Shareholder agreement in Malaysia: do you need one, what it covers, what it costs

Do you need a shareholder agreement in Malaysia?

No law in Malaysia requires a Sdn Bhd to have a shareholder agreement, and the Companies Commission of Malaysia (SSM) does not ask for one. A Sdn Bhd with two or more owners should still have one. It matters most in a 50/50 company, in a family company, and where one owner invests and another runs the business.

A shareholder agreement is a private contract between the owners of a company. It says in advance how they will run the company together, and what happens when an owner leaves, dies or disagrees with the others. It binds only the people who sign it, and the courts enforce it between them.

Without one, two sets of rules decide those questions: the Companies Act 2016 (Act 777) and the company's constitution, if it has one. A constitution is the company's own rulebook (in Malay, perlembagaan syarikat). It is not the Federal Constitution. Older companies call it the memorandum and articles of association.

• Required by law: no. Worth having with two or more owners: yes, most of all at 50/50.
• What it must settle: deadlock, an owner who leaves or dies, decisions that need every owner's consent, dividends, and who sees the books.
• Cost: no law fixes a lawyer's fee for a shareholder agreement. The published prices we read are in the cost section below.
• A free template can be a start, if a lawyer checks it against the constitution before anyone signs.
• Stamp duty: usually RM10 for each signed copy, paid within 30 days of signing.
• Already fallen out, and no agreement? See the first steps in the section on falling out below.

People often call a co-owner their "partner" (in Malay, rakan kongsi; in Chinese, 合伙人), and say shares are "on paper" when one person holds them for another. In law, a co-owner of a private company limited by shares (Sdn Bhd) is a shareholder, and the document is a shareholder agreement (perjanjian pemegang saham; 股东协议). This article uses "partner" and "owner" in the everyday sense. A partnership agreement is a different document. It is for a partnership under the Partnership Act 1961, or a limited liability partnership under the Limited Liability Partnerships Act 2012.

What happens if your Sdn Bhd has no shareholder agreement?

If a Sdn Bhd has no shareholder agreement, the Companies Act 2016 and the company's constitution decide every question between the owners. A company does not need a constitution (section 31). If it has none, the Act alone sets the rights and duties of the company, its directors and its shareholders. A memorandum and articles from the Companies Act 1965 now count as the constitution.

• A partner wants to leave. Without an agreement, there is no right to be bought out: the partner must find a buyer or agree a price. A court steps in only in limited cases, such as unfair treatment (section 346) or where winding up is just and equitable (section 465). An agreement can say who buys and how the price is set.
• You are 50/50 and cannot agree. Without an agreement, a tied shareholders' vote usually fails, because the Act gives the chairperson no casting vote (but see the caveat below). If the owners cannot agree a way out, a court may have to end it, even by winding the company up. An agreement can set deadlock steps: talk, mediation, then a set way for one owner to buy the other out.
• The majority removes you as a director. Without an agreement, owners with more than half the votes can remove a director, subject to the constitution (section 206). You keep your shares but lose your say. An agreement can give each owner a right to name a director, if the constitution says so too.
• A partner dies. Without an agreement, the shares pass to the executor or administrator of the estate, and may then pass to the family (section 109). An agreement can give the other owners a right to buy the shares from the estate at a valued price.
• You cannot see the books. Without an agreement, only directors may inspect the accounting records (section 245); other shareholders get the yearly financial statements. An agreement can give every owner regular reports and a right to inspect the books.
• No dividend is paid. Without an agreement, the directors decide, and the Act gives no owner a right to a dividend (section 132). An agreement can set a dividend policy, but any payment still needs profits and solvency (section 131).

Two voting rules sit behind all of this. Most shareholder decisions need more than half of the votes cast, called an ordinary resolution (section 291). Big changes, including a change to the constitution, need 75% of the votes cast, called a special resolution (sections 36 and 292). So an owner with more than 25% who votes against can block a special resolution, and at 50/50 either owner can block every resolution.

One caveat on ties. Many older companies still run on articles based on Table A, the model rules under the Companies Act 1965. Table A gives the chairman a casting vote, and those articles still apply until the company changes them (section 619). So check your own constitution before you rely on a tie.

When business partners in a Sdn Bhd fall out: quitting, 50/50 deadlock, a partner who dies, shares held on paper

When the owners of a Malaysian Sdn Bhd fall out and have no shareholder agreement, the dispute usually ends in one of two ways. The owners agree a price so that one side leaves, or one of them goes to court. Mediation, where a neutral person helps the owners agree, is a third way if both sides accept it. A court case takes time and money, and nobody can promise its result.

Fallen out with your partner and have no agreement? What you can do first

A shareholder of a Malaysian Sdn Bhd who has fallen out with the other owners still has rights under the Companies Act 2016. Use them before you think about court.

1. Ask the company in writing for the latest yearly financial statements. It must send them to every shareholder within six months of the year end (sections 257 and 258).
2. You can also buy a copy of the financial statements the company lodged with SSM (sections 259 and 601). But an exempt private company, one with 20 or fewer shareholders and no company among them, may lodge only a certificate instead (section 260). Many family companies qualify.
3. Ask to inspect the register of members and the minutes of shareholder meetings (sections 55 and 342).
4. If you are still a director, you have a right to inspect the accounting records (section 245).
5. Read the company's constitution, or its old memorandum and articles. It may give you more rights than the Act.
6. If you hold 10% or more of the paid-up voting shares, you can require the directors to call a shareholders' meeting (section 311).
7. If an owner stays away so that no meeting can be held, a director or another owner can ask the court to order one. The court can direct that one owner present is enough for a quorum (section 314). The court decides whether to make the order.
8. If you hold more than 25% of the votes, you can block a special resolution, such as a change to the constitution. At a meeting, that works only if you attend, or send a proxy, and vote against it. A written resolution cannot pass without your agreement.
9. Keep a copy of every letter and every reply, and take advice before you act.

If that fails, agree a price so that one side leaves, try mediation, or go to the High Court, below.

Can you take your partner to court? Three routes under the Companies Act 2016

A shareholder of a Malaysian Sdn Bhd can ask the High Court for one of three remedies under the Companies Act 2016. The first is an oppression order, for an owner who is treated unfairly (section 346). The second is permission to sue in the company's name, for harm done to the company itself (sections 347 and 348). The third is winding up, the last resort (section 465). The wrong route can lose the case.

Two points from the cases shape all three routes. First, courts will not step in just because you were outvoted: shareholders have to accept majority rule (Owen Sim Liang Khui v Piasau Jaya Sdn Bhd, Federal Court, 1995). Second, a breach of a shareholder agreement is usually a contract claim, not oppression. The Federal Court said so in Jet-Tech Materials Sdn Bhd v Yushiro Chemical Industry Co Ltd (2013). It said so again in ISM Sendirian Berhad v Queensway Nominees (Asing) Sdn Bhd (2026). So write the remedies into the agreement itself, such as a buy-out at an agreed price or arbitration.

Is a shareholder agreement the same as the company constitution?

No. A Sdn Bhd's constitution is the company's own rulebook: it binds the company and every shareholder, and anyone can inspect it at SSM. A shareholder agreement is a private contract that binds only the owners who sign it. A Sdn Bhd can have one, both or neither.

A company adopts a constitution by special resolution and lodges it with SSM within 30 days (section 32). Once adopted, it binds the company and every shareholder, including one who joins later, as if each had signed it (section 33). Anyone may pay SSM a fee to inspect or copy a lodged document, so the constitution is public (section 601). It can be changed by special resolution, unless it forbids the change (section 36). It has no effect where it conflicts with the Act.

The shareholder agreement is a contract. A new shareholder is bound only if he or she signs it, or signs a deed of adherence. That is a short document by which a new shareholder agrees to be bound by the existing agreement. The agreement is not lodged with SSM and stays private.

The two documents must match. In Tuan Haji Ishak Ismail v Leong Hup Holdings Bhd (1995), the Court of Appeal considered a private agreement about board seats. It held that the agreement did not bind the company, or the shareholders who had not signed it. So a right that must bind the company, such as the right to name a director, belongs in both documents. The company may also sign the agreement. But a contract promise by the company cannot stop its shareholders using a power the Act gives them, such as removing a director. In a Sdn Bhd, only the constitution can limit that power itself (section 206). But owners who sign the agreement can promise each other how they will vote, so the main promises should be the owners' own.

What should a shareholder agreement for a Sdn Bhd cover?

A shareholder agreement for a Malaysian Sdn Bhd usually covers the board, reserved decisions, share transfers, deadlock, exit or death, information, dividends, funding and disputes. The usual subjects are:

• What each owner puts in, who sits on the board, and how directors are appointed and removed.
• New shares and funding: who puts in more money, as shares or as a loan, and what happens if an owner cannot pay. By default the directors need the shareholders' approval to issue shares (section 75). Exceptions include a bonus issue, an offer to all owners in proportion, and shares issued to pay for an asset after 14 days' notice.
• Transfers of shares, deadlock, decisions that need every owner's consent, and the exit or death of an owner, with how the shares are valued.
• Information and dividends: what each owner receives and may inspect, and how much profit is paid out.
• Confidentiality, limits on taking the company's customers or staff, how disputes are resolved, and how new shareholders join by a deed of adherence.

Shareholder agreement sample clauses: what each clause does

The sample wording in this section shows what each shareholder agreement clause does. It is an example for discussion, not a template to sign. Square brackets mark the places where a number or a name goes. Words with capital letters, such as Shares or Fair Value, are terms the full agreement defines. Your own agreement must match your constitution, your share split and your plans.

Reserved matters: decisions every owner must agree to

A reserved-matters clause lists decisions that the board or the majority may not take alone. Each needs the written consent of every owner, or of owners holding a stated percentage. Set the percentage above the largest owner's holding, or the clause protects no one. In a 50/50 company, "every Shareholder" means both of you must agree. Most of the listed matters are decisions for the board, and a shareholders' vote cannot stop the board unless the constitution limits its powers (section 211). So write the same list into the constitution as a limit on the directors, and say what follows a breach.

Sample wording: "Each Shareholder shall use its votes to make sure that the constitution requires, and the Company obtains, the prior written consent of every Shareholder before the Company does any of the following: (a) issue any shares; (b) sell or license any trademark, land or other asset worth more than RM[50,000]; (c) borrow more than RM[100,000]; (d) change the business or the constitution; (e) change the pay of any director or Shareholder from that set out in [Schedule X]."

Directors and board seats

A board-seat clause gives each owner, or each owner above a stated holding, the right to appoint one director. It matters because the Act lets a bare majority remove any director of a private company, subject to the constitution (section 206). So the right must also be written into the constitution; in the agreement alone, it binds only the signatories. A director you appoint must still act in the best interest of the company (sections 213 and 217), and cannot simply follow your instructions.

Sample wording: "Each Shareholder holding at least [25]% of the Shares may appoint one director by written notice to the Company, and may remove and replace that director in the same way. Each Shareholder shall vote its Shares to give effect to this clause, and against any change to the constitution that is not consistent with this Agreement."

Transfers: right of first refusal, tag-along and drag-along

A transfer clause controls who may buy into the company. A right of first refusal means that an owner who wants to sell must first offer the shares to the other owners. Tag-along applies when an owner sells shares that give an outsider half or more of the votes. The other owners may then sell to that buyer on the same terms. Drag-along means that if owners holding a stated majority sell the whole company, the rest must sell too, on the same terms. Set the drag-along percentage above the largest owner's holding. The buyer must not be connected with the owners who drag, and each owner must get the same price and kind of payment. How a sale is completed if an owner refuses to sign needs its own document. A power of attorney is one way, and in Peninsular Malaysia it has formal rules. It must be signed before a lawyer, magistrate or commissioner for oaths who certifies it, and a copy is deposited at the High Court (Powers of Attorney Act 1949, sections 3 and 4). It should also say that it is irrevocable (section 6). These rights should also be in the constitution, which should let the directors refuse a transfer until the buyer signs a deed of adherence (section 106).

Sample wording: "A Shareholder who wishes to sell any Shares shall first offer all of them to the other Shareholders at the price a buyer has offered, and the other Shareholders may buy all of them within [30] days; if they do not, the seller may sell them to that buyer within [60] days at no lower price and on no better terms. No Shareholder shall sell Shares that would give the buyer, with any Shares it and persons connected with it already hold, 50% or more of the votes, unless the buyer first offers to buy every other Shareholder's Shares on the same terms. If Shareholders holding at least [__]% of the Shares accept an offer for all the Shares from an unconnected buyer, every other Shareholder shall sell to that buyer at the same price and for the same kind of payment."

Deadlock clause: what happens when 50/50 owners cannot agree

A deadlock clause sets the steps the owners follow when a decision is stuck. That can be a tied shareholders' vote, a board that cannot agree, or a reserved matter that one side refuses. It matters most in a 50/50 company, because the Act gives no casting vote at a shareholders' meeting. The board's casting vote depends on the directors agreeing who chairs.

1. One owner gives a written deadlock notice.
2. The owners meet within a set number of days.
3. A neutral mediator helps them try to agree.
4. Buy-sell: one owner names a price per share, and the other must buy at that price or sell at it.
5. As a last resort, the company is sold or wound up.

A buy-sell can favour the owner with more money, who can name a price the other cannot pay. So limit it to serious, defined deadlocks. Say what happens if the other owner does not answer, and give the buyer time to raise the money. If the seller refuses to sign, see the transfers section above. This wording is for a company with two owners.

Sample wording: "If the Shareholders fail to agree on a Reserved Matter, on appointing auditors, or on any matter the constitution requires the Shareholders to approve, at two meetings held [14] days apart, either Shareholder may serve a Deadlock Notice, after which the Shareholders shall meet within [10] days and then try mediation for [30] days. If the deadlock remains, either Shareholder may name a price per Share, and the first price notice served prevails; within [30] days the other shall elect in writing to buy all the first Shareholder's Shares, or to sell all of its own, at that price; if it does not elect in time, it is treated as having elected to sell, and completion shall take place within [90] days."

Leaver clause: when a partner wants to quit or stops working

A leaver clause says what happens to an owner's shares when that owner stops working in the business. Without one, nobody has a right to buy or to be bought out. A good leaver, who retires, falls ill or leaves by agreement, is usually bought out at a fair value fixed by an independent valuer. A bad leaver, who leaves in breach or is dismissed for serious misconduct, may be bought out at a discount.

Take care with the trigger. The majority can remove a director by a simple vote (section 206), and usually controls who is dismissed. So the clause must not let the majority create the trigger itself. Apply it only to owners who work in the business under a service agreement. Give the others no right to buy when the majority ends that agreement without cause. The owner may then choose to stay, or to sell at Fair Value. Say who buys, in what shares, and how they pay. The company itself generally cannot fund the purchase (section 123). A court may also test the discount under the rule on sums payable for a breach of contract (section 75 of the Contracts Act 1950). The court asks whether the sum protects a legitimate interest and is proportionate (Cubic Electronics Sdn Bhd v Mars Telecommunications Sdn Bhd, Federal Court, 2018). The owner who must accept the discount has to show that it is unreasonable. No Malaysian case has yet decided whether or how this applies to a bad-leaver discount on shares, so keep any discount modest.

Sample wording: "If a Working Shareholder resigns, retires, or stops work because of ill health, the other Shareholders may, within [90] days, buy all of that Shareholder's Shares at Fair Value. If a Working Shareholder is a Bad Leaver, the other Shareholders may, within [90] days after the admission or finding, buy all of that Shareholder's Shares at [80]% of Fair Value. A Bad Leaver is a Working Shareholder whose service agreement ends because of fraud, serious misconduct, or a serious breach of this Agreement or of the service agreement, as admitted or as found by a court or arbitrator. In every other case where the Company ends a Working Shareholder's service agreement, the other Shareholders have no right to buy, but that Shareholder may require them to buy all of its Shares at Fair Value, in proportion to their holdings, within [90] days. Fair Value is fixed by an independent accountant agreed by the Shareholders or appointed by [a named body], as a going concern and with no minority discount."

Death clause: when a partner passes away

A death clause gives the surviving owners an option to buy the deceased owner's shares from the estate. The price is a valued price, and the option runs for a set time. Without it, the shares pass by transmission to the executor or administrator, and the family may become your co-owners (section 109). If the executor wants the shares registered in someone else's name, the executor signs a transfer. The usual transfer rules then apply, as if the deceased owner had signed it, so the constitution may let the directors refuse (section 109). But in 2026 the Court of Appeal treated the registration of a will's beneficiaries as a transmission (Loh Siew Choong v Toong Yuen (Ipoh) Sdn Bhd). The board could not refuse it on the grounds it gave. So take advice on the current position.

The buyers under the clause are the other owners, not the company: a Sdn Bhd generally cannot buy back its own shares (section 123). The clause binds the estate only if the deceased signed the agreement, and it should also sit in the constitution. Some insurers offer cover that pays out on an owner's death to fund the purchase. If the company is to pay the premiums or lend the price, take advice first. The same section limits a company's help to buy its own shares. A policy on another person's life is void unless the holder has an insurable interest in that life (Financial Services Act 2013).

Sample wording: "On the death of a Shareholder, the surviving Shareholders may buy all of the deceased Shareholder's Shares at Fair Value, in proportion to their holdings, within [120] days after the personal representative or any other person entitled to those Shares gives the Company written notice or, if no such notice is given within [12] months after the death, within [120] days after those [12] months end, and the personal representative, or any other person entitled to those Shares, shall sell on request. The Shareholders may arrange insurance or takaful cover, in a form the law allows, to fund the purchase."

Can a shareholder agreement stop a partner who leaves from competing? Non-compete, confidentiality, non-solicitation

In Malaysia you generally cannot stop a partner who leaves from opening a rival business, for example a bakery down the road. Section 28 of the Contracts Act 1950 makes any agreement that restrains a person from a lawful trade or business void to that extent. Its three exceptions cover the seller of a business's goodwill and partners in a partnership. A shareholder in a Sdn Bhd is not a partner for this purpose. Outside those exceptions, Malaysian courts do not ask whether the restraint is reasonable. In Polygram Records Sdn Bhd v The Search (1994) the High Court held that a restraint of trade must be declared void. It also held that section 28 applies after the contract ends.

A confidentiality clause stops an owner from using or disclosing the company's secrets, during and after ownership. It can last without limit in time where the contract says so, subject to the law on restraint of trade. The Federal Court agreed in Dynacast (Melaka) Sdn Bhd v Vision Cast Sdn Bhd (2016). A non-solicitation clause stops a departing owner from approaching the company's customers or staff for a set period. It is narrower than a non-compete, but a wide one may still be void under section 28, so keep it narrow and short.

Sample wording: "Each Shareholder shall keep the Company's Confidential Information secret and use it only for the Company's business, during and after the time it holds Shares. For [12] months after it ceases to hold Shares, a Shareholder shall not solicit business from any customer of the Company with whom it dealt in the [12] months before it left, or solicit any employee of the Company to leave. Confidential Information means [list: customer lists, pricing, supplier terms, recipes, source code]."

Dispute clause: mediation first, then arbitration or court

A dispute clause says how the owners resolve a dispute about the agreement: usually a meeting, then mediation, then arbitration or court. Mediation binds only if the parties sign a settlement, which is then binding under the Mediation Act 2012 (section 14). Arbitration is a private hearing before an arbitrator chosen under the agreement, instead of a judge in open court. If the agreement has an arbitration clause and one party sues in court instead, the court will normally stay the court case (section 10 of the Arbitration Act 2005). The Court of Appeal upheld such a stay in Padda Gurtaj Singh v Tune Talk Sdn Bhd (2022). It said the law presumes that such a dispute can go to arbitration. The exceptions include cases that affect wider parties such as creditors, so some remedies, such as winding up, stay with the court. Think before you choose arbitration: most disputes under the agreement will then have to go there, and the parties pay the arbitrator and the centre. If you choose it, use the current model clause of the Asian International Arbitration Centre (AIAC) from its website, because older versions still circulate.

Sample wording: "Any dispute arising out of or relating to this Agreement shall first be referred to a meeting of the Shareholders within [14] days of a written notice, and then to mediation administered by [the AIAC]. If it is not resolved within [60] days of the notice, it shall be decided by arbitration in [Kuala Lumpur] before one arbitrator, administered by [the AIAC] under its rules current at the start of the arbitration, in the English language. A party may still apply to a court for urgent interim relief."

How much does a shareholder agreement cost in Malaysia?

Four Malaysian law-firm websites that we read on 15 October 2026 priced the drafting of a standard shareholder agreement at RM5,000 to RM25,000. Those prices are other people's, not ours, and a few websites are not a survey. Some of the pages said the price goes up with the number of owners and the complexity of the terms.

No law fixes the fee for this work. The Solicitors' Remuneration Order 2023 fixes fees for property sales, tenancies, loans and their discharge, and small items such as witnessing a signature. For a shareholder agreement, and for a later sale of shares, it says the fee must be fair and reasonable. The factors include the skill and time involved, the complexity and the value at stake. Stamp duty and expenses are paid on top of the fee. Agree the fee in writing before the work starts. The Legal Profession (Publicity) Rules 2025 do not let a law firm publish its own fees, so this article gives none.

None of the pages said whether its price includes service tax. A law firm registered for service tax adds 8% to its fee, the rate since 1 March 2024. Two other costs belong in the budget: stamp duty on the agreement, usually RM10 a copy, and the far higher cost of a dispute. This article gives no estimate of lawyers' fees for a dispute.

Can you use a free shareholder agreement template?

Yes, you can use a free shareholder agreement template in Malaysia: a template that all the owners sign is a binding contract between them. On the websites we read on 15 October 2026, downloadable templates ranged from free to RM299 (a sale price). A template gives you a structure and a list of subjects. It cannot know four things about your company:

• It does not know your constitution, if the company has one, which governs the company's meetings and votes. Rights that must bind the company have to be in it too.
• It does not know your share split or your plans. A 50/50 company needs a deadlock clause. A founder and a passive investor need information rights and a leaver clause. A family company needs a death clause.
• It may be written for another country's law. The clearest example is a post-exit non-compete, which is generally void here under section 28 of the Contracts Act 1950.
• It does not stamp itself. A shareholder agreement signed in Malaysia must be stamped within 30 days of signing (see the stamping section below).

A middle course is to fill in a template, then ask a lawyer to review it against your constitution and your plans before anyone signs.

Do you need to stamp a shareholder agreement, and how much is the stamp duty?

Yes. A shareholder agreement in Malaysia must be stamped within 30 days of signing. The duty is usually a fixed RM10 for each signed copy (Stamp Act 1949, First Schedule, Items 4 and 34). If it is signed as a deed, the duty is also RM10 (Item 38). Stamping is filed through the MyTax portal of the Inland Revenue Board of Malaysia (LHDN, also called HASiL), under its self-assessment system. LHDN's list of categories does not name a shareholder agreement.

One caveat. If the agreement includes a promise to lend or repay money, such as a shareholder loan, LHDN's guideline may treat it as a security instrument. Duty is then charged on the amount instead of RM10, so check the category with LHDN or your lawyer first.

If you stamp late, the penalty is RM50 or 10% of the unpaid duty, whichever is more, within three months after the deadline. After that it is RM100 or 20%, and the Collector of Stamp Duties may reduce it (section 47A). Until the duty and any penalty are paid, the agreement cannot be admitted in evidence in court (section 52). If you signed an agreement between 2023 and 2025 and never stamped it, see the FAQ on the penalty waiver.

A later sale of shares carries its own duty: the buyer pays RM3 for every RM1,000 of the price or value (Item 32(b)). The FAQ below has the detail.

When should you sign a shareholder agreement, and what should you ask a lawyer?

Sign a shareholder agreement before any owner puts money in, or before the company starts trading. At that point everyone still agrees. You can sign one later, but it binds only the people who sign it, so every owner must agree then. An owner who is already in dispute may not. If the company already has a constitution, have both documents reviewed together so they match.

Before you instruct a lawyer, ask these questions in writing:

1. What does the fee cover: the agreement only, or also changes to the constitution, the board resolutions and the stamping?
2. Is the fee fixed or hourly, and will you confirm it in writing before you start?
3. Does the fee include service tax?
4. How much stamp duty will the agreement attract, and who will stamp it, and when?
5. Will you check our constitution against the agreement, and update it so the two match?
6. Which clauses do you recommend for our share split, and which clauses in our draft may not be enforceable in Malaysia?

To choose a firm, see How to find a lawyer in Malaysia: a practical checklist. It covers shortlisting and checking a practising certificate.

This article is general information about the law of Malaysia as at 15 October 2026. It is not legal advice on your situation, and reading it does not make you a client of the firm. The price figures come from websites that other people published, and they are not our fees. The sample wording is an illustration of what a clause does, not a document to sign. Laws, fees and prices change, so check the current position before you rely on a figure.