I find one of the most challenging aspects of an M&A transaction in Malaysia is the regulatory regime in which the target company operates.

If the target company requires certain licences for its operations or operates within a regulated industry, the M&A process must take into account the relevant regulatory requirements. This may involve getting the approval from the relevant regulatory bodies or notifying them of the changes in shareholders, directors or management.

The regulatory requirements may be confusing due to the complicated interplay of regulations, governmental policies, guidelines and directives pertaining to the industry in which the target company is operating. The challenge is exacerbated as some governmental policies are not rendered in writing, and some guidelines or directives may not be accessible by the public.

It is also common for companies to hold licences that may not reflect the latest governmental policies. For example, the shareholding structure of those companies may not reflect the latest equity conditions if an application for a new licence is made at the time of the M&A transaction. This will present difficulties in an M&A transaction that may require regulatory approval due to the proposed share transfer.

Therefore, it is prudent to contact regulators to ascertain the latest policy positions. Where applicable, confirm with the regulators the procedures for obtaining their consent or notifying them for the proposed share transfer or change of directors or management of the target companies.

#MalaysianCorporateLawyer

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This post was first posted on LinkedIn on 15 February 2024.