In an M&A transaction, it should be determined early on whether consent from or notification to the following parties is required for the change of shareholder or director of the target company:

(a) regulatory body (pursuant to a condition imposed on a licence or regulatory requirements)

(b) counterparty of a contract of which the target company is a party (pursuant to a term in the contract)

For me, the difference between consent and notification is clear.

If consent is required, it should be obtained before the transaction is completed. This means securing approval from the relevant regulatory body or counterparty before making any changes to the shareholders or directors of the target company.

On the other hand, if merely notification is required, the parties can proceed with the transaction and then inform the regulatory body or counterparty of the changes afterward.

However, I have encountered a puzzling situation where a regulator states that it will consider whether to approve a change of shareholding only after the change has been effected. If the consent is not granted, would the parties have to unwind the transaction, and the purchaser will then have to retransfer shares of the target company to the seller?

#MalaysianCorporateLawyer

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This post was first posted on LinkedIn on 7 March 2024.