offer the authority of the judiciary, well-established procedural rules, and the ability to obtain injunctive relief or urgent interim measures. Malaysian courts are also competent to handle complex commercial matters and provide binding precedents. However, litigation can be slow and costly, and proceedings are typically public, which may risk disclosure of sensitive commercial information. Enforcing Malaysian court judgments abroad also requires additional steps.
Arbitration, on the other hand, provides flexibility, confidentiality, and the ability to select arbitrators with relevant industry expertise. It is often quicker than court proceedings and arbitral awards can be enforced internationally under the New York Convention, to which Malaysia is a signatory. The downsides include potentially high costs, limited court powers to grant interim measures outside the arbitration process, and very restricted rights of appeal, which can reduce recourse if procedural or substantive issues arise. In practice, arbitration is commonly preferred in cross-border Malaysian M&A, whereas domestic disputes may still be brought before Malaysian courts, particularly where urgent relief or injunctions are required.
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