When conducting legal due diligence on public listed companies (PLCs) in Malaysia, the scope of due diligence is limited by the laws of insider trading.

Insider trading occurs when someone uses confidential, non-public information about a company to make a profit or avoid a loss in the stock market.

Therefore, legal due diligence on PLCs in the context of M&A is typically limited to publicly available information including the following:

1. Review of Announcements & Reports

• Analysing announcements and annual reports filed by the PLC with Bursa Malaysia Securities Berhad to assess material contracts, material litigation, governance and any material events.

2. Statutory Records from the Companies Commission of Malaysia (CCM)

• Extracting and reviewing relevant statutory records of the PLC and its group of companies (“Group”) from CCM to obtain corporate information and assess the Group’s general compliance with filing requirements under the Companies Act 2016.

3. Constitution of the Group

• Reviewing the PLC’s constitution (if the latest constitution has been lodged with CCM) to identify provisions that could potentially restrict M&A.

4. Corporate Profile and Searches

• Conducting company search on the Group with the CCM to obtain basic corporate information, as well as winding-up and bankruptcy searches on the Group and its directors and substantial shareholders.

5. Land Searches

• Investigating the ownership of real properties through land searches if the land title details are available.

6. Intellectual Property Search

• Conducting searches with the Intellectual Property Office of Malaysia (MyIPO) in relation to intellectual properties registered in Malaysia.

7. CTOS & Public Search Checks

• Performing checks on the sellers (with the sellers’ consent) through CTOS, and conducting Google searches on the Group and sellers to uncover any media mentions or reputational risks.

8. Seller’s Legal Due Diligence Questionnaire

• Preparing a legal questionnaire for the sellers to confirm the sellers’ ownership of shares and relationship with the PLC.

Under section 188(1) of the Capital Markets and Services Act 2007,  a person is an “insider” if that person:

(a)        possesses information that is not generally available which on becoming generally available a reasonable person would expect it to have a material effect on the price or the value of securities; and

(b)        knows or ought reasonably to know that the information is not generally available.

The restrictions on insider trading mean that it would not be in the purchaser’s favour to gain any non-public information that could have a material effect on the price or the value of shares.

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This post was first posted on LinkedIn on 25 January 2025.