M&A: Minority shareholders’ protection

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Today’s post is about provisions in shareholders’ agreement for the benefit of minority shareholders.

It is common to have a shareholders’ agreement when an M&A transaction results in more than one shareholder in the target company.

Some provisions to include in a shareholders’ agreement for the benefit of a minority shareholder include:

1.      The minority shareholder to have board representation. This includes the right to appoint and remove director(s) nominated by the minority shareholder.

2.      The minority shareholder to have the first right of refusal in the event the majority shareholder intends to dispose the majority shareholder’s shares.

3.      The minority shareholder to have tag along rights in the event of disposal of the majority shareholder’s shares to a third party.

4.      Have a list of board reserved matters, which cannot be passed without unanimous consent of the board of directors or without the vote of the director nominated by the minority shareholder.

5.      Have a list of shareholders reserved matters, which cannot be passed without unanimous consent of all shareholders or without the minority shareholder’s vote.

6.      The minority shareholder to have a representative as a bank account signatory to authorise bank transactions which exceed certain threshold.

#malaysiancorporatelawyer
#shareholdersagreement
#mergersandacquisitions

This post was first posted on Linkedin on 27 April 2023.

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