What happens to Sdn Bhd shares when a shareholder leaves or dies?

When a partner leaves or a shareholder dies: the short answer

A partner cannot simply quit a Malaysian Sdn Bhd, and the other shareholders cannot simply vote a shareholder out: a forced sale needs a clause in the constitution, a signed agreement or a court order. No law gives a partner a right to be paid out. A shareholder leaves by selling or giving away the shares. Nobody has to buy them unless the constitution, a shareholder agreement or a court order says so, and the company can buy them only under a court order (Companies Act 2016, sections 105, 123 and 346).

When a shareholder of a Malaysian Sdn Bhd dies, the shares do not pass straight to the family. They pass by transmission, which means the law moves them with no transfer signed, to the executor or administrator named in a grant of probate or letters of administration, or to the person a small-estate distribution order names for the shares (section 109). Shares held jointly pass instead to the surviving joint holder. The company must register the executor or administrator within 60 days of their written notice. For shares held alone, nobody in the family can sign for them, sell them or vote them until that grant or order exists. The company itself cannot buy them without a court order. The family then keeps or sells the shares.

In this article, "partner" means a co-owner of a Sdn Bhd (in Malay, rakan kongsi). The "constitution" is the company's rule book; for a company set up before 31 January 2017, its old memorandum and articles count as its constitution (section 619). If a shareholder has died, start at "What happens to a shareholder's shares when they die in Malaysia?"; otherwise read on.

My partner wants to leave our Sdn Bhd. What happens to the shares?

A partner leaves (退股) a Malaysian Sdn Bhd by transferring the shares to someone else, with a signed and stamped transfer form lodged with the company (Companies Act 2016, section 105). There is no way to resign from a shareholding, and no law gives a shareholder a right to leave and be paid out.

A partner who asks for "my capital back" is asking the company to pay them out. In Chinese, 退股 is often used to mean exactly that, but a Sdn Bhd does not work that way. Money paid for shares is the company's share capital. Outside a winding up or a court order, the company can return it only by a formal reduction of share capital, explained below (sections 115 to 119), and it cannot buy the shares (section 123).

Resigning as a director is a separate step; the shares stay where they are. A director resigns by written notice to the company at its registered office (section 208). But the resignation does not take effect if it would leave the company without a director who lives in Malaysia, and a sole director must first call a meeting to appoint a new one (sections 196 and 209). Until the register of members (the company's list of shareholders) is changed, the leaver is still a shareholder, with the votes and any dividend (section 101).

Nor does leaving end a personal guarantee given to the bank. The leaver stays liable for what the guarantee already covers until the bank releases them; check the guarantee for how to stop it covering new borrowing (Contracts Act 1950, sections 81 and 83). Make the bank's release, and the repayment of any loan the leaver made, terms of the sale. The firm's guide on how to leave a Sdn Bhd and get paid covers guarantees, loans and the resignation (written for 50/50 owners, but those points apply to any Sdn Bhd).

Can we remove a shareholder from our Sdn Bhd?

No ordinary vote of the other shareholders removes a shareholder from a Malaysian Sdn Bhd: a forced sale needs a clause in the constitution, a signed agreement or a court order. The shareholders can remove a director by ordinary resolution, more than half of the votes, unless the constitution says otherwise (Companies Act 2016, section 206). That ends the directorship only. But shareholders with at least 75% of the votes cast at a meeting can change the constitution by special resolution, or propose a reduction of share capital that cancels particular shares (sections 36, 115 and 116). If a notice of meeting or a written resolution proposes either, take advice at once: the court can stop or undo a resolution that unfairly discriminates against you (section 346).

Between the shareholders, a shareholder can be made to sell in three cases: a clause in the constitution that forces a transfer, a leaver or buy-sell clause in an agreement the shareholder signed, or a court order. On an oppression application (a court case by a shareholder who says the company is run unfairly against them), a court can order one shareholder to buy another's shares, but only where the company's affairs are oppressive, in disregard of a shareholder's interests, or unfairly discriminatory or otherwise prejudicial (section 346). Courts expect shareholders to accept majority rule, and judge the conduct by its effect (Owen Sim Liang Khui v Piasau Jaya Sdn Bhd, Federal Court, 1995).

Who buys a leaving partner's shares, and at what price?

The buyer of a leaving partner's shares in a Malaysian Sdn Bhd is the other shareholders or an outsider. It cannot be the company: a Sdn Bhd cannot buy its own shares, even if every shareholder agrees, and only a company quoted on a stock exchange may (Companies Act 2016, sections 123 and 127). The Act sets no price formula. The price is what is agreed, or what an independent valuer fixes under a signed clause. Nobody has to buy. An outsider must get past the constitution, which often gives the existing shareholders a right to buy first and lets the directors refuse a new shareholder; with no constitution, there is no such right unless a shareholder agreement gives one.

The company itself can pay a leaver only under a court order on an oppression application (section 346), or by a reduction of share capital: a special resolution, at least 75% of the votes cast at a meeting, plus either the High Court's confirmation or a solvency statement signed by every director. A solvency statement says that the company can pay its debts as they fall due for the next 12 months and that its assets exceed its liabilities; a director who signs one without reasonable grounds commits an offence (sections 112 to 119). A reduction pays back share capital, which can be far less than what the shares are worth, and creditors can object. Do not pay a leaver for the shares, or hand back their capital, from the company's account, and do not use company money to help anyone buy the shares: outside these steps the law does not allow it, except in narrow cases (sections 123 to 126). Repaying a genuine loan the leaver made is different; agree it in the sale terms.

If the price goes to court, the court fixes "the proper price" in its discretion (Chiptar Holdings Sdn Bhd v THC Rice (KL) Sdn Bhd, High Court, 2023). In some recent High Court cases the court ordered a buy-out at fair value with no discount for a minority holding (Sim Chu Hu v Kerk Han Meng, High Court, 2024). That is a trend, not a fixed rule: the price stays in the court's discretion, and in at least one unreported case a buy-out was ordered at 25% below the valuer's price. Get advice before you sell if you may go to court: as a general rule, only a shareholder still on the register can bring an oppression application.

How is a Sdn Bhd share transfer done, and what is the stamp duty?

A share transfer in a Malaysian Sdn Bhd needs a signed and stamped instrument of transfer lodged with the company (Companies Act 2016, section 105). The company must register the buyer within 30 days, unless the Act or the constitution allows the directors to refuse, by a resolution with full reasons within those 30 days and notice to both sides within 7 days (section 106). Stamp duty on a sale of shares is RM3 for every RM1,000, or part of RM1,000, of the price or the value of the shares on the transfer date, whichever is higher (Stamp Act 1949, First Schedule, Item 32(b)).

SSM publishes a standard "Form of Transfer of Securities" under section 105, which took the place of the old Form 32A. The buyer pays the duty. For most unlisted companies, LHDN values the shares at the higher of the agreed price and the net tangible assets per share. Present the form for stamping within 30 days of signing, through LHDN's MyTax, and pay within 14 days of LHDN's notice of assessment unless the notice allows longer (sections 40 and 47). Ask a tax adviser about any tax on the sale before you sign.

What to do now if a partner wants to leave

• Ask the company secretary for the constitution and any shareholder agreement, and read the transfer and leaver clauses.
• Check the accounts to see whether the partner's money is share capital or a loan to the company.
• Do not pay the partner for the shares, or return their capital, from the company's account, and do not sign anything yet.
• Read the bank guarantee and loan letter, and talk to the bank before the partner resigns as a director or signatory.
• See a lawyer before anyone signs a share sale, a settlement or a release.

The rest of this article is about a shareholder who dies. If that is not your case, go to "When to get a lawyer" near the end.

What happens to a shareholder's shares when they die in Malaysia?

When a shareholder of a Malaysian Sdn Bhd dies (pemegang saham meninggal dunia; 股东去世), the shares become part of the estate (harta pusaka) and pass by transmission (pemindahan hak), not by transfer: the law moves them, and nobody signs a transfer for the deceased. The company must register the executor or administrator within 60 days of their written notice (Companies Act 2016, section 109). If the shares were held jointly with someone else, they pass to the surviving joint holder instead (section 109).

If the other shareholders or the company send the family forms to sign, wait. Before a grant or order, no widow, child or other heir can sign for shares held alone. A Sdn Bhd cannot buy back its own shares (section 123). The law sets no price: the paid-up value, the amount first paid for the shares, can be far less than what they are worth, so do not agree a price before you have a valuation.

The company does not end: it is a legal person separate from its shareholders, and it continues until it is removed from the register (section 20). Until someone is registered in place of the deceased, the company may treat the registered holder as the only person entitled to vote, receive notices and receive dividends (section 101). The constitution may still let the executor or administrator receive the dividends, or vote, once they show the grant, so read it first. Death does not end the deceased's personal guarantees to the company's bank for debts already owed: the bank can claim against the estate (Contracts Act 1950, sections 81 and 84).

Who can deal with the shares: next of kin, executor or administrator?

For shares the deceased held alone, only the executor named in a grant of probate, the administrator named in letters of administration, or the person a small-estate distribution order names for the shares, or Amanah Raya Berhad once it declares it will administer the estate, can deal with a deceased Malaysian shareholder's shares. A widow, a son or a next of kin cannot sign for the shares, sell them or give the company notice on family status alone. Which office deals with the estate depends on whether there is a will and on its size.

• With a will (non-Muslim, Peninsular Malaysia): the executor applies to the High Court for a grant of probate, however small the estate (Small Estates (Distribution) Act 1955, section 5).
• No will, and the whole estate is worth RM5,000,000 or less: a small estate. Since 15 July 2024 this includes an estate with no land, such as shares and money only. A beneficiary petitions the Estate Distribution Officer for a distribution order (sections 3, 4 and 8).
• No will, movable property only (anything other than land, such as shares, money and vehicles), worth RM600,000 or less: a quicker summary order from the Estate Distribution Officer (section 8B).
• No will, and the estate is worth more than RM5,000,000: letters of administration from the High Court.
• Movable property only, worth RM600,000 or less, with or without a will, where nobody is entitled to apply for probate and no petition for letters of administration is pending: Amanah Raya Berhad may take on the administration (Public Trust Corporation Act 1995, section 17).

Shares count at their value, so a family company can take an estate past RM5,000,000. The firm's Probate Route Check shows which office handles an estate. In Sabah and Sarawak some of these statutes are different, so take advice there.

If the estate is Muslim: faraid and the grant

For a Muslim who dies, faraid, the Islamic law of inheritance, fixes each heir's portion of the estate. The Wills Act 1959 and the Distribution Act 1958 do not apply to Muslims. Faraid decides who gets what, not who may sign: the grant or order still comes from the civil routes above. When the High Court or another authority needs it, the Syariah Court can certify who the heirs are and their portions; that document is often called the faraid certificate. One holding can be split among many heirs, and the heirs can agree that one of them takes the shares.

Can the company refuse to register the executor or the heirs?

The company must register the executor or administrator of a deceased Malaysian shareholder within 60 days of their notice, and must accept the grant as proof (Companies Act 2016, section 109). Some older constitutions let the directors refuse a transmission as they could refuse a transfer; whether that still works after the 2026 decision below is not settled, so read the constitution and take advice if the board refuses.

What did the Court of Appeal decide in Loh Siew Choong (2026)?

In Loh Siew Choong v Toong Yuen (Ipoh) Sdn Bhd (Court of Appeal, 28 September 2026), the court held that when an executor asks a Malaysian Sdn Bhd to register the beneficiaries named in the will, that is also a transmission, not a transfer. So the board could not refuse it under the transfer rules in the company's constitution. A further appeal to the Federal Court may still follow, so take advice before you act on it.

In Loh, a mother's will left her shares to five named beneficiaries. After the executor was registered, the board refused to put shares in three beneficiaries' names. The Court of Appeal held that the company's transfer rules, including a 30-day right for existing shareholders to buy first, did not apply to a transmission, and that debts the beneficiaries allegedly owed the estate were no lawful ground to refuse. It added, without deciding it, that heirs without a will, under the Distribution Act 1958 or faraid, take the same route.

Two cautions. The Act still says that if the executor chooses to have "another person" registered, the executor signs a transfer and the usual transfer rules apply (section 109). A sale to a buyer is such a transfer; Loh did not decide what else the rule still covers. And a genuine challenge to the will itself can hold up registration. If the company still refuses, the High Court can order it to register.

Must the other shareholders buy the shares of a shareholder who died?

No law makes the other shareholders of a Malaysian Sdn Bhd, or the company, buy a deceased shareholder's shares. They buy only if a death clause in the constitution or a shareholder agreement gives them that right or duty, or if the estate agrees to sell. Without a clause, the heirs may become co-owners with the surviving shareholders, with the same rights as any shareholder once registered (Companies Act 2016, section 109).

The estate, for its part, cannot make the survivors or the company buy without a clause or a court order (sections 123 and 346). The estate can sell to the survivors, or to an outsider if the constitution allows; the executor or administrator signs the transfer, and the buyer pays the usual stamp duty. Once registered, the estate has the same remedies as any shareholder, including an oppression application under section 346. So get registered first.

What if the shareholder who died was also the only director?

If the only director of a Malaysian Sdn Bhd dies, the company secretary must, as soon as practicable, call a meeting of the next of kin, the personal representatives (the executor or administrator) or the shareholders to appoint a new director (Companies Act 2016, section 209). If no director is appointed within six months of the death, the Registrar of Companies (SSM) may strike the company off.

A director's office ends on death (section 208). With no director left, there is no board to fill the vacancy: the new director is appointed at the meeting the secretary calls, or by an ordinary resolution of the shareholders (sections 202 and 209).

What to do now after a shareholder dies

• Do not sign any transfer or "buy back" form before a grant or order exists: nobody in the family can sign for shares held alone until then.
• Do not agree a price before you have a valuation. The law sets no price, and the paid-up value is not a valuation.
• Tell the company secretary in writing that the shareholder has died, and ask for a copy of the constitution and any shareholder agreement.
• Apply for the grant or order: use the Probate Route Check to find the right office, then gather the documents listed under "Key facts and documents after a death".
• See a lawyer if the company refuses to register the grant, if the estate is contested, or before anyone signs a sale.

How can we plan now for a partner who leaves or dies?

A leaver clause and a death clause in a shareholder agreement decide in advance who buys a Malaysian Sdn Bhd partner's shares, at what value and within what time. Put the same rules in the constitution, which binds the company and every shareholder (Companies Act 2016, section 33). A will can deal with the shares, and after Loh its beneficiaries can be registered by transmission, but a further appeal may follow, so do not rely on the will alone. Write the death clause to apply on a shareholder's death and to bind the executor or administrator and anyone entitled by transmission: in Loh, a right to buy first that covered only "transfers" did not stop the heirs.

Some owners fund a death buy-out with insurance or takaful on each other's lives. A policy on another person's life is void unless the policyholder has an insurable interest in that life when the policy is taken out, and a business partner is not on the list of people for whom the Act assumes one (Financial Services Act 2013, Schedule 8). Family takaful has stricter rules on when the interest must exist and on the covered person's written consent (Islamic Financial Services Act 2013, Schedule 8). Ask the insurer and a lawyer who should own the policy before you pay a premium.

Key facts and documents after a death

• Death: shares pass by transmission; the company must register the executor or administrator within 60 days of their written notice (section 109). The Court of Appeal treated registering a will's beneficiaries as a transmission too (Loh Siew Choong, 28 September 2026); a further appeal may follow.
• Documents the company secretary usually asks for after a death: the grant or order, the death certificate, the executor's or administrator's signed notice, identity documents, the share certificate if one was issued, and for a Muslim estate, if asked for, the Syariah Court's faraid certificate.

When to get a lawyer

See a lawyer before you sign a share sale, a settlement or a release, when the company refuses to register a grant or a transfer, when the only director has died, when the estate is contested, or when a letter arrives from the other side's lawyer. Bring the constitution, any shareholder agreement, the accounts and, after a death, the will and any grant or order. The article how to find a lawyer in Malaysia explains how to choose one.

This article is general information about Malaysian law as at 17 October 2026. It is not legal advice on your situation, and reading it does not make you a client of the firm. Figures, deadlines and court decisions change, so check the current law before you rely on one.