Buying 60% of a Malaysian Sdn Bhd: what approvals and due diligence do we need?

First step is to ensure proper due diligence is conducted. Thereafter, to sign numerous agreements to ensure that all existing or past liabilities are all declated and as to whom should bear them.

Dear Sir/Madam,

Thank you for your query.

Before proceeding with the purchase of 60% shares in the company, there are several important approvals and checks that should be completed to protect you from hidden liabilities.

First, you will need to review the company’s Constitution and any existing shareholders’ agreement to confirm whether board or shareholder approvals are required for the share transfer, and whether there are any pre-emption rights or restrictions. It is also important to check whether the company’s existing loan agreements or major contracts contain change-of-control clauses that require consent from banks or counterparties.

From a documentation perspective, you should not proceed on a simple share transfer form alone. A properly drafted Share Sale Agreement is essential. This agreement should contain comprehensive warranties and indemnities from the founders covering matters such as undisclosed liabilities, accuracy of financial statements, tax compliance, ongoing litigation, validity of contracts, and compliance with laws. Depending on risk exposure, it may also be advisable to retain part of the purchase price in escrow or include specific indemnities for identified issues.

Due diligence is critical. This should include a review of the company’s audited accounts and current management accounts, outstanding loan facilities and security, major contracts, litigation exposure, tax compliance status, employment liabilities, and SSM filings. Particular attention should be given to any personal guarantees, registered charges, contingent liabilities, or off-balance sheet commitments.

In short, the key risks in a share acquisition lie in inheriting historical liabilities. A structured legal and financial due diligence exercise, combined with strong contractual protections in the Share Sale Agreement, is the primary safeguard.

We would be happy to arrange a call to understand the transaction size, timeline, and industry involved so we can advise on the appropriate scope and provide a fee estimate.

Kevin