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FAQ : Shareholders Agreement



Q: What is a Shareholders Agreement?


A shareholder agreement is a document that states the purpose, terms, and conditions of a relationship between shareholders and the company.


The key points in a shareholder agreement are:

  • The number of directors, method, and rights of shareholders to appoint directors and remove them

  • The quorum for board meetings, general meetings, is determinant of the outcome of certain decisions made by the board in relation to majority shareholders or appointed directors.

  • Rights of minority shareholders in decisions that require unanimous shareholders' approval (e.g.: rulings to wind up or proposing voluntary arrangement of the company, creation, issuance, or redeem any shares that dilute minority shareholdings).

  • Restrictions on disposal of shares.

  • Non-competition of business with the company, non-solicitation of customers or employees while the shareholders remain as the company’s shareholders, and for a period of time after they cease to be shareholders.

  • Method and mechanism of raising funds; investments into the company either by contribution by shareholders or through external loans.

  • Dividend policy specifies a minimum or maximum percentage of profits for distribution in each financial year.

  • Method of resolving any shareholder disputes; by way of arbitration or otherwise.

Q: Is it necessary to have a Shareholder Agreement?

  • Yes, to prevent any future risks to the business that is common in any business environment, be it loss of partners, friends, disputes over shares, etc which exposes you to huge costs for legal dispute resolution.

Q: What is paid-up capital?

  • Paid-up capital is the initial capital or amount of money invested by the shareholders into the company for the shares allotted and issued to the shareholders.

Q: Is there a difference between a director and a shareholder?

  • A director manages the company and is not required to be a shareholder. A shareholder owns parts of a company by holding its shares. A shareholder is not entitled to be the director, directors are instead appointed by fellow shareholders.

Q: What is the minimum investment and directors to start a company?

  • There is no stated minimum investment or paid-up capital required. However, RM 1 and one director is the minimum requirement to start up a company. Depending on the nature of the industry or purpose of the company, there may be requirements that the company has to meet in minimum paid-up company by government agencies, banks, etc for any application for grants, licenses, loans, tender, and other business dealings.

Q: How do I transfer shares in a private limited company?

  • There are restrictions to transfer shares for private limited companies that does not apply to public companies. The mechanism is not mandated by law, but must be included in the shareholder agreement to ensure clear expectations between directors and shareholders.

  • Methods

  • Shares can be offered to a third party without initial offer to other shareholders on pro-rata basis (Pre-emption rights).

  • A shareholder offers to sell his/her shares to another shareholder at a price fixed by the offeror/sellor.

  • Consent of other shareholders is not required for sale of shares. However, approval by the board of directors’ is required for all transfer of shares.


This is intended as general guidance not actual legal advice. Please contact me at aziraaziz.law@gmail.com or fill up a form at www.aziraaziz.com for detailed legal services related to above, or anything at all related to law and policy.



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