Apr 122021
 

How do existing shareholders settle the entry of a new shareholder into the company? Your lawyers will generally include the following clauses in your shareholders` pact. Please note that, although these are standard clauses, your lawyer who drafts the shareholders` pact can optimize these clauses, whether you are a majority or minority shareholder. There are no laws governing how the shareholder contract should be developed. However, the parties should comply with certain provisions of the Malaysian Corporations Act that cannot be repealed by such a shareholder pact. Obligations of the parties: the shareholders` pact should define the contribution of each shareholder to the company, such as the provision of management know-how and technical know-how to the company, the introduction of commercial activities and the guarantee of financing, etc. Does the shareholders` pact replace the Constitution? Existing shareholders can regulate the entry of a new shareholder into the company by limiting the transfer of shares. The Malaysian Companies Act 2016 stipulates that a private company has a restriction on the transfer of its shares. This is one of the opposite characteristics between a private company and a public company in which these shares are freely transferable to a public limited company. However, the Companies Act 2016 does not specify the nature of the restriction or the extent of the restriction required. These restrictions generally apply in the form of a right of first refusal in favour of other existing shareholders or in the form of board powers to refuse registration of the share transfer. 1.1 The shareholders are all shareholders of the company, a company [STATE OF INCORPORATION] and are the sole directors and senior executives of the company. PandaTip: This section ensures that shareholders have the same expectations about when they can withdraw money from the company and ensure that distributions do not compromise the company`s financial needs. Rights of the first refusal – a requirement for a shareholder to offer the other shareholders of the company the right (but no obligation) to acquire the shares before the sale or sale of shares to a third party.

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