Rights of Shareholders in Malaysia

In Malaysia’s corporate landscape, shareholders are more than just investors, they are essential stakeholders with defined legal powers that shape the governance and direction of companies. Guided by the Companies Act 2016 (‘CA 2016’), Malaysian law ensures that shareholders, whether majority or minority, have enforceable rights to protect their interests, influence board decisions, and uphold transparency. Understanding these rights is crucial not only for investors but also for directors and business owners navigating an increasingly regulated and shareholder-conscious environment.

Appointment and removal of directors

All shareholders, excluding preference shareholders, have the right to vote on any company resolution—including proposals that recommend specific management actions to the board. However, under the Companies Act 2016 (‘CA 2016’), such recommendations are not binding unless the following conditions are met:

The recommendation serves the best interest of the company;
The company’s constitution expressly authorizes shareholders to make such recommendations; and
The recommendation was made in the form of a special resolution.

Shareholders´ influence is real but conditional. Unless the resolution meets the legal and constitutional threshold, the board retains discretion over whether to act on it.

Voting threshold for private companies

Action	Required Votes
Appoint Director	Ordinary resolution, namely a resolution passed by a simple majority of more than half of the members who are entitled to vote, or written resolution.
Dismiss Director	Subject to the consitution, ordinary resolution. However, the director cannot be dismissed through a written resolution but solely through a meeting of members.

Reserve matter for shareholders

The CA 2016 outlines specific decisions that must be reserved for shareholders such as:

Appointment or dismissal of directors;
Amendments to the company constitution;
Disposal or acquisition of substantial property transactions involving directors, major shareholders, companies within a holding group and related persons;
Issuance of new shares;
Winding up or liquidation.

The above reserved matters are not exhaustive, the company constitution may specify other matters to be decided by shareholder approval.

Disproportionate voting rights

It is legally permissible for private companies, subject to their constitution, to issue different classes of shares. Each class my vary in the terms of the voting rights. Hence, private companies are permitted under their constitution to issue shares with double voting rights instead of the standard "1 share, 1 vote" structure. The multiple share class structure is typically used to dilute or retain influence over company decisions.

Meeting and voting

Shareholders have the right to attend, participate and speak at a meeting. They also have the right to vote on any resolution of the company. However, voting rights may vary subject to the terms of the constitution.

Subject to their constitution, the CA 2016 provides companies with the flexibility to hold meetings using any technology, provided it allows shareholders to participate, speak, and vote. This includes video conferencing, telephone conferencing or hybrid platforms. However, if the company’s constitution stipulates that meetings must be held in person, the company’s constitution must be amended first.

Responsibility

The CA 2016 provides that the company is a separate legal entity, which means a company is independent of its shareholders. The company is considered an artificial legal entity with unlimited authority to:

initiate or defend legal proceedings;
acquire, own, manage, or dispose of assets and property;
engage in contracts or perform any lawful act in its own name.

Shareholders are protected through a legal construct commonly referred to as the corporate veil, shielding them from personal liability for the company's actions or omissions. However, in exceptional cases, courts may pierce or lift the corporate veil to hold shareholders personally accountable. This generally occurs when:

the company is used as a front to circumvent legal obligations or perpetrate fraud;
the company serves merely as an instrument or extension of its controllers, rather than operating independently.

Courts are generally reluctant to interfere with corporate autonomy, but they may intervene if there is compelling evidence of improper or abusive control by shareholders. In such circumstances, the company’s rights and liabilities may be attributed directly to its controllers.

Minority shareholders

While majority rule governs most corporate decisions, the CA 2016 ensures that minority interests are not unfairly prejudiced or ignored.

Minority shareholders may apply to court if the company’s affairs are conducted in a manner that is oppressive, unfairly discriminatory, or prejudicial to their interests.
Shareholders may bring legal action on behalf of the company if directors fail to act in the company’s best interest.

Conclusion

Understanding shareholder rights is not just about knowing what is written on paper, it is about recognizing the power and responsibility that come with ownership. Whether you are a majority shareholder or part of a minority bloc, being aware of your rights allows you to hold directors accountable, challenge unfair actions, and contribute to the long-term success of the company. Ultimately, informed shareholders are the foundation of a resilient, responsible, and fair corporate ecosystem.