The document analyzes the legal issues surrounding compulsory acquisition of shares in Malaysia and the United Kingdom. It discusses three main legal issues: 1) Whether the interest of minority shareholders can be protected. It finds that both Malaysian and UK law have provisions allowing minority shareholders to control how their shares are acquired or require fair consideration. The courts can also consider fairness. 2) Whether adequate procedural guidelines for compulsory acquisition are provided. Both countries set out clear procedures and timelines for acquisitions. 3) Whether assessing fairness based on shareholders as a whole is appropriate. The document recommends that lawyers protect minority shareholders' rights, minorities are given board representation, and providing long-term contracts to minority customers.

1. 1
2016
ANALYSIS OF COMPULSORY ACQUISITION OF SHARES
LEGAL ISSUES IN MALAYSIA AND UNITED KINGDOM
Asmah Che Wan;
Amirul Aizad Mohd Noor;
Nur Afiqah Azni;
Nur Akmal Adnan;
Wan Nur Fatihah Mukhtar;
Wan Soraya Azmei
LLB (Hons) Students in Universiti Utara Malaysia
Supervised by Prof. Dr Asmah Laili Binti Yeon1
ABSTRACT
The main objective of this paper is to analyze the legal issues found in the
compulsory acquisition in Malaysia and the United Kingdom. It consists of several parts in
order to achieve the goal of it. In the introduction part, the authors explain about mergers
and acquisition, how they occur and also provide the readers with statistic of acquisition in
Asia-Pacific and in the United Kingdom. Not only is that, the meaning of a squeeze-out
transaction provided too. Next, there comes the problem that diverts the compulsory
acquisition to be held properly. Following that is the statutory provision part, where the laws
that regulate this compulsory acquisition as a whole are being elaborated and explained in
detail. Case laws that are relevant to this topic can also be found herein. The laws between
Malaysia and United Kingdom are compared in order to achieve the ends of this paper,
which is to create an analysis of these two countries. After all has been discussed, here comes
the main part of this paper which is the legal issues. There are three legal issues that the
authors have found namely, whether the interest of minority shareholders can be protected,
whether the statute provides adequate procedural guide for compulsory acquisition, and
lastly, whether it is appropriate to use the circumstances of shareholders as a whole in
accessing fairness. It is to be highlighted here that there are three recommendations that the
authors suggest. Firstly, lawyer plays crucial role in protecting the minority shareholder’s
reasonable expectations in a litigation proceeding. Secondly, minority shareholders are to be
given the chance to represent on the board by way of arrangement of settling disputes. Lastly,
by providing more long-term contracts to the minority customers. The authors hope that by
reading this paper, the readers would have deeper understanding on the topic of compulsory
acquisition.
1 Prof. Madya, UUM College of Law, Government and International Studies,Universiti Utara Malaysia; Ph.D in
Law, Securities Industry, University of Aberdeen, UK, Master of Comparative Laws (MCL), Land Law,
International Islamic University of Malaysia., LL.B (Hons), International Islamic University of Malaysia;Assoc.
Prof., Universiti UtaraMalaysia, 2001- present.

2. 2
INTRODUCTION
Mergers and acquisitions are among the most effective ways to expedite the
implementation of a plan to grow rapidly. Companies in all industries have grown at
lightning speed, partly because of an aggressive merger and acquisition strategy. The
impact of technology and the Internet has only further increased the pace and size of
deals. Buyers of all shapes and sizes have many of the same strategic objectives—to
build long-term shareholder value and take advantage of the synergies that the
combined firms will create—but each industry has its own specific objectives.
Technology companies, in search of new ideas, new products, trained knowledge
workers, strategic relationships and additional market share, have been the most
acquisitive2. Deals in the pharmaceutical industry are encouraged by the need to put
more products into development pipelines and achieve certain economies of scale in
combining research and development efforts. Defense industry mergers have been
driven by shrinking federal budgets and the need to win private-sector. Deregulation
in the energy and financial services industries have just begun to spawn deals driven
by the ability to offer a more diversified range of services.
Merger-and-acquisition frenzy has created intense competition for the same
target companies, where a premium is placed on price and speed. The fear in many
boardrooms is that the company will be left out or left behind if it does not move
quickly to acquire other businesses. Deals that used to take months to get done now
close in a matter of days, especially if no regulatory approvals need to be obtained
and no shareholder battles will take place as a condition for getting the deal
completed3. In this environment, acquisitions are moving so fast and are being bid up
so high that the likelihood of problems and errors has increased dramatically4.
The terms "merger" and "acquisition" are often confused and used
interchangeably by business and financial executives. On the face of it, the difference
may not really matter since the net result is often the same: Two companies (or more)
that had separate ownership are now operating under the same roof, usually to obtain
2
Kauffman, E. M. (2001, April 30). Mergers and acquisitions: An introduction. Retrieved November 26, 2016,
from http://www.entrepreneurship.org/resource-center/mergers-and-acquisitions-an-introduction.aspx
3
The Malaysian code on Take-Overs and mergers 2010 (2010 code) and practice note (PN) 2010 – frequently-
asked QuestionsSecurities commission Malaysia. (1993). Retrieved November 26, 2016, from
https://www.sc.com.my/the-malaysian-code-on-take-overs-and-mergers-2010-2010-code-and-practice-note-pn-
2010-frequently-asked-questions/
4
PLC, E. I. I. (2016). 2015 mergers and acquisitions report: Malaysia. Retrieved November 26, 2016, from
http://www.iflr.com/Article/3439983/2015-Mergers-and-Acquisitions-Report-Malaysia.html

3. 3
some strategic or financial objective. However, the strategic, financial, tax and even
cultural impact of the deal may be very different, depending on how the transaction is
structured. Merger refers to two companies joining (usually through the exchange of
shares) to become one. Acquisition occurs when one company, the buyer, purchases
the assets or shares of another company, the seller, paying in cash, stock or other
assets of value to the seller5.
Another situation happens when a shareholder (or two or more shareholders
acting together) reaches 90% or more of the shares in the company they are called a
dominant owner6. Under the Takeovers Code, a dominant owner has the right, and in
some circumstances the obligation, to buy the remaining shares from the rest of
the shareholders. This is called compulsory acquisition. Acquisitions in Malaysia are
primarily regulated under the Capital Markets and Services Act, 2007 (Act 671)7
(CMSA) and the Malaysian Code on Take-Overs & Mergers 2010 (Code)8. The
Code contains principles and rules governing the conduct of all persons or parties
involved in a takeover. The objective of the regulatory regime of the CMSA is to
ensure that the acquisition of voting shares or control of companies takes place in an
efficient, competitive and informed market. As in the United Kingdom, all the
procedures are stated in the Chapter 3 of Part 28 of the Companies Act 20069. These
provisions that govern compulsory acquisition will be thoroughly discussed and
compared in the later part of this paper.
5
Kauffman, E. M. (2001, April 30). Mergers and acquisitions: An introduction. Retrieved November 26, 2016,
from http://www.entrepreneurship.org/resource-center/mergers-and-acquisitions-an-introduction.aspx
6
The Malaysian code on Take-Overs and mergers 2010 (2010 code) and practice note (PN) 2010 – frequently-
asked QuestionsSecurities commission Malaysia. (1993). Retrieved November 26, 2016, from
https://www.sc.com.my/the-malaysian-code-on-take-overs-and-mergers-2010-2010-code-and-practice-note-pn-
2010-frequently-asked-questions/
7
Capital Markets and Services Act, 2007 (Act 671)
8
Malaysian Code on Take-Overs & Mergers 2010 (Code)
9
Chapter 3 of Part 28 of the Companies Act 2006

4. 4
The bar chart above refers to the statistic of acquisition in Asia-Pacific from the year
of 1995 to 2014.
The bar chart above illustrates the statistic of acquisition transactions in the United
Kingdom from the year of 2011 to 2014.
PROBLEM
Somehow, the problem of dissenting shareholders is endless debate in the
company law. In the situation where a bidder seeks full control of the company and a
takeover bid has received 90 per cent acceptance, the difficulty arises where a
minority is unwilling to part with its holding. The main objective of the law in this
particular area is to balance the interests of the majority and minority. Subsequently,
this will ensure that the majority commits no fraud on the minority and to empower
the majority where it will is thwarted by a bloody-minded minority.

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ISSUE 1: WHETHER INTEREST OF MINORITY SHAREHOLDERS CAN
BE PROTECTED?
The laws regarding companies and securities in Malaysia are closely related to
common law or the law in United Kingdom (UK). Therefore in determining issue of
whether interest of minority can be protected, we may see a few similarities between
these two countries. It must be noted that when it comes to compulsory acquisition of
shares, there would be usual cases where minority would not give up their shares to
the bidder and these kind of rule (compulsory acquisition of shares) may seem like
oppression towards minority. However, that is not entirely true because there are still
options under rules and provisions that can be used by minority to protect their
interest. Even though they might not succeed in protecting their shares, there are some
provisions that can be used to safeguard their rights under Malaysian law and also
under UK law.
In Malaysia, right of minorities is stated under Section 223 of CMSA 2007.
Based on this provision, it states that where a takeover offer has been accepted by
holders of not less than 90% in the nominal value of those shares of that class
excluding the shares that already held at the date of the takeover offer by the offeror
and persons acting in concert, the remaining minority shareholders may within the
offer period require the offeror to acquire its shares on terms of the takeover offer or
such other terms as may be agreed. Here it shows rights of minority over their shares.
In other words, minority may put reasonable conditions for bidder to buy their shares
as agreed by both parties. This provision ensures that minorities would not feel
completely left out by the act of majority and shows that bidder must still respect
them as a holder of a share in the company. This provision also can be seen in UK,
where it is stated under Section 983 of Companies Act 2006, the right to be bought
out by the bidder known as ‘sell-out’. Basically, sell-out rights enable minority
shareholders, in the wake of such bid, to require the majority shareholders to purchase
their shares. Since they involved the compulsory purchase or acquisition of shares
against the will of the holder of the shares or the acquirer, high thresholds will apply
to the exercising of such rights and there are protective rules on the price that must be
paid for the shares concerned (Formacompany, 2016). It is clear that, based on both
provisions that I stated above, right of minorities can still be protected by allowing
them to control the way of how their shares shall be bought by the bidder.

6. 6
There is another provision in Malaysia and also in UK which can be used to
protect the rights of minority shareholders. In Malaysia, under Section 224(5) of
CMSA 2007, when the offeror who has not obtained acceptances made an application
to the court, the court may made an order to authorize the offeror to give notices
under subsection 222(1). This subsection is subject to subsection (6). The court only
grant the order if it satisfied that the failure for the offeror to obtain acceptances was
due to the inability of the offeror to trace one or more of the shareholders after made
reasonable enquiries or the shares which the offeror has acquired or contracted to
acquire by virtue of acceptances of the take-over offer is not less than the 90% in the
nominal value as specified in section 222(1). The court may also grant the order if it
thinks that the consideration offered is fair and reasonable. Based on Section 222(5)
of CMSA 2007, the highlight would be on the last sentence. It states that ‘the court
may grant the order if it thinks that the consideration offered is fair and reasonable’.
Here it shows that the court would consider the right of minority shareholders by
ensuring that the offer made was fair and reasonable before granting order of
acquisition to the bidder. So the court would have discretion in granting the order
while making sure fairness and justice would be upheld. While in UK, this kind of
provision can be seen in Companies Act 2006 stipulated under Section 986(9). In this
provision, a bidder who fails to meet the 90 per cent threshold due to the existence of
untraceable shareholders can apply to the courts for permission to exercise squeeze-
out rights. However the bidder must satisfy the Court that the shareholders are
untraceable and that the consideration offered is fair and reasonable. The court must
also consider that it is just and equitable to make the order having regard to the
number of shareholders who have been traced but who have not accepted the offer
(Craig Cleaver, 2014). Here we can see that UK law also put consideration towards
dissenting minority shareholders.
In addition to that, we may also see the other rights of minority shareholders
stated in Malaysia and also UK law. As for in Malaysia, under Malaysian Code on
Take-Overs & Mergers 2010, Rule 22 states about the compulsory acquisition and
the right of minority shareholders. Under paragraph (1), when an offeror makes a
take-over offer for more than one class of shares, the offeror must made a separate
offers to each class of the shares. Meanwhile under paragraph (6) of the Rule 22, an
offeror is required to provide upon any demand made by the dissenting shareholders
in the manner prescribed by the Capital Market Services Act, a written statement of

7. 7
the names and addresses of other dissenting shareholders within four market days
from the date of receipt the demand. Based on the rules above, it can be seen that the
order to make separate offers to each class of shares would certainly protect
shareholders rights. It must be noted that there are few types of shares like preference
shares, ordinary shares and others. These shares enable the holder different types of
rights and that is why the price per unit also usually differs. Therefore, rule to make
separate offer to each class of shares depending on the type of share, shows that
Malaysian law did consider the rights of minority shareholder. Apart from that,
paragraph (6) under Rule 22 of the same Code allows minority shareholder or
dissenting shareholder to get the name and addresses of the other dissenting
shareholders. By this way, those minority shareholder would not be left out and they
may perhaps decides their option and discuss over it regarding acquisition of share.
While in UK, although it is a bit different than Malaysia, however it can still be seen
that UK law also put consideration towards minority shareholders. Under Section 979
of CA 2006, the bidder must exercise his squeeze-out rights by serving notices within
three months beginning on the day after the deadline for acceptance of the offer.
Consideration offered to the minority shareholders must be the same consideration
offered to other shareholders under the original offer to avoid unfairness and injustice.
This provision would prevent minority shareholder from being oppressed by the act of
majority by giving same consideration to the other shareholders so that fairness can be
achieved.
Apart from that, it must be noted that both Malaysian law and UK law allows
minority shareholders who feel oppressed by the act of majority, particularly in
respect of compulsory acquisition of shares to bring the matter to the court of law. In
Malaysia, Section 224 of CMSA stated about minority’s rights to apply regarding
compulsory acquisition to the court. Under subsection (1), the court may on the
application of any dissenting shareholder order that the offeror is not entitled and not
bound to acquire those shares or the court also can specify other terms of acquisition
from the terms of the take-over offer. So here it can be seen that the right to be heard
did given to minority shareholder. Of course, minority shareholder must show cause
on why compulsory acquisition of shares should not be given to the offeror. Under
Section 33A (5)(d) of Malaysian Code on Takeovers & Mergers 1998, duty is
imposed on Securities Commission to ensure that the directors of both the acquiring
and target companies act in good faith when responding to, or making

8. 8
recommendations with respect to a take-over offer (Dr Mushera Ambaras, 2005). The
right of minorities to be heard can be seen in the case of Amin Bin Halim & Anor v
Tenaga Nasional Berhad and other cases (2016) where minority who dissented to
the compulsory acquisition of shares brought the case to the court. Even though
plaintiffs failed to show a good reason to deny such acquisition of shares and failed to
show that defendants acted in bad faith, but still it is a good case to show that right to
be heard indeed is given to minority who feel oppressed by the act of majority. While
in UK, the right to be heard by the minority can be seen under Section 979 of CA
2006. Based on this provision, where there is a case minority feel oppressed by the
compulsory acquisition of their shares, those dissenting shareholders have 6 weeks
from receipt of Section 979 notice to challenge the notice before the Court. The
squeeze out rights of the bidders cannot be exercised until any such application has
been disposed of. However, according to an article in the Thomson Reuters Legal
Solution website, dissenting shareholders will require a compelling argument if they
are to persuade Court that an offer accepted by 90 per cent of shareholders should not
be upheld. Here we can see that right to be heard are given in UK as well for minority
who feel oppressed by the act of majority shareholders. Also, General Principle 3 of
City Code (UK) imposes target directors a series of specific obligations. This is to
ensure that the directors would act in good faith. It must be noted that, also in UK
law, the directors of Target Company, being fiduciary agents of company have duty to
act bona fide for benefit of company as a whole. We can see in case Mills v Mills
(1938) where the court held that powers given to directors cannot exercised in order
to gain some private advantage or for any purpose foreign to the power.
All in all, the rights indeed given to minority shareholders to protect their
rights even though it would be hard to safeguard their shares, however they would
still be given chance to bring the matters to court in case of oppression.

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ISSUE 2: WHETHER THE STATUTE PROVIDES ADEQUATE
PROCEDURAL GUIDE FOR COMPULSORY ACQUISITION?
In general, the procedures involved in the compulsory acquisition of shares in
Malaysia are stated in the Capital Market and Services Act 2012 (CMSA) with
further explanation can be found in the Malaysian Code on Take-over and Mergers
2010. In cases where the company is a public listed company, cross-reference must be
made to Bursa Malaysia Securities Berhad Listing Requirements.10 Meanwhile, for
the United Kingdom’s counterpart, the statute used to cover the compulsory
acquisition of shares cases are the Companies Act 2006 and the City Code on
Takeovers and Mergers, which is applicable to the listed companies in the United
Kingdom. These statutes provided rather lucid explanation on the flow of the
compulsory acquisition transaction, from the preliminary requirements and process
until the compulsory acquisition is fully effective.11
The preliminary step to the compulsory acquisition of shares is that the
offering company must make a take-over offer to the target company. According to
Section 222(1) of the CMSA, when the target company accepted the offer, the
offeror must ensure the sum of offer which has been accepted formed at least nine-
tenths of the nominal value of the company, excluding any shares that were held prior
to the take-over offer. This acceptance is to be made within four months after the
offer was made.
In two months following the acceptance, the transferee company may serve a
notice expressing its intention to acquire shares in the target company to the
dissenting shareholders in the prescribed manner. Together with the notice, the
transferee company must attach a statutory declaration as evidence that they had
satisfied the conditions to give out such notice.
Section 222(2) allocates one month to the dissenting shareholders upon
service of the notice, to send a written demand to the offeror, requesting for a
statement containing a list of names and addresses of other dissenting shareholders, as
shown in the register of members. The offeror have to wait for fourteen days upon the
handover of the list before they proceed to the next stage in acquiring the shares.
10
Public Mergers & Acquisitions in MalaysiaChristopher & Lee Ong http://www.christopherleeong.com/our-
work/publications/public-mergers-acquisitions-in-malaysia
11
MalaysiaTakeover Guide Rahmat Lim & Partners
http://www.rahmatlim.com/SitePages/Publication/PublicationByYear.aspx?Year=2014

10. 10
Section 222(7) of the CMSA stated on the procedure to finalized the
acquisition transaction where after the expiration of the one month from the service of
notice made or the 14 days, the offeror shall sent the copy of notice along with the
documents of transfer to the offeree. After that, payment shall be made in
consideration to the share units to the offeree. Thereupon, the transfer of shares will
be legalized by registration of the offeror as the new holder to those shares.
Subsection (5) to Section 222 of the CMSA serves as a reminder to the
offeror. It stated that if the copy or notice of declaration was not made in the
prescribed manner; or if the notice of declaration or the list of names and addresses is
false or believed to be false, the person who commits such act can be charged for
offence.
Meanwhile under Section 223 of the Act, it stated about the right of minority
shareholders. Where a takeover offer has been accepted by holders of not less than
90% in the nominal value of those shares of that class excluding the shares that
already held at the date of the takeover offer by the offeror and person acting in
concert, the remaining minority shareholders may within the offer period require the
offeror to acquire its shares on terms of the takeover offer or such other terms as may
be agreed. Under subsection (2), the offeror must give notice to any shareholder who
has not accepted the take-over offer within one month before the end of the offer
period and if the notice is given before the end of offer period, it shall state that the
take-over offer is still open for acceptance in the notice.
Should the offeror fails to achieves the 90% acceptances, compulsory
acquisition is still possible through an application made to the court under Section
224(5) of the CMSA for the authority to compulsory acquire the remaining shares.
But, this is only applicable if the court believes that the offeror had satisfied three
conditions. Firstly, the failure is caused by the inability to trace any persons who
holds relevant shares to the acquisition. Secondly, the sum of shares, including the
percentage holds by the missing shareholder amounts to 90% or more of the nominal
value of the shares and thirdly, the consideration to the offer is fair and reasonable.
The dissenting shareholder are given a period of one month after the service of
notice to apply to the court that the application made by the offeror was unnecessary,
improper or vexatious. This is stated under Section 225(4) of the CMSA. In such
situation, if the court satisfied with the claim, the court may order that the offeror

11. 11
shall be barred from acquiring the said shares or to specify the terms of acquisition, if
there is deviation from the term in the take –over offer.12
The process of compulsory acquisition of shares in UK is mentioned in
Chapter 3 of Part 28 of the Companies Act 2006. Basically, there is no exact
statutory definition for acquisition of share in Companies Act 2006. However,
acquisition can happen when one company decides to take over another one.13 The
acquisition may be done by way of purchasing either the majority or entirety of the
ownership stake of the company being taken over. It must be noted that acquisition
can be divided two types which are hostile and friendly. A hostile takeover occurs
when a company is bought by another without its consent, usually when the buying
company purchases a majority amount of its shares to get a controlling stake. On the
other hand, when both companies agree to the terms of the acquisition, it is referred to
as a friendly takeover.
Part 28 of the Companies Act 2006 allows an offeror to compulsorily acquire
the shares of non-assenting minority shareholders either by way of ‘squeeze out’ or
through a scheme of arrangement. Under UK law, Section 979 of the Companies Act
2006 is the relevant "squeeze out" provision. It gives a takeover offeror who has
already acquired 90% of a company's shares the right to compulsorily buy out the
remaining shareholders.
Basically, there are some conditions where the right to squeeze-out right is
available. The first condition is where there has been a ‘takeover offer’. Under
Section 974 of CA 2006, takeover offer means an offer to acquire all shares in the
company or where there is more than one class of shares in a company, all the shares
of one or more classes. Here, where an offeror obtains acceptances of at least 90% of
the shares it is offering to buy in the target company and acceptances of at least 90%
of the voting rights carried by the shares it is offering to buy, it can require the
remaining non-accepting shareholders to sell their shares on the terms of the offer.
The second condition to exercise ‘squeeze-out’ right is that when the offeror
has acquired at least 90 per cent in value of the shares of any class to which the offer
relates, and where the share of that class are voting shares, not less than 90 per cent of
the voting rights carried by those shares as stated under Section 979(4) of CA 2006.
12
Section 224 (1) Capital Market and Services Act
13
A guide to compulsory acquisition in the absence of a takeover bid Doug Goodman 11/06/2014
http://www.gadens.com/publications/Pages/A-guide-to-compulsory-acquisition-in-the-absence-of-a-takeover-
bid.aspx

12. 12
The third condition to exercise squeeze out is that through dead register
applications. An offeror who fails to meet the 90 per cent threshold due to the
existence of untraceable shareholders can apply to the courts for permission to
exercise squeeze-out rights stated under Section 986(9) CA 2006. However, the
offeror must satisfy the Court that the shareholders are untraceable and that the
consideration offered is fair and reasonable. The court must also consider that it is just
and equitable to make the order having regards in particular, to the number of
shareholders who have been traced but who have not accepted the offer.
The last condition for squeeze out is that offeror must follow the order for
notices. Under Section 979 of CA 2006, if the 90 per cent threshold is reached, the
offeror must send out notices to all the relevant minority shareholders informing them
that it will compulsorily acquire their shares. The notices must be in a prescribed
manner as stated under Section 980 of the same Act and must either be served
personally or by post. Once a valid notice has been sent to the relevant minority
shareholders, the offeror is entitled to and is bound to acquire those shares on the
terms of the offer. Should the offeror fail to send a copy of a notice or a statutory
declaration, or if he makes a false declaration, he would be liable for under Section
980(6) CA 2006.
It is pertinent to note the vitality of timing in the squeeze out process. The
offeror must exercise his squeeze-out rights by serving the notice expressing his
intention to acquire the remaining shares from the dissenting shareholder within three
months from the date after the deadline for acceptance of the offer. This period is
extended to six months for offers for private companies. Apart from that, six weeks
after notice has been served, the offeror must begin to complete the compulsory
acquisition process by transferring to the target company, the consideration for the
shares to which the offer relates. It must be noted that the consideration offered to the
minority shareholders must be the same consideration offered to other shareholders
under the original offer to avoid unfairness and injustice.
Differences between the laws of the two countries and suggestion for
improvements to the current statute in Malaysia
In Malaysia, Section 222 of the CMSA stated that the nine- tenths calculation
is made according to the nominal value of the shares belonging or contracted to be
acquire by the offeror himself alone. But, the CMSA under Section 224 (5) allows the

13. 13
offeror to carry out compulsory acquisition even though they have not fulfilled the
90% requirement if the offeror fulfill certain requirements. In contrast, in the United
Kingdom, s 979(6) (b) of the CA 2006 stated that the 90% of the values of the shares,
or in cases of voting shares, 90% of the voting rights is the sum of shares owned or
contracted to be acquire by the offeror and its associates company, the company
where the offeror owns a significant portion of its voting shares. Therefore, the
probability of achieving the 90% requirement is very high as the financial sources are
obtained from many sources.
In addition, Section 222(2) of the CMSA provides the dissenting shareholders
with the right to access the names and address of other dissenting shareholders and
are given 14 days before any further action can be taken by the offeror to proceed
with the acquisition. This is considered as the right of the minority shareholder in this
case. This right is important to give the dissenting shareholders time to consider
whether it is fair for them let go of their shares. If they thinks that the compulsory
acquisition is done in an unjust way, they may bring the case to the court to defend
their rights. There is no equivalent provision provided in the United Kingdom’s
statute.
In Malaysia, the CMSA never mentions in clear term on the type and degree
of punishment available to the offending offeror, according to section 223 (5). In the
contrary, the United Kingdom’s counterpart specifically mentions in section 980(8)
CA 2006 that the maximum penalty upon conviction of failure to submit the notice or
the statutory declaration, or fabricating the declaration is 2 years imprisonment, or
fine, or both. It is important to have the sanctions available to be read together with
the offence so that the expectant offender are warned with the possible punishments
awaits him.
Apart from that, the Companies Act in the United Kingdom comes with a
provision that exclusively explains on the actions of company in dealing with the
payment allotment of consideration held on trust under section 981(9). In contrast, the
Malaysia’s statute only mentions that the consideration will be hold by the offeree in
a different account, in trust of the shareholder. Thus, there seems to be inadequacy to
the current provision that needs to be improvised.
In conclusion, the statutes that govern both countries are designed to fit the
local needs and as a guide to smoothen the acquisition of shares process. It is
therefore unavoidable to have certain differences between the two acts while covering

14. 14
similar issue. However, improvement is a must considering the nature of this area of
law that is ever- changing, especially in Malaysia where the Securities law is still new
and is rapidly growing, despite not having many expert in this area. It is naturally
inevitable that inadequacy of law may be faced, so reference should be made to other
countries on this matter to learn from their experience and development before the
local law can be reinforced.
ISSUE 3: WHETHER IT IS APPROPRIATE TO USE THE
CIRCUMSTANCES OF SHAREHOLDERS AS A WHOLE IN ACCESSING
FAIRNESS?
In the compulsory acquisition, there will be an issue of fairness concerning the
shareholders, particularly the minority shareholders. Basically fairness is defined as
the quality of treating people equally or in a way that is right and reasonable. In
applying to meaning of fairness to this issue, any shareholders, regardless whether the
majority or the minority, both parties must be treated equally.
Section 181 of the Companies Act 196514 provides the general protection for
the minority shareholders. The subsection (1)(a) any member or holder of a debenture
of the company may made an application to the Court if the company’s affairs are
conducted or the directors’ power are exercised in a manner oppressive to one or
members or holders of debentures or in disregard of the interests of the members,
shareholders or holders. When oppression is made out, the court may grant relief if it
thinks fit, which including an order to direct or prohibit any act, cancel or vary any
transaction or resolution, regulate the conduct affairs of the company in the future or
provide for the purchase of shares of debentures of the company by other members or
holders of debentures or by the company itself15. The court also may order reduction
on the company’s capital or made an order for the company to be wound up as
remedy of oppression against the members of the company. In Rahya Trading Sdn
Bhd v Tong Khin Company Sdn Bhd and another16, the oppression of a minority
shareholder was proven due to the company’s insistence that the minority shareholder
remains as a shareholder against his wishes even though the company was no longer
involved in any business. As a result, the court granted the relevant protection.
14 Companies Act 1965 (Act 125).
15 Section 181(2) of Companies Act 1965 (Act 125).
16 [2014]5 CLJ 726.

15. 15
The issue of fairness in compulsory acquisition arises in a situation where the
minority is dissatisfied with the offer made by the offeror of takeover as the minority
think that the shares is more valuable compared to the offer. All minority shareholders
in a compulsory acquisition would be entitled to receive any privately negotiated
higher price. However, the compulsory acquisition procedure does not provide for any
higher price determined by the court to pass on to all the minority shareholders and all
minorities will not necessarily receive the same price per share. The minority might
risk receiving a lower price if they choose to bring an action to the court for the
assessment of price. If the minority being deprived from getting a reasonable and fair
assessment pertaining the true value of the shares this will means that the majority has
deny the minority shareholders the chance of getting profits during the compulsory
acquisition.
In Amin Halim Rasip & Anor v Tenaga Nasional Bhd & other case17, TNB
made an offer to acquire all the remaining shares not already held by TNB in Integrax
at an initial offer price of RM2.75 per share in 2015. Notwithstanding that the offer
was “not fair but reasonable”, the board recommended that the shareholders reject the
offer on the basis that the offer was “not fair” and this outweighed its
“reasonableness”. The offer price was subsequently revised to RM3.25 per share and
ultimately accepted by the shareholders notwithstanding the board recommending that
the shareholders reject the revised offer on the basis that underlying value of the
shares was at a material premium to the revised offer price.
In UK, in assessing fairness, the court will consider the whole affected parties
not just the minority. The principles in assessing the element of fairness are derived
from cases that have been decided. In Re Grierson, Oldham and Adam Ltd18, the
dissenting minority shareholders after receiving a statutory notice acquire the shares
applied to the court that the offer in the notice was unfair on a few grounds. The first
ground is that the price offered for the shared was lower than the market price of the
shares in the previous years and the price offered did not recognize the advantages to
be obtained by the offeror in respect of the acquisition. Other ground are the offer
price compared unfavorably compared to price offers of the classes of shares and the
applicant would be compelled to sell shares at loss from original investment and
would not capable to deduct from capital gains tax.
17 [2016]1 LNS 591.
18 [1968]1 Ch 17.

16. 16
The evidence presented by the applicants was done by an independent expert
and was unchallenged as the respondent company presented no evidence to contrary.
The court thus accepted the evidence on all the above mentioned grounds. It would
seem at this stage on the evidence that the offer price given is unfair to the dissident
minority.
The principle for the test of fairness is not only on the applicant minority but
upon all affected shareholders including those who did not oppose and accepted the
offer19. In re Sussex Brick Co. Ltd20, the court held that for the application on the
ground unfairness to succeed, the court must satisfied that the offer to be obviously
unfair, patently unfair, unfair to the meanest intelligence and it is not sufficient to
show the offer was not as it might have been. Thus, the court approach in determining
the unfairness is very high.
It is very clear that in order to prove unfairness is exceptionally difficult,
however, the common law have recognized in some circumstances the presumption of
unfairness. One example of the presumption of unfairness can be seen in the matter of
Re Bugle Press Ltd21. In this case, the transferor company, Bugle Press Ltd, had three
shareholders, with the two main shareholders holding 4500 shares each. The sole
minority shareholder held 1000 shares. The two main shareholders, holding 9000
shares, incorporated the transferee company of which they were the sole directors and
shareholders and were incorporated for the sole purpose to effect the acquisition of
the transferor company. The new company acquired the shareholding of the two main
shareholders and proceeded to squeeze-out the minority shareholder by virtue of
having nine tenths of the total shares in the company. The court found that there are
sufficient grounds to refuse the acquirer to squeeze-out the affected remaining
minority shareholders. It is clear in this situation the two main shareholders can easily
collude and the offer consideration can be manipulated in order to utilize the squeeze-
out on terms that are unfair to the minority shareholder.
19Smit, Albertus Ebenhaezer."Compulsory Acquisition of Minority Shareholders: A Critical Analysis."
Accessed November 25,2016.
https://open.uct.ac.za/bitstream/item/22703/thesis_law_2015_smit_albertus_ebenhaezer.pdf?sequence=1.
20 [1961]Ch 289n.
21 [1961]1 Ch.67 CA

17. 17
RECOMMENDATION
Majority shareholders escape the hardship of suppression by occupying
corporate offices and compensating themselves handsomely as employees of the
corporation. As one court put it:
“When dissension and agreement arise, the majority attempts to oust the
minority, not only of control, but of a fair return upon the investment. Instead
of treating all the stock alike, and disturbing the profits fairly and
proportionately by way of dividends, the majority first elect themselves as
directors, then as directors, they elect themselves officers, and then distribute
among themselves a substantial part of the profits in the way of excessive
salaries, additional compensation and other devices.”22
Often, minority shareholders may be unable to protect their interest because
they are insufficiently sensitised to questionable business practice of the shareholders.
Under this subtopic, the author will give a few recommendations for the minority
shareholders to protect themselves against compulsory acquisition on unfair terms.
Firstly, minority shareholders may appoint lawyer to represent them to fight for their
rights. The minority shareholders’ lawyer can take several steps to fight the
oppressive action by few steps. First, he should get information about the corporation
who will acquire the compulsory acquisition, its operation and oppressive action
being taken by the majority shareholders and corporate directors. Some of these
information can usually be obtained by asserting the minority shareholder’s right to
inspect corporate books and records, and, if the minority shareholder is a director of
the company, he has the right to inspect corporate books and record and make on
premises inspections. In litigation, a minority shareholder’s lawyer should request
protection of the minority shareholder’s reasonable expectations. The reasonable
expectations of the shareholders, as they exist at the inception of the enterprise and as
they develop thereafter through a course of dealing concurred in by all of the
shareholders is perhaps the most reliable guide to a just solution of a dispute among
shareholders in the typical close corporation.
22
. Carr v. Kimball, 153 App. Div. 825, 834, 139 N.Y. Supp. 253, 259
(1912), alffd mem., 215 N.Y. 634, 109 N.E. 1068 (1915).

18. 18
Another way of giving minority shareholder in regards on the representation
on the board is by way of arrangement of settling disputes. A squeeze-play can be
avoided by setting up in advance charter, or by-law provision or by shareholder’s
agreement in matter of arrangement to resolve whatever policy disagreements or other
disputes which may arise from time to time among the participants in an enterprise.
After doing some research, the author has found out that there are at least two
approaches which seemingly promising. The first one is arrangement by which
impartial outsiders will be brought in to manage the business until the parties have
resolved their differences. Another approach is to provide in advance, for an
agreement to arbitrate future disputes. This matter should also include disputes on
management and policy question and it should be enforced. This is because, in my
opinion, arbitration has great potential for settling disputes in small business quickly
and satisfactorily, and thus a long, drawn-out dissension that can leads to squeeze-
plays can be avoided.
The author also believed that a long-term employment contracts between
shareholders and corporation should be effective in order to protect the right of the
shareholders, especially for those minority shareholders. This is because, it can be
understood that persons organizing a small business corporation who invest
practically all of their money and assets in the enterprise may expect to receive
benefit from the trading. Therefore, minority shareholders will need assurance that
they will be retained the company’s employment. A minority shareholder may protect
himself against being deprived of employment with the company by insisting on a
long-term employment contract. It is to be noted that the agreement stated here is not
an agreement among the shareholders, but it is a contract between the corporation and
a particular shareholder-employee. Therefore, in the author’s opinion, to guard against
the possibility that the corporations will grow and the salaries for majority
shareholders become prosperous without a proportionate increase in the minority
shareholder’s compensation, he may insist that his employment contract include, a
basic salary, some provision for contingent compensation,23 or an arrangement under
which his salary will be increased in a fixed proportion with salaries of designated
corporate officers. Other than that, he may insist upon including in the contract
23
e.g. a percentage of profits

19. 19
provision for severance pay or liquidated damages in the event that the corporation
breaches the contract.
In Malaysia, the take-over of listed companies via the Asset Disposal route
have raised concerns that the minority shareholders may be forced to sell-out by a
small number of substantial shareholders who hold majority shares to attain simple
majority required under Section 132C of the Companies Act 1965, even though the
prices offered may not be fair or reasonable. Therefore, in order to prevent this from
happening, it may be feasible to providing a veto over officer action. This means that,
as the principal corporate offices will usually be held by majority shareholders, a
minority shareholder will want to be in a position to prevent an action by those
officers which would be prejudicial to his interest. Therefore, in the author’s opinion,
to decrease the chance of unfavourable officer action, the by-laws might define the
duties and powers of the officers in narrow terms in order to prohibit the delegation of
any important work of the board of directors to officers or committees.

20. 20
CONCLUSION
In conclusion, it is noticeable that the laws regarding companies and securities
in Malaysia are closely related to common law or the law in United Kingdom (UK).
However, the fact that the remedies in order to give rise to claims for minority
shareholder’s oppression are as limitless as the human capacity for greed and fraud is
also noticeable. Fortunately, the judicial system has responded with equal creativity
where they provided and recognized the limited protections for minority shareholders
as stated in Capital Market Services Act 2007 (CMSA) and Malaysian Code on
Take-Overs & Mergers 2010 in Malaysia. The Capital Market and Services
(Amendment) Act 2015 ("CMSA Amendment") which came into effect on 15
September 2015 introduces various amendments to the CMSA which gives an impact
on Code Takeovers. The CMSA Amendment provides enhanced protection to the
offeree shareholders as the SC is empowered to appoint an independent adviser if the
offeree company fails to do as required under the Code. The compulsory acquisition
provisions under the CMSA has also been extended to cover convertible securities
and thus, providing greater certainty for an offeror participating in a take-over offer.24
By recognizing the limited protection for the minority shareholders in a typical
corporation under majority rule, it has given rights for the minority shareholders
against oppression. Therefore, whether representing majority or minority
shareholders, the attorneys have to do well to think creatively about a resolution that
will effectively preserve maximum value for their clients and take advantage of the
tools available to them.
24
O.Lee & Christopher. “Public Merger & Acquistion in Malaysia.” Accessed December 5th
, 2016.
http://www.christopherleeong.com/media/2407/160307-public-ma-in-malaysia-march-vf.pdf

21. 21
REFERENCES
Author, A. A., & Author, B. B. (Date of publication). Title of article. Title of Online
Periodical, volume number (issue number if available). Retrieved from
http://www.someaddress.com/full/url/
N.A. (2016). Public Mergers & Acquisitions in Malaysia. Retrieved from
http://www.christopherleeong.com/our-work/publications/public-mergers-
acquisitions-in- malaysia
N.A. ( 2014). Malaysia Takeover Guide. Retrieved from
http://www.rahmatlim.com/SitePages/Publication/PublicationByYear.aspx?Ye
ar=2014
Goodman, D. (2014). A guide to compulsory acquisition in the absence of a takeover
bid retrieved from http://www.gadens.com/publications/Pages/A-guide-to-
compulsory- acquisition-in-the-absence-of-a-takeover-bid.aspx
REFERENCES BARU
(n.a.). (n.d.). Companies Act 2006. Retrieved on November 22, 2016, from
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Dr Mushera Ambaras. (2005). Defensive tactics and strategies in companies
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Cases
Amin Bin Halim & Anor v Tenaga Nasional Berhad and other cases [2016] MLJU
283
Mills v Mill[1938] HCA 4