Shareholders Disputes, IPO, Investment

4. WHAT CAN BE DONE IF THERE ARE SHAREHOLDERS DISPUTES?
Shareholder disputes occur when a serious disagreement happens between two or more
shareholders in a company. Shareholder disputes almost always affect the performance of
the company which is why they must be solved as quickly as possible. Several common
issues that lead to disputes include:
a. Disagreements over the direction of the business;

b. Disputes over the distribution, ownership, and sales of company shares;
c. Fighting over company responsibilities i.e. one shareholder feels he or she is doing more
work than the other;
d. Minority shareholders feel they’re oppressed; or
e. Directors breaching their duties
HOW CAN DISPUTES BE RESOLVED?
A. DRAFT A SHAREHOLDERS AGREEMENT PRIOR TO ESTABLISHING A BUSINESS

A Shareholders Agreement (SHA) is crucial in resolving shareholder disputes as fairly and
amicably as possible.
A SHA represents the mutual understanding of the shareholders of your company by

establishing and assigning the roles of shareholders clearly. The SHA also establishes the
rights of shareholders including rights on the sale and transfer of company shares.
B. NEGOTIATION
The best solution is for the disputing parties to negotiate with each other and find an
amicable settlement. A mediator or trusted third-party can be involved in the negotiations
to assist the process of reaching a fair outcome for all parties.
C. SELLING OUT COMPANY SHARES

Selling out can be used as a direct option to get out of a shareholder dispute.
D. ALTERNATIVE DISPUTE RESOLUTION (ADR)

ADR is faster and cheaper than going to the court to resolve shareholder disputes. Whether
the final outcome is binding or not depends on the type of ADR engaged.
E. INVOLVING THE COURT

Going to court involves engaging with lawyers to find a resolution. If there are grounds for
oppression, the court is granted a list of powers to be ordered on companies including:
a. Winding up the company

b. Regulating the affairs and conduct of the company
c. Ordering shareholders to purchase or sell their shares to other shareholders
d. Ordering a party to refrain from a specified conduct or to do a specified act
e. Making changes to or revoking the constitution of the company.
5. WHAT ARE THE QUANTITATIVE CRITERIA OF A COMPANY TO GO FOR ACE MARKET IN
BURSA MALAYSIA?
The relevant authorities will look at several areas to determine the suitability of your
company for listing.
Some of the reasons may include your need to:

a. raise additional capital to seize growth opportunities;
b. enable your current shareholders to realise their investment;
c. encourage and reward your loyal and committed employees via an employee equity
scheme (ESOS); and/or
d. enhance the credibility and profile of your company as a public listed entity in the eyes
of your customers and suppliers.
ACE Market is a sponsor-driven market designed for companies with growth prospects. It
was formerly known as the MESDAQ Market prior to 3 August 2009. Sponsors must assess
suitability of the potential issuers, taking into consideration attributes such as business
prospects, corporate conduct and adequacy of internal control.
ACE Market provide companies with greater visibility via the capital market and a clearly
defined platform to raise funds from both institutional and retail investors.
The summary of the relevant listing criteria is as follows: -
A. Quantitative Admission Criteria

No minimum operating track record or profit requirement.
B. Public Spread
a. At least 25% of the company’s total number of shares; and
b. Minimum of 200 public shareholders holding not less than 100 shares each.
C. Bumiputera Equity Requirement
a. Companies with MSC status, BioNexus status and companies with predominantly
foreign-based operations are exempted from the Bumiputera equity requirement.
b. No requirement at the point of listing.
c. Allocation of 12.5% of the enlarged share capital to Ministry of International Trade

and Industry (MITI)- recognized Bumiputera investors.
i. within 1 year after achieving Main Market profit track record, or

ii. 5 years after being listed on ACE Market,
whichever is the earlier.

6. CAN A PERSON BECOME A SHAREHOLDER IN A COMPANY WITHOUT ACTUALLY
INVESTING ANY MONEY?
A. What is a shareholder?
This is the name given to anyone who owns ‘shares’ in a company limited by shares. As a
shareholder, you own part of a company in relation to the proportion of shares you
hold. A company can have just one shareholder or many shareholders. Each one is
entitled to receive a portion of profits in relation to the number and value of their
shares. Shareholders invest their money into the company by buying shares, and have
the potential to profit from the company if business goes well.
B. Can anyone be a shareholder?
Yes, any person or corporate body (company, firm, organization etc.) can be a
shareholder of a private company limited by shares.
C. What are shares?
Shares are units of equity ownership interest in a corporation that exist as a financial
asset providing for an equal distribution in any residual profits, if any are declared, in
the form of dividends. Each piece represents a certain percentage of the company.
Anyone who owns shares in a limited company is called a 'shareholder' or 'member'.
The number of shares held by each member determines how much of the company they
own and control. They normally receive a percentage of trading profits that correlates
with their percentage of ownership.
Here are some really simple examples of popular share structures:
One issued share = 100% ownership of the company.

Two of equal value = 50% ownership per share.
10 of equal value = 10% ownership per share.
100 of equal value = 1% ownership per share.
As a conclusion, to become a shareholder in a company, you need to invest some money

into the company by buying the company’s shares.
7. WILL THE SHAREHOLDERS AND DIRECTORS OF A PRIVATE LIMITED COMPANY BE HELD
LIABLE IF THE COMPANY GET SUED?
Two very basic but important principles of company law (whether in Malaysia or many
other jurisdictions) which translates to a company having the following features:
A. A COMPANY IS A SEPARATE LEGAL ENTITY

Malaysian law recognises this under sections 20 and 21 of the Companies Act 2016 (the
"Companies Act"). A company is distinct from its shareholders, directors, and other
representatives, and is capable of performing all of the responsibilities of a legal entity,
including the ability to sue and be sued, to acquire, own, hold, develop, or dispose of
property, and to engage in transactions.
B. THE SHAREHOLDERS OF THE COMPANY ARE GENERALLY NOT RESPONSIBLE FOR THE
COMPANY’S DEBTS AND OTHER OBLIGATIONS
Specifically, in the case of shareholders, their liability or risk is only up to the amount
they have invested or agreed to invest in the company. If the company were to wind up,
the shareholders have no legal responsibility to rescue the company or inject further
capital. This is known as the ‘limited liability principle’ and can also apply to directors,
other representatives / agents and employees.
C. CORPORATE VEIL
It is the separation between the company and the people behind it where they’re seen
as separate entities. However, this represents the general rule. As with all rules, if this
rule is applied strictly without exceptions, it can be abused.
There are instances where the people behind the company can be held personally
responsible for acts purportedly carried out by or in the name of the company. This is
sometimes called “piercing the corporate veil”, which is to go behind the so-called
“corporate veil” or “legal entity” and hold the ultimate “controlling mind” of the
company personally liable.
The core of company law (in this context, the separate legal entity / limited liability
principles) is driven by commercial considerations in the sense that genuine
businessmen need an avenue or entity to carry out legitimate business ventures without
the fear of being personally responsible should the venture fail – which can happen for
various inadvertent reasons (e.g. bad luck, recession, competition, wrong business
model, etc). At the same time, the law recognizes that there will be unscrupulous
parties who will abuse this avenue and cause hardship to other third parties– hence the
exceptions to the general rule.
The broad consensus is that a director's role in controlling the firm should not subject
him to tort liability (i.e., he shouldn't be sued). If the director has abused his position
and gone beyond his authorized responsibilities, the situation may be different.
All in all, the shareholders and directors would not be held liable for any legal action from a
third party due to the company being a separate legal entity with the shareholders and
directors. The director, however, may be taken action if his position being abused (such as
siphoning money to other accounts, fraud, scam, etc.).

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4. WHAT CAN BE DONE IF THERE ARE SHAREHOLDERS DISPUTES?

a. Disagreements over the direction of the business;

HOW CAN DISPUTES BE RESOLVED?

A. DRAFT A SHAREHOLDERS AGREEMENT PRIOR TO ESTABLISHING A BUSINESS

A SHA represents the mutual understanding of the shareholders of your company by

C. SELLING OUT COMPANY SHARES

D. ALTERNATIVE DISPUTE RESOLUTION (ADR)

E. INVOLVING THE COURT

a. Winding up the company

Some of the reasons may include your need to:

The summary of the relevant listing criteria is as follows: -

A. Quantitative Admission Criteria

C. Bumiputera Equity Requirement

b. No requirement at the point of listing.

c. Allocation of 12.5% of the enlarged share capital to Ministry of International Trade

i. within 1 year after achieving Main Market profit track record, or

whichever is the earlier.

B. Can anyone be a shareholder?

C. What are shares?

Here are some really simple examples of popular share structures:

One issued share = 100% ownership of the company.

As a conclusion, to become a shareholder in a company, you need to invest some money

A. A COMPANY IS A SEPARATE LEGAL ENTITY

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