The Rights of Shareholders in Malaysia
By: Alex Nip, Secretarial Director
Shareholders are often described as the "owners" of a company, but ownership in the corporate sense is more nuanced than ownership of property. A shareholder does not own the company’s assets directly; rather, the shareholder owns shares — a bundle of legal rights and interests in the company. In Malaysia, those rights are drawn primarily from the Companies Act 2016 ("CA 2016"), supplemented by the company’s constitution (if it has one), any shareholders’ agreement, the common law, and — for listed companies — the Bursa Malaysia Listing Requirements and the Malaysian Code on Corporate Governance.
Core Statutory Rights of Shareholders
1. Right to Vote
Voting is the most fundamental method by which shareholders influence the company. Generally, each ordinary share carries one vote at general meetings. Certain decisions require shareholder approval, including:
- Alteration or amendment of the constitution
- Issuance of new shares (subject to existing shareholders’ authority)
- Reduction of share capital
- Annual approval of directors’ fees and benefits
- Approval of substantial transactions (e.g., acquisitions or disposals of substantial value under section 223)
Resolutions are generally passed as either:
- Ordinary resolutions — a simple majority of more than 50% of votes cast.
- Special resolutions — at least 75% of votes cast, required for more significant matters such as constitutional changes and capital reductions.
2. Right to Be Informed and Receive Notices
Shareholders have the right to receive notice of general meetings, audited financial statements, the directors’ report, and the auditors’ report. Public companies must also lodge annual returns and circulate financial statements within statutory timelines. This information right ensures shareholders can make informed decisions about their investment and the company’s stewardship.
3. Right to Attend and Speak at General Meetings
Shareholders are entitled to attend, speak, and ask questions at general meetings, whether annual general meetings (mandatory only for public companies) or extraordinary general meetings. Under the CA 2016, virtual meetings are permitted unless the constitution says otherwise — a feature that became especially important during and after the COVID-19 era.
4. Right to Requisition Meetings and Resolutions
Members holding at least 10% of the paid-up capital carrying voting rights may requisition the directors to convene a general meeting (section 311). If the directors fail to act, the requisitioning members may convene the meeting themselves.
Members may also propose resolutions to be considered at general meetings, subject to threshold requirements under the CA 2016.
5. Pre-emptive Rights (Section 85)
Where a company proposes to issue new shares that rank equally with existing shares as to voting or distribution, those shares must first be offered to existing shareholders in proportion to their shareholdings — unless the constitution provides otherwise. This protects shareholders from unwanted dilution of their economic and voting interests.
6. Right to Appoint and Remove Directors (Section 206)
Shareholders have the power to appoint directors and, importantly, to remove a director before the expiration of the director’s term by ordinary resolution. A special notice of at least 28 days must be given to the company, and the director concerned has an entrenched right to be heard at the meeting. The constitution may impose stricter requirements for appointment but cannot dilute the statutory removal right below an ordinary resolution.
7. Right to Dividends
Shareholders have a right to share in the profits of the company through dividends, but only when:
- The directors recommend (or declare) a dividend; and
- The company is solvent — meaning it can pay its debts as they fall due within twelve months after the distribution.
There is no automatic right to a dividend; it must be declared in accordance with the Act and the constitution. Persistent withholding of dividends in bad faith can, however, ground a claim for oppression.
8. Right to Transfer Shares
Shares are personal property and are generally freely transferable, subject to any restrictions in the constitution or shareholders’ agreement (such as pre-emption clauses and rights of first refusal commonly found in private companies).
9. Right to Share in Surplus Assets on Winding Up
Upon winding up, after all creditors have been paid, shareholders are entitled to share in any surplus assets of the company in accordance with their rights attached to their shares.
10. Right to Apply for Court-Ordered Meetings
If it is impractical to call or conduct a meeting in the manner prescribed (for example, due to deadlock), the court may, on the application of a director or member, order a meeting and prescribe how it is to be held.