As ESG considerations become increasingly prominent in the business landscape, it’s prudent to consider ESG in M&A legal due diligence.

Below are the key legal requirements and corporate governance code to consider in relation to ESG in M&A legal due diligence:

Environmental

1. Environmental Quality Act 1974 (EQA)

 The EQA, together with its subsidiary legislations, regulates the discharge of pollutants into air, water and land, as well as the emission of noise. It also provides a licensing framework to prevent pollution and enhance environmental protection.

Social

2. Employment Act 1955 (EA)

The EA provides for minimum terms and conditions of employment that must be complied in respect of employees who fall under the EA, including employees whose wages are RM4,000 or less per month.

3. Laws relating to statutory contributions

In Malaysia, employers are required to make statutory contributions in accordance with  the Employees’ Provident Fund Act 1991, Employees’ Social Security Act 1969, Employment Insurance System Act 2017 and Pembangunan Sumber Manusia Berhad Act 2001.

4. Employees’ Minimum Standards of Housing, Accommodations and Amenities Act 1990

Where an employer provides housing, accommodation and amenities to employees, this Act prescribes the minimum standards which must be complied with. It also requires employers to obtain a certificate for accommodation.

5. Anti-Trafficking in Persons and Anti-Smuggling of Migrants Act 2007

 The Act aims to prevent and combat human trafficking and smuggling of migrants, specifying related offences and penalties.

6. Occupational Safety and Health Act 1994

This Act aims to secure the safety, health and welfare of persons at work.

 Governance

7. Malaysia Anti-Corruption Commission Act 2009

This Act aims to prevent corruption in Malaysia and establishes related offences and penalties.

8. Companies Act 2016

The Act regulates companies in Malaysia and sets out the legal requirements in relation to establishment, management and dissolution of companies.

 9. Listing Requirements

The Listing Requirements issued by Bursa Malaysia govern public listed companies in Malaysia on matters related to governance, including board composition, public shareholding spread, and continuing disclosure on specified matters to Bursa Malaysia, the shareholders and the public.

10. Malaysian Code of Corporate Governance

This Code sets out corporate governance principles that go beyond the minimum requirements prescribed by statute, regulations or those prescribed by Bursa Malaysia. Public listed companies in Malaysia are required to apply or explain an alternative.

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This post first posted on LinkedIn on 5 December 2024.