A Guide To Shareholder Roles And Rights In Malaysia

Some think that shareholders do not play a big part in the running of a company other than providing financing then going on holiday while waiting for dividends to kick in.

In reality, shareholders do play an important role in relation to their control over the company and are the ones whom the board of directors answers to.

So, what are the roles and rights of a shareholder in a company?

Roles of a shareholder

We list out below some of the examples where a shareholder needs to play his role in the company:

• issuance of additional shares of the company;
• appointment or removal of company directors by way of an ordinary resolution;
• approval of directors’ remuneration (for public company);
• appointment or removal of auditor (for public company);
• amending and changing the company constitution (in which case a special resolution of 75% or more of all shareholder votes would need to be obtained);
• in instances where any arrangement or transaction exceeding RM250,000 or 10% of the net asset value of the company between the company and:
  • a director of the company;
  • a substantial shareholder of the company, its
    holding company, or its subsidiary; or
  • a person connected to such director or substantial shareholder, involving the acquisition or disposal of shares or non-cash assets from or to the company,
• allowing or rejecting any arrangement or transaction involving the acquisition or disposal of substantial property or undertaking of the company;
• declaring a dividend;
• approving the financial statements of the company;
• winding up of the company by way of voluntary liquidation;
• allowing or rejecting alteration or reduction of share capital of a public company.

Rights of a shareholder

Subject to a Shareholders’ Agreement that says otherwise, a shareholder usually has the following rights:

• attend, participate and speak at a meeting;
• on a vote taken by show of hands, every shareholder has one vote;
• on a vote taken in a written resolution or on a poll taken at a general meeting, every shareholder has one vote in respect of each share held;
• receive equal share in the distribution of the surplus assets of the company in the event of a liquidation;
• receive equal share in dividends declared by the board;
• raise comments and questions; purchase new shares issued by the company (“pre-emption right”);
• priority to purchase shares from other shareholders (“right of first-refusal”);
• sell or be restricted to sell his shares;
• access certain information relating to the affairs of the company;
• sue the relevant directors for breach of fiduciary duty;
• nominate directors and propose shareholder resolutions;
• make recommendations to the board of directors on management matters.

To to learn more about shareholder protections, check out our post on Shareholders’ Agreements, the most important document when incorporating a company with more than one owner.

Incorporate your company with MISHU

With every company incorporation, MISHU provides complimentary consulting and advisory services to educate shareholders and directors of their roles, responsibilities and rights.