Have clear definitions in M&A agreements

Linkedin Post

In M&A transactions, the following terms are open to interpretation if used in transaction agreements without being defined:

1. Family
Does “family” mean immediate family or extended family? Do the parties to the agreements intend for the term “family” to include adopted children, spouses of siblings and grandparents?

2. Affiliate
The term “affiliate” is not defined in the Companies Act 2016. It may be interpreted widely or narrowly, depending on what works in favour for each of the parties to the agreements.

3. Control
Does “control” mean 33% or more of voting shares in a party (as referred in the Capital Markets and Services Act 2007), or more than 50% of voting shares, which allow for the passing of an ordinary resolution?

4. Ownership of a company
What exactly constitutes “ownership”? Is it referring to legal ownership or beneficial ownership? Does holding more than 50% or 100% of the shares in a company constitute “ownership”?

5. Personnel
This term is sometimes used loosely in agreements. Does the term “personnel” include contract workers, part time workers and consultants? It may be better to use terms such as “employee”, “officer” or “agent” depending on the context.

Define the terms clearly in transactions agreements to avoid dispute.

#malaysiancorporatelawyer
#mergersandacquisitions

Linkedin Post
Conversation on W&I Insurance in M&A Transactions

As an M&A lawyer with a keen interest in the nuances of the M&A field, I’ve observed that warranty and indemnity insurance (W&I) is not that common in M&A transactions in Malaysia, as far as I know. Therefore, when I saw Martijn de Lange of BMS Group commenting about W&I …

Company Law
Indirect Substantial Shareholder

A person can be a substantial shareholder in a company without directly holding any shares in that company. One of the challenges that often arises when I work on IPOs or other equity capital market exercises is the assessment of whether an individual holds an indirect substantial shareholding in a …

Company Law
Legal Requirements for Directors’ Fees and Benefits in Malaysia

One common issue I encounter in both M&A deals and IPO exercises relates to compliance with the legal requirements for the payment of director’s fees and benefits. Additionally, the legal obligations regarding director’s service contracts should not be overlooked. Here are the key points: Constitution 1. If a company, whether public …