This document summarizes the key rights of shareholders and members in Malaysian corporate law. It discusses the differences between shareholders and members, the importance of registration in the register of members, and the rights and liabilities that come with shareholder and member status. It also outlines various classes of shares like preference shares and their associated rights, as well as shareholders' pre-emptive rights and how share dilution can occur. The document concludes by discussing how class rights can be varied and the process for objecting to such variations.

1. You can cite this information as follows :
 In-text citation : Ng and Chang (2021)
 Reference list : Ng, M.Y. and Chang, C.F. (2021) “Corporate Law of Malaysia : The Rights of Shareholders and Members in Malaysian
Business Entities” Social Science Research Network, at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3797485
Note : These slides may provide extra information or illustration that are not found in the full article. This is to facilitate students’ learning.
Undang-undang syarikat  公司法
Corporate Law of Malaysia :
5. Rights of Shareholders and
Members
•Quick reference for Undergraduate Students
•With translation of key terms in “Bahasa” and “中文”

2. Topics in this Series (search SlideShare using this title) URL to the full Article
1 Boleh Law Introduction to Malaysian Company Law & Companies https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3779693
2 Boleh Law Incorporation of Companies https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3797479
3 Boleh Law Corporate Constitution https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3797482
4 Boleh Law Share Capital & Capital Maintenance https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3797487
5 Boleh Law Rights of Shareholders & Members https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3797485
6 Boleh Law Loan Capital https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3797494
7 Boleh Law Directors & Officers https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3806994
8 Boleh Law Accounting and Auditing of Corporate Accounts https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3830195
9 Boleh Law Anti-money laundering and anti-terrorist funding https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3830185
10 Boleh Law Taxation https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3830197
11 Boleh Law Meetings https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3830189
12 Boleh Law Rescuing a Company https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3830190
13 Boleh Law Winding-up a Company https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3830192

3. This chapter cover :
• The difference between a shareholder and members
• The important of registration into the Register of Members
• Rights and liabilities of members
• Various rights enjoyed by different classes of shareholders
• What is Preference shares, its rights and limitations
• Pre-emptive rights and share dilution
• Variation in class rights
CA = Companies Act

4. “Stockholder” vs “Shareholder”
• Traditional definition :
– “Stockholder” – a person who, upon investing his money into the company, own the
stock or inventory of the company.
– “Shareholder” – a person who own shares in the form of rights in the company, rather
than physical stocks.
• Both are owners to the company in one way or another.
• Both have the same rights (Sec.87, CA 2016)
• Stockholding and Shareholding can be used interchangeably in Malaysia, unless if the
company’s constitution explicitly distinguish them.

5. Shareholders
Shares can be obtained by :
1) Purchase shares of the company – from the share market
2) Shares obtained through employee share option schemes (“ESOS”) (skim opsyen saham
pekerja ; 员工认股权计划)
3) Transfer – voluntary transfer from the transferor (the original shareholder) to the transferee
(the new shareholder)
4) Transmission by operation of law – involuntary transfer when the shareholder dies,
bankrupt or become mentally incapacitate
• A shareholder can be an individual (non-corporate shareholder), as well as a business entities
(corporate shareholder).
• A shareholder does not automatically become a “member” of the company. He becomes a
member when his name is entered into the company’s Register of Members.
• Hence, a shareholder may not be a member, but a member is certainly a shareholder

6. Register of Members (“RoM”)
RoM contains information about :
1) The name, addresses, identity card number, nationality and the usual residential address –
if the shareholder is an individual ; or
The company’s name, place of incorporation, company’s registration number (as stated on
the Notice of Registration), address of registered office – if the shareholder is a business
entities
2) If the company has an authorised share capital, the RoM must show the allotment date
(tarikh saham diperuntukan, 股份配发日期) number of shares held by each shareholder
and the amount paid and unpaid
3) The date when the name is entered into the RoM
4) Names of previous members who have cease to be shareholder for the past 7 years

7. • RoM can be in electronic form.
• RoM must be kept at the registered office of the company or at the office of which the RoM
was prepared
A typical Register of Members

8. • Any member may inspect the RoM free of charge. Non-members may also do so with a fee of
not more than RM10.
• The time difference between the date the share is acquired and the date when the ownership is
entered into the RoM are the rights that is available only to members.

9. Effect of entrance into RoM
• A prima facie evidence of the member’s legal right (Sec.101, CA 2016).
• Members has the right to :
1) Vote in relevant meetings
2) Receive notice of meetings
3) Receive dividend ; and
4) Exercise any rights and power attached to the share, as provided in the company’s
constitution
• It is not necessary that share certificate must be issued (Sec.97, CA 2016). However, the
company must issue the cert within 60 days if the member request for it. (Sec.98, CA 2016).

10. Liabilities of Members
• If the company is limited by shares, the liabilities of the members is limited to the extent of
the amount unpaid on shares held by him
• If the company is limited by guarantee, the liability of members is limited to the amount that
he has agreed to contribute in the event of the company being wound up
• However, if the company is unlimited, the liabilities of the members will be unlimited.
Note : See Chapter 1 : Introduction to Malaysian Company Law & Companies – for detail
explanation and example on “limited liabilities”

11. Rights available to Members
1) Receive dividend – company has distributable profit; and it will remain solvent following the
distribution
2) Receive notices – kept members informed of development in the company.
3) Right to attend and vote at meetings
4) Right to review the management
5) Right to take derivative action – the Harbottle Rule is no longer valid in Malaysian company
law
6) Right to bring action against the company for oppression
7) Right to wind-up the company
8) Right to share in any surplus capital should the company be wound-up.
Note : There are many more detail under each of these headings. You are strongly encouraged to
read the full article for more insight.

12. Class rights and Preferred rights
• Shares may be issued with various rights attached.
• Example :
– Share A – with no right to vote + right for dividend
– Share B – with voting rights + right for dividend + no right to receive surplus assets
– Share C – with no voting rights + cumulative dividend + redeemable
• The shares are distinguished by “class”. In the example above, it is Class A, Class B and
Class C.
• The rights attached to each class of shares will be stated in the constitution (Sec.90(1), CA
2016)

13. • If the company does not has a constitution, the rights are such as those stated in Sec.71 of CA
2016 :
“A share in a company, other than preference shares, confers on the holder :
a) The right to attend, participate and speak at a meeting
b) The right to vote on a show of hands on any resolution of the company
c) The right to one vote for each share on a poll on any resolution of the company
d) The right to an equal share in the distribution of the surplus assets of the company ; or
e) The right to an equal share in dividends authorized by the Board”
• Note that it is not necessary that all shares are equipped with voting rights. If there is voting
right, it is also not necessary that each share will have 1 vote. The company’s constitution may
provide for shares to be issued without voting rights; with special voting rights; with limited or
conditional voting rights (Sec.69(d), CA 2016)
• Shares within the same class are ranked parri passu or equal / homogeneous (Sec.89, CA 2016).

14. Pre-emptive rights
• Pre-emptive rights means new shares must first be offered to existing shareholders
(Sec.85, CA 2016) (hak terdahulu ; 优先购买权)
• The pre-emptive rights is contained in the constitution.
• Offer is made by way of “right issue” where shareholders are given a specific timeframe,
eg : 3 weeks, to exercise the option. The offer lapse upon expiry of the stipulated time and
the unsubscribed shares (saham tidak dijual ; 没卖出的股票) will be offered to other
shareholders or to the public in the case of a public company.
• Purpose : to maintain the shareholders’ voting and distribution rights proportion. Without
such restriction, the shareholders’ right may be diluted.
• “Dilution” means the shareholder will have a smaller share of ownership over the
company. They may enjoy lesser dividend pay-out following issuance of the new shares.

15. Example of dilution :

16. Preference shares
Special rights attached to the preference shares are :
1) Rights to repayment of capital – shares can be redeemed (ditebus ; 可赎回) on a specific date (also
called Redeemable/non-Redeemable preference shares – saham keutamaan yang boleh ditebus ; 可赎
回优先股)
2) Rights to participate in the surplus assets – sharing profit from the sale of assets that is no longer
needed (also called Participating/non-Participating preference shares)
3) Rights to participate in the profit
4) Dividend may be cumulative or non-cumulative (kumulatif ;累积)
5) (some) Voting right
6) Priority in receiving capital and dividend payment in relation to other shares in the company
7) Any shares that are not preference shares are “ordinary” or “equity” shares.
Note : There are many more detail under each of these headings. You are strongly encouraged to read the
full article for more insight.

17. Variation in Class rights
• variation (ubah ; 更改) occur when the right of one class has been changed rendering the
shareholders now has a set of right that is different from those he used to enjoy when he
first purchase the share.
• variation may also occur when the rights of another class (e.g. Class B) has been changed
rendering rights of Class A shareholders being jeopedized – Greenhalgh v Arderne
Cinemas Ltd (1946)
• to render it a “variation”, the resulting changes must have essentially altered the rights
attached to the shares concerned

18. Example :
• When Ali bought a share in Class X, he is entitle to “dividend as and when it is
announced by the company.”
• Assuming that the constitution provides that the company can declare multiple dividends
in a year as long as there is sufficient profit to so, and for the past 5 years, Ali has
received dividends as much as 3 times a year (final and interim dividends)
• Now, the company directors proposed to change the provision in the constitution to
“dividend once a year”.
• If the amendment is approved, Ali will only receive dividend once a year. Which means,
he will not be entitled to other interim dividends declared by the company.

19. Greenhalgh v. Arderne Cinemas Ltd. (1946)
• Arderne has 2 classes of shares – 10s per share and 2s per share
• Each 2s shares carries 1 vote
• Arderne then convert the 10s shares into five 2s shares. Each carrying the same 1 vote.
• This left Greenhalgh with less voting power as compared to those who previously held the 10s
shares.
• Greenhalgh complaint that he and other minority shareholders have been defrauded
• The court held that Greenhalgh has not been defrauded as his voting right has not been changed.
The voting right for the 2s shares has been the same for both existing and new shareholders.
• Note that Greenhalgh’s power over the company may have changed in fact. He, along with other
minority shareholders, now have less say over the company. But strictly speaking from the point
of law, his voting rights has not been affected. He can still exercise his voting power as before.
• Generally, issuance of new shares as in Greenhalgh is not considered as a variation of voting
rights. Pre-emptive right intend to maintain shareholders’ votes proportion, that is, the strength
of their power to voice. The principle right to vote does not change.

20. Rights can be varied by :
1) Abrogating or repealing (batal ; 废除) the right attached to the shares (Sec.96(1), CA
2016)
2) Altering the existing rights – this can be done if the power to vary class right is provided
in the company’s constitution. Otherwise, consent must be secured from at least 75% of
the total shareholders in the class concerned (Sec.91, CA 2016). This consent can be
obtained by way of a special resolution passed at a class meeting.
3) Issuance of preference shares that ranked equally with existing preference shares – this
issue only vary the right of the existing preference shareholders. It will not affect the rights
of ordinary shareholders
4) Amend, add or delete a provision in the constitution that concerns class rights variation
(Sec.339(6), CA 2016)

21. • Shareholders who disagree with the variation may apply to the court to block the variation.
• The right to complaint is only available if the shareholder holds at least 10% of the total
voting right in the class concerned (Sec.93, CA 2016).
• Objection must be made within 30 days from the date the variation is made.
• The court may order for the variation to be aborted if it thinks that the variation may unfairly
prejudice the complainant.
• Otherwise, the variation will come into force after 30 days from the date of the variation is
made.
• The shareholders will be given a written notice informing within 14 days of the variation

22. The End
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