The veto power of minority shareholders

Company Law

Minority shareholders are powerful.

Shareholders who either singularly or collectively hold at least 25% of the voting shares in a company may veto on the following matters in relation to the company as provided under the Companies Act 2016 of Malaysia:

• Change of name (s. 28)

• Adoption of constitution (s. 32)

• Amendment of constitution (s. 36)

• Conversion from an unlimited company to a limited company (s.40)

• Conversion from public companies to private companies or private companies to public companies (s. 41)

• Alteration of share capital (unless provided otherwise in the constitution) including by way of consolidation and division of share capital, conversion of paid-up shares into stock, reconversion of stock into paid-up shares and subdivision of shares (s. 84)

• Variation of rights attached to shares in a class of shares (s. 91)

• Reduction of share capital (ss. 115 -117)

• Financial assistance by a company whose shares are not quoted on a stock exchange for the acquisition of a share in the company or its holding company or for reducing or discharging a liability incurred for such an acquisition (s. 126)

• Payment of interest on share capital issued to raise money to defray construction expenses (s. 130)

• Members’ right for management review (s. 195)

• Payments to director way of compensation for loss of office or as consideration in connection with his retirement from office (s. 227)

• Voluntary winding up (s. 439)

• Removal of liquidator in members’ voluntary winding up (s. 445)

• Arrangement entered into between a company about to be or in the course of being wound up and its creditors (s. 460)

• Winding up by Court (s. 465)

In M&A transactions, being aware of shareholders’ rights as provided under the Companies Act helps in negotiating shareholders’ agreement where there is more than one shareholder post completion.


This post first appeared on LinkedIn on 25 May 2023.

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