Shareholder(s) Agreement is not a mandatory requirement in Malaysia. However, it is important to govern the relationship between the shareholder; spell out the rights and obligations between the shareholder(s); or how a dispute is to be resolved, etc.
There are a few key features in shareholder(s) agreement:
a. Shareholder(s) Rights & Obligations
It is important to spell out the contribution of each shareholder(s), for instance, the provisions of managerial and technical expertise to the company, introduction of business or securing funding, etc.
b. Regulation of the Sale of Shares
The requirement of a shareholder to offer the other shareholder(s) the right (but not an obligation) to acquire the shares prior to its sale or the disposal of shares to a third party.
c. Rights to Transfer Shares, Right of First Refusal, Tag Along Right, Drag Along Right
The right of a shareholder to require any shareholder(s) selling its shares to cause the buyer to acquire the shares of the former; or the right of a shareholder to require another shareholder(s) to sell its shares on the same terms and conditions to another buyer.
d. Other Clauses
i. description on how the company is going to be run
ii. element(s) of protection for minority shareholder(s) and the company
iii. define how important decisions are to be made and how voting is to be carried out
Shareholder(s) agreement serves as an additional layer of protection against the rights of the shareholder(s).
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