The M&A scene in Malaysia throughout 2015 saw a decline to approximately US$10.28 billion, from US$14.95 billion in 2014. However, the value of Malaysian deals completed for the same period shows a slight improvement from US$6.74 billion in 2014 to US$7.06 billion in 2015.

Malaysian M&A deals made up 0.22 per cent of the global deals announced (US$4.75 trillion) in 2015. While global M&A had increased 42 per cent and 24.9 per cent respectively for announced and completed deals for 2015, Malaysia saw a major drop of 31.6 per cent in announced M&A deals. However, there was an increase of 4.8 per cent in completed M&A deals for the same period.2

The largest transaction of the year, heading the top 10 list of M&A deals in Malaysia, was the sale by 1Malaysia Development Bhd (1MDB), a strategic development company wholly owned by the government, of its energy assets to China General Nuclear Power Corp (CGN), valued at US$2.3 billion3 and completed in Q1 of 2016. Other noteworthy M&A deals in 2015 include Tenaga Nasional Bhd’s acquisition of a 30 per cent stake in Turkish power company GAMA Enerji AS for US$243 million, which was completed in April 2016.4


Malaysia does not have any single reference legislation governing M&A transactions. Parties wishing to explore M&A activities in Malaysia must therefore refer to a number of key pieces of legislation. The Companies Act 1965 primarily governs all companies incorporated in Malaysia as well as branch offices of foreign companies. The Companies Act covers certain procedural aspects of acquisition and disposal, such as the requirement for shareholders’ approval, directors’ duties and schemes of arrangement, together with related party transactions and the processes involving such transactions.

Apart from the Companies Act 1965, M&A deals involving public companies are also regulated by the Capital Markets and Services Act 2007 (CMSA). The CMSA regulates, inter alia, market activities and players in the capital market, substantial shareholding reporting requirements as well as insider trading. The Malaysian Code on Take-Overs and Mergers 2010 (Takeover Code) and the Practice Notes issued under the CMSA apply to takeovers of listed and unlisted public companies. The Takeover Code is administered by the Securities Commission (SC).

Additionally, M&A transactions pertaining to companies listed on Bursa Malaysia Securities Berhad (Bursa Malaysia), the Malaysian stock exchange, must also comply with related provisions under the Main Market Listing Requirements or the ACE Market Listing Requirements, depending on the listed market (Listing Requirements). The Listing Requirements contain rules governing the conduct of public listed companies, including disclosure requirements, public spread as well as certain requirements that need to be complied with during a takeover process.

Sectoral legislation may also apply to M&A transactions depending on the industry involved. There are certain sectoral regulators in Malaysia that are responsible for issuing the relevant licences required for a business to operate, particularly those in the manufacturing sector. Approval from such regulators, therefore, may also be required in connection with takeover offers. In the context of banks and insurance companies, the approval of Bank Negara Malaysia (BNM) is normally required, with BNM having complete control and discretion as to whether consent is to be granted or otherwise. Similarly, investments in the telecommunications sector require the approval of the Malaysian Communications and Multimedia Commission. It should be noted that activities in the oil and gas sector is mostly governed by the Petroleum Development Act, which may necessitate the approval of Petronas. Additionally, government policies may also apply in certain politically sensitive sectors, such as the defence sector.


There were three major developments in corporate and takeover law in Q3 of 2015 and Q2 of 2016. The Capital Market and Services (Amendment) Act 2015 (CMSAA 2015) and the Securities Commission (Amendment) Act 2015 (SCAA 2015) came into force on 15 September 2015, and the Companies Bill 2015 was passed by Parliament in Q2 of 2016.

i Amendment to the Capital Market Services Act 2007

To ensure securities law in Malaysia remains consistent with market changes domestically and globally, amendments were made to the CMSA. The relevant amendments under the CMSAA 2015 are as follows:

  • a the SC may appoint an independent adviser for an offeree if the offeree has not done so as required under the Takeover Code, to ensure that the interests of the minority shareholders of the offeree are protected;
  • b the SC may specify persons who may be presumed to be persons acting in concert in relation to a takeover offer by an entity other than a corporation or a public company; and
  • c in relation to a takeover offer made by an offeror to acquire all the shares of an offeree, the definition of shares under Sections 222 (Compulsory Acquisition) and 223 (Right of Minority Shareholder) of the CMSA will include convertible securities, which encompass warrants, options and other securities capable of being converted into new voting shares of the offeree.
ii Amendment to the Securities Commission Act 1993

The amendments to the Securities Commission Act 1993 were made to encourage greater transparency over the governance structure of the SC and to promote growth in the Malaysian capital market. The significant amendments comprise the following:

  • a the creation of a Board of Commission to regulate and manage the SC;
  • b the extension of the powers of the SC to supervise auditors of public listed entities;
  • c the introduction of a new regulatory framework for ‘recognised market’ to allow for the establishment of trading platforms for shares or derivatives;
  • d the empowerment of the SC to transfer control and access of an exchange to a statutory manager for the purpose of managing systemic risk; and
  • e the enhancement of the rights of offeree shareholders in a takeover.
iii Passing of the Companies Bill 2015

The Companies Bill, originally tabled in July 2013 and revised in 2015, seeks to replace the current Companies Act 1965 with a view to modernising the Malaysian corporate scene, keeping it abreast with other developed jurisdictions. The proposed new Companies Act also aims to provide an efficient approach to the corporate legal framework in Malaysia with the aim of reducing the regulatory burden and compliance costs, providing greater flexibility and enhancing the responsibilities of corporate participants.

Key features of the Companies Bill that may affect M&A deals include the following.

  • a The introduction of a solvency test to be passed by the directors of a company with regard to financial assistance, share buyback, redemption of preference shares and capital reduction, which provides increased duties and responsibilities on directors of a company, stating in essence that immediately after the transaction there is no ground on which the company could be in a position to be unable to pay its debts.
  • b The introduction of three new exceptions to the general prohibition on financial assistance given by companies, namely financial assistance provided by a company:

• that is regulated by banking, finance, insurance laws or supervised by the SC, and such financial assistance is given in the ordinary course of business and under ordinary terms as to the rate of interest and repayment;

• for the purpose of the acquisition of shares in its foreign holding company or for the purpose of reducing a liability incurred for such an acquisition; and

• for the purpose of the acquisition of shares in the company or its holding company that, in the opinion of its directors, is in the best interests of the company, and the terms of conditions of the assistance are fair and reasonable.

  • The directors who vote in favour of the financial assistance are required to make a solvency statement that the company satisfies the solvency test.
  • c Companies are now allowed to be incorporated and operated with only one shareholder and director.
  • d Companies will no longer be limited by their objects and will have the full capacity to carry on or undertake any business or activity.
  • e In the past, every company was required to have an article of association in place. In the absence of such article, the standard Table A in the Companies Act 1965 would apply. With the introduction of the new Companies Act, companies have options as to whether to have constitutional documents.
  • f There is a general prohibition on directors to allot shares in the company or grant rights to subscribe for shares in the company. However, one exception is that shares may be issued as consideration for the acquisition of shares or assets by the company provided the members have been notified 14 days before such shares are issued.
  • g The par-value regime will be abolished, and all new shares issued by a company will have no par or nominal value.
  • h Shareholders’ written resolutions may be passed with only a simple or special majority (as the case may be) instead of the current unanimous vote requirement for all shareholders’ written resolutions.
  • i The intertwining of ordinary and special resolutions, namely, where the act is silent on what type of resolution needs to be passed, it shall be by way of ordinary resolution, and matters requiring ordinary resolution may be passed by special resolution.
  • j The introduction of two new corporate rescue mechanisms to save a company from being wound up: judicial manager and corporate voluntary assistance.

It is still unknown what the extent of the effects of the above legislation on M&A deals will be in Malaysia, but because the legislation has been promulgated with a view to modernising the relevant corporate laws in Malaysia, it is expected to create a more balanced and efficient regulatory framework. The new Companies Act already provides for transition clauses that will assist companies in Malaysia to adjust to the new laws that will be in place.

In addition to the above, Bursa Malaysia conducted a review and public consultation in October 2015 over its proposed changes to the listing rules. With the primary objectives of promoting greater transparency and maintaining the highest standards of market integrity and investor protection, Bursa Malaysia amended the Main Market Listing Requirements and the

ACE Market Listing Requirements in various key areas in Q1 2016. The key amendments, which were made pursuant to Section 9 of the CMSA, include:

  • a improving the quality of disclosures in annual reports by prescribing the disclosure of non-financial information such as the management discussion and analysis;
  • b enhancing the integrity of financial statements and transparency on significant matters highlighted in the auditor’s report;
  • c strengthening the corporate governance practices of listed issuers by mandating poll voting for all resolutions set out in the notice of any general meeting or in any notice of resolution that may properly be moved and is intended to be moved at any general meeting;
  • d improving transparency and shareholder engagement by requiring the posting of a summary of key matters discussed at annual general meetings on the listed issuer’s website; and
  • e streamlining the relevant listing requirements consequential to changes in the relevant laws and guidelines issued by the SC.

As far as intra–ASEAN M&A activities are concerned, the promises created by the ASEAN Economic Community (AEC) launched in December 2015 still hold. While the expectations of the success of the initiatives pursuant to the AEC remains positive, the AEC has yet to show any significant progress. It is understood that the challenges of unifying the various countries’ economies may take longer due primarily to the large differences found between the development of the economies of the various members of the AEC.


It is undeniable that foreign elements play a significant part in driving M&A deals in Malaysia. It was reported that 34 per cent of the Malaysian M&A deals in 2015 comprised inbound deals, while 12 per cent involved outbound deals.5

Chinese M&A investment in Malaysia has been strong since 2015 onwards, including:

  • a the acquisition of Edra Global Energy Bhd by CGN for US$2.3 billion;
  • b China Railway Group’s investment in the purchase a 60 per cent equity stake in Bandar Malaysia Sdn Bhd for US$1.72 billion (through a consortium of Iskandar Waterfront Holdings and China Railway Engineering Corporation (M) Sdn Bhd);
  • c Greenland Holding Group’s purchase of Southern Crest Development Sdn Bhd for US$658 million;
  • d Shandong Hengyuan Petrochemical’s purchase of the majority stake in Shell’s Malaysian Refining Unit for US$480 million; and
  • e Longcheer Holdings’ purchase of Pearl Discovery Development Sdn Bhd for US$89 million.

In February 2016, Shandong Hengyuan Petrochemical successfully bid to purchase a majority stake in Shell’s Malaysian Refining Unit for a total capital cost of US$480 million.

Australia’s REA Group Ltd’s purchase of 77.4051 per cent in Malaysia-based iProperty Group Ltd for US$414 million was an example of Australian interest in the Malaysian M&A transaction.

On the Asian front, Axiata Group Berhad (via its wholly-owned subsidiary, Axiata Investments (UK) Limited) expanded into the Nepal market through the acquisition of Reynolds Holdings Limited, which holds 80 per cent equity interest and a controlling stake in Nepal’s top mobile operator, Ncell Private Limited. IHH Healthcare Bhd acquired India’s Global Hospitals Pvt Ltd, Singapore-listed OLS Enterprise Ltd acquired Malaysian Phosphate Additives Sdn Bhd, and Petronas acquired Azerbaijan’s Shah Deniz from Norway’s Statoil. Regarding Singaporean interest, Ong Beng Seng was one of the purchasers of the entire equity interest in Langkah Bahagia Sdn Bhd. There was also Taiwan investment in Malaysia through the sale of 100 per cent stakes in The Royal Bank of Scotland Berhad and the assets of Labuan Offshore Banking Unit to Taiwanese company, CTBC Financial Holding Co.

America’s participation in the Malaysian M&A can be seen in the acquisition of Tenaga Kimia Sdn Bhd’s 73 per cent stake by Austin Powder Asia Pacific Inc.

Norwegian interest was represented by Telenor Group’s, an Oslo-based mobile operator, acquisition of Prabhu Money Transfer Sdn Bhd, a licensed money services business providing international remittance services.

Malaysia’s Tenaga Nasional Berhad’s (TNB) acquisition of a 30 per cent stake in GAMA Enerji AS marks TNB’s entry into the Turkish energy sector, while Kulim Bhd’s sale to Malaysia’s Sime Darby of the former’s stake in London-listed New British Palm Oil Ltd, which preceded Sime Darby’s 100 per cent takeover of the New British Palm Oil Ltd, Yinson’s acquisition of Fred Olsen, Norway, as well as Malaysia Airports Holdings Berhad’s acquisition of Turkey’s Istanbul Sabiha Gokcen International Airport (ISG) marked European forays by Malaysian entities.

It is expected that cross-border M&A deals in Malaysia will remain healthy, despite factors such as the softening of the ringgit against the US dollar.


Malaysia M&A deal activity picked up in the second half of 2015, with energy accounting for the largest sector in value terms followed by real estate and industrial. US$8.9 billion worth of M&A deals has been recorded so far, compared with US$10.8 billion transacted in 2014.6 The largest energy deal in 2015 was the acquisition of Edra Global Energy Bhd by CGN, valued at US$2.3 billion, followed by the acquisition of Perdana Petroleum Bhd by Dayang Enterprise Holdings Bhd for US$338.6 million.

Other notable deals in the real estate and industrial sectors were IOI Properties Group Bhd’s acquisition of Mayang Development Sdn Bhd for US$277.5 million and MMC Corp Bhd’s acquisition of 53.4 per cent of shares in NCB Holdings Bhd for US$259.5 million, respectively.

The below tables list, according to sector, some of the significant M&A transactions that took place within the Malaysian market.

Table 1: top 10 M&A deals in Malaysia




Target company/asset

Approximate value (US$)





Edra Global Energy Bhd

2.3 billion





15.5 per cent interest in Azerbaijan’s Shah Deniz gas project

2.25 billion

Oil and gas


Sime Darby Plantation Sdn Bhd

Kulim Malaysia Bhd & other shareholders

98.8 per cent shares in New Britain Palm Oil Limited

1.74 billion



Axiata Group Berhad (through its wholly-owned subsidiary, Axiata Investments (UK) Limited)

TeliaSonera UTA Holdings BV and SEA Telecom Investments BV

Reynolds Holdings Limited

1.365 billion



Pandawa Sakti Sdn Bhd

Ballarpur Industries Ltd

98.1 per cent stake in Sabah Forest Industries Sdn Bhd

500 million



Dayang Enterprise Holdings Bhd

Employees Provident Fund, HSBC Global Asset Management (UK) Limited, Lembaga Tabung Haji and others

59.5 per cent stake in Perdana Petroleum Bhd

338.6 million



Malaysia Airports Holdings Bhd (MAHB)

Limak Insaat Ve San Tic AS and Limak Yatirim Enerji Uretim Isletme Hizmetleri Ve Insaat AS

40 per cent equity stake in Istanbul Sabiha Gokcen International Airport and LGM Havalimani Isletmeleri Ticaret ve Turizm

324.578 million



IOI Properties Group Bhd

Tan Sri Lee Shin Cheng and Puan Sri Hoong May Kuan

Mayang Development Sdn Bhd

277.5 million

Real estate


MMC Corp Bhd

Permodalan Nasional Bhd and Amanahraya Trustess Bhd

53.4 per cent stake in NCB Holdings Bhd

259.5 million



Tenaga Nasional Bhd

GAMA Holding AS International Finance Corporation and GIF Holding I Cooperatief UA

30 per cent stake in GAMA Enerji AS

255 million


Table 2: notable M&A deals in Malaysia




Target company/asset

Approximate value (US$)



OLS Enterprise Ltd

Right Earth Sdn Bhd, Casa Lite Sdn Bhd, Malaysia Technology Development Corporation Sdn Bhd and Mr Lim Lee Wan

Malaysian Phosphate Additives Sdn Bhd

222.7 million



edotco Group Sdn Bhd

Digicel Group Limited

75 per cent stake in Digicel Asian Holdings Pte Ltd (the parent of Digicel Myanmar Tower Company Limited)

221 million



UEM Group Bhd

UEM Sunrise Bhd

Subscription of 4.1 per cent shares in UEM Sunrise Bhd

216.1 million

Real estate


IHH Healthcare Bhd

Mr K Ravindranath, Everstone Capital, International Finance Corporation and Anand Rathi Financial Services and other shareholders

73.4 per cent shares in Global Hospitals Pvt Ltd

194 million



CIMB Group Holdings Bhd

Lot A Sentral Sdn Bhd (subscription of new shares) and Mapletree Dextra Pte Ltd and CMREF 1 Sdn Bhd (sale of shares)

Lot A Sentral Sdn Bhd

194 million

Real estate


IOI Oleochemical Industries Berhad (via its indirect wholly-owned subsidiary, Alstersee 217 V V GmbH)

Cremer Oleo GmbH & Co KG

Acquisition of Cremer Oleo’s entire oleochemicals manufacturing business in Germany

99.9 million



Royal Group


Double-Tree by Hilton Kuala Lumpur

96 million

Real estate


WZ Satu Bhd

Silk Holdings Bhd

Entire equity interest in highway toll concessionaire Sistem Lingkaran Lebuhraya Kajang Sdn Bhd

91 million

Engineering and construction


Longcheer Holdings Ltd

Pacific Star Development

51 per cent interest in Puteri Cove Residences & Quayside

89 million

Real estate


Sunsuria Berhad

Sime Darby Property (Sungai Kapar) Sdn Bhd

50 per cent equity interest in Sime Darby Sunsuria Development Sdn Bhd

47.77 million


2015 has also seen more Chinese companies investing in Malaysia. The total value of Chinese M&A into Malaysia was at US$830 million in the first seven months of 2015, nearly four times the figure for all of 2014. The significant deals were Greenland Holding Group’s purchase of Southern Crest Development Sdn Bhd for US$658 million, Longcheer Holdings’ purchase of Pearl Discovery Development Sdn Bhd in real estate at US$89 million, and Grand Parkson Retail Group’s purchase of YeeHaw Best Practice Sdn Bhd in the dining and accommodation industry.7

In addition, some recently announced notable deals include the sale of Seadrill Ltd’s entire 8.2 per cent stake in Malaysia’s oil and gas service provider, SapuraKencana Petroleum Bhd, for US$195 million; the sale of 100 per cent stakes in The Royal Bank of Scotland Berhad (US$189.7 million) and the assets of Labuan Offshore Banking Unit (US$132.5 million) by Royal Bank of Scotland Group Plc to CTBC Financial Holding Co; and the sale of the entire equity interest in Langkah Bahagia Sdn Bhd to Ong Beng Seng, Ong Tiong Sin and Seow Lun Hoo, who have acquired an indirect 14.8 per cent stake in Malaysia’s Alliance Financial Group Bhd.


M&A transactions in Malaysia have been funded and derived either from internally sourced funds or bank facilities, or through the capital market (through an initial public offering (IPO), as well as a secondary offering). Deals financed by private equity and venture capital companies were also observed.

i Capital markets

2015 saw IPOs on the market on a drastic decline, mainly due to the low oil price, currency concerns, state-linked financial issues and a gloomy economic setting on a global scale. Among the major IPOs in 2015 were Malakoff Corporation Berhad (US$505.3 million), Sunway Construction Group Berhad (US$127 million), Al-Salām Real Estate Investment Trust (US$61.9 million) and Ikhmas Jaya Group Berhad (US$27.7 million). In the first half of 2016, there were six IPOs, with Ranhill Holdings Bhd and LKL International Berhad being among the largest candidates. Bankers believe that 2016 will be equally, if not more, challenging, as investment banking teams brace for a tepid IPO market in Malaysia save for a few large deals raising US$150 million and above.8

ii Venture capital and private equity

Venture capital and private equity activities in South-East Asia have slumped to their worst-ever performance since 2004, driven by macro uncertainty, rich valuations and high competition. The total deals value for the past year dropped to US$4.2 billion, down from US$7.5 billion in 2014 and about one-third of the five-year average, according to a study by Bain & Company.9 However, venture capital companies in Malaysia, particularly Malaysian Venture Capital Management Berhad, Malaysian Technology Development Corporation Berhad and others, have been steadily investing in technology-based startups, which have not been drastically affected by the slump in oil prices.

The two major deals recorded in the private equity business in the past year involved RRJ Capital raising funds of some US$4.5 billion and Baring Private Equity Asia raising US$4 billion.

Analysts further observed that 2016 will bring an increase in both private equity investments and exits focusing on consumer and technology sectors amid growing interest in sectors such as healthcare and business services. This was evidenced in the levels of fundraising by Asian-backed private equity firms (as seen from the fundraising by Baring Private Equity Asia and RRJ Capital) during the year, which shows the appetite for investment against a drop in regional currencies.10

iii Crowdfunding

Crowdfunding is an alternative, unconventional source of funding for small and medium-sized enterprises (SMEs), with ideas and products being brought to the attention of the general public to be funded either directly or through third-party crowdfunding programmes.

Guidelines on the regulation of equity crowdfunding platforms were released by the SC, effective 10 February 2015 (Guidelines).11 While the Guidelines deal generally with the establishment and registration of an electronic facility, Chapter 11 of the Guidelines specifically addresses the framework within which an equity crowdfunding facility (ECF) can be established.

The framework sets out the requirements for an issuer in an ECF. It allows an eligible issuer to raise up to 3 million ringgit within a 12-month period, or a maximum of 5 million ringgit through the ECF platform.

It is noteworthy that while ECFs are not a new concept in the world of financing, Malaysia is the first country in the Asia-Pacific area to recognise and codify laws relating to crowdfunding activities. In addition, in June 2015, six platform operators were licensed by the SC to launch in Malaysia, namely Alix Global, Ata Plus, Crowdo, CrowdPlus.asia, Eureeca and pitchIN.12

Continuing on from the SC’s ECF initiatives, the SC also introduced a regulatory framework to facilitate peer-to-peer (P2P) financing in Q2 2016. A new Chapter 13 of the Guidelines on Recognised Markets provides for the duties and responsibilities of P2P operators, and the type of issuers and investors who can participate in P2P financing.

Through an online platform, P2P facilitates businesses and companies in their efforts to raise funds from both retail and sophisticated investors. Investors who invest through a P2P platform operated by the SC’s registered P2P operators are, in effect, buying securities in the form of an investment note or Islamic investment note, which will be issued by the businesses or companies. While there is no investment limit imposed on investors, in order to manage their risk exposure, retail investors are advised to limit their investment in P2P to a maximum of 50,000 ringgit at any point in time.

Only locally incorporated companies with a minimum paid-up capital of 5 million ringgit are allowed to make an application to operate a P2P platform, and ongoing obligations are imposed on the operator to ensure compliance with the platform rules.13

iv FinTech

FinTech, a combination of ‘finance’ and ‘technology’, rose sharply in 2015, with the introduction of various technological advancements globally. The SC launched the Alliance of FinTech Community (aFINity@SC) initiative with a view to forming a network for FinTech stakeholders to engage with the SC, aiming to accelerate growth and innovation in the financial market. Through aFINity@SC, the SC additionally intends to introduce policies and provide regulatory clarity for FinTech businesses.14

A Malaysian-based FinTech product, the Investment Account Platform (IAP), was launched in Q2 2016. The IAP is an online, shariah-compliant investment platform set up by six Malaysian banks and backed by the government that serves as a central marketplace for financing SMEs through Islamic financing facilities.

As the main regulator of all finance and financing-based activities, BNM has expressed its acceptance of the rise of FinTech in Malaysia as well as in the rest of the world. BNM is also aware of the risks involved in FinTech activities. However, it has been explained that it will only regulate FinTech to the extent of the existing laws and regulations that are already under the purview of BNM. With this in mind, BNM is currently in the process of issuing an exposure draft of the regulatory framework and guidelines for FinTech operators, and is currently taking comments on said draft from experts and advisers. It is anticipated that the initial exposure draft on legislation relating to FinTech will be issued by BNM in Q3 2016.15


Malaysian employment law has not experienced any major developments in 2015. The main legislation governing the Malaysian employment law is the Employment Act 1955 (1955 Act). The 1955 Act applies to all employees who earn not more than 2,000 ringgit a month and those who are engaged in manual labour. The 1955 Act governs all matters relating to employment in west Malaysia, which includes the imposition of minimum terms and conditions of employment. Employees who do not fall under the purview of the 1955 Act will be governed by the employment contract entered into with his or her employer.

Employment in Malaysia is also governed by, inter alia, the Employees’ Provident Fund Act 1991 (EPF Act), the Employees’ Social Security Act 1969 (SOCSO Act), the Industrial Relations Act 1967 and the Minimum Wages Order 2016. The EPF Act requires employers and employees to pay monthly contributions on the full amount of their wages at the prescribed rate towards the employees’ retirement savings fund. In Q1 of 2016, the government announced the reduction in the statutory rate from 11 to 8 per cent. Employees, however, have the option to maintain their contribution at 11 per cent.

On 1 June 2016, the SOCSO Act raised the ceiling for wage contribution payments from 3,000 ringgit per month to 4,000 ringgit per month. In addition, the SOCSO Act will now apply to all Malaysian employees, including permanent residents who are employed under a contract of service or apprenticeship with an employer, irrespective of their wages.

Effective 1 July 2016, the new Minimum Wages Order 2016 came into effect and revoked the Minimum Wages Order 2012. An employee shall now be paid an average minimum wage of not less than 1,000 ringgit per month in Peninsular Malaysia, or 920 ringgit per month in Sabah, Sarawak and the Federal Territory of Labuan, an increase from 900 ringgit and 800 ringgit per month, respectively, under the previous rule.

The personal data and privacy of employees in Malaysia is protected under the Personal Data Protection Act 2010 (PDPA). Pursuant to the PDPA, employers are responsible for the data protection and privacy management of its employees. The company and employers must obtain an employee’s consent to process his or her personal data, and such data must be disposed of or destroyed by companies when no longer required or used. This, however, should be read together with Section 61 of the 1955 Act, which requires employers to keep the register of their employees for a minimum period of six years.16

In M&A transactions, the status of the employment of existing employees post-acquisition must be carefully weighed and properly handled. This is particularly important where a change occurs in the ownership of a business for the purposes of which an employee is employed or forms part of such business. If the new employer wishes to retain an employee, such employer must, within seven days of the change of ownership, make an offer to the employee under terms and conditions of employment not less favourable than those under which the employee was employed before the change occurs. The employee shall not be entitled to any termination benefits, if he or she unreasonably refuses the offer. Any termination of a contract of services must be done by giving a minimum termination notice whereby requirements provided under the 1955 Act are to be complied with.17


i Goods and services tax (GST)

GST came into force on 1 April 2015. GST effectively replaces the government sales tax and the service tax, and is applied at a uniform rate of 6 per cent on all taxable goods and services made by a taxable person in the course of business in Malaysia, and on the importation of goods and services into Malaysia. However, certain transactions are deemed neither a supply of goods nor a supply of services, which includes transfer of a going concern (TOGC).

TOGC involves the transfer of the whole or part of a business together with its assets as a going concern from a taxable person to another taxable person, and, if only part of the business is transferred, that part of the business must be able to operate on its own. Under TOGC, no output tax would be charged or received by the transferor, and the transferee need not pay GST to the transferor for the transfer of the business of part of the business.

The transferor is required to notify the Royal Customs of Malaysia (RMC) by the date of transfer in writing of the business being sold as a TOGC. On 24 May 2016, a Guide on TOGC was issued by the RMC, which provides that such notification shall be made to the RMC regardless of whether the transferor continues his or her business or ceases business on the date of the transfer.

It has already been widely commented on that GST has assisted tremendously in providing liquidity to the government, and has assisted the government in providing a solid budget despite the current difficult times. It is reported that GST has grossed 37.67 billion ringgit in proceeds, and the projected net proceeds as at December 2015 was 27.126 billion ringgit.18

ii Real property gains tax (RPGT)

The sale of shares or assets in Malaysia does not generally attract any form of capital gains tax, since the only form of capital gains tax in Malaysia, being RPGT, applies only to real estate and real properties. Unless otherwise subject to the levy imposed under exchange control regulations or RPGT, gains on foreign direct investments that are of a capital nature to a foreigner will not normally be subjected to tax. RPGT is charged on gains arising from the disposal of real property, which is defined as any land situated in Malaysia, and any interest, option or other right in or over such land. RPGT is also charged on the disposal of shares in real property companies.

The Finance Act 2014 amended Section 21B(1) of the Real Property Gains Tax Act 1976. With this amendment effective from 1 January 2015, for all acquisition of real property where the consideration consists wholly or partly of money, the acquirer shall retain all of that money or a sum not exceeding 3 per cent (up from the previous 2 per cent) of the total value of the consideration sum to be remitted to the Inland Revenue Board for the purposes of RPGT.

The rates of RPGT remain unchanged from 2014.19 For companies and non-citizens or non-permanent residents, RPGT is imposed when they dispose of real property even when the property is held for more than five years.

iii Stamp duty

Another important aspect of taxation in M&A transactions in Malaysia involves the imposition of stamp duty on transaction documents by virtue of the Stamp Act 1949. The significance of stamping transactional documents is to ensure said document’s admissibility as evidence in the courts of Malaysia,20 and in some cases to ensure the validity of transfers relating to documents of transfer.21

There are two different methods of calculating stamp duty – nominal and ad valorem. Nominal stamp duty is typically charged at 10 ringgit, while ad valorem stamp duty will typically be based on the value of the transfer or the market value, whichever is higher. In transactions involving share transfer, stamp duty is imposed on the share purchase agreement itself, as well as the share transfer forms. Stamp duty on the share purchase agreement is charged a nominal fee, while the share transfer forms will incur ad valorem stamp duty.22 On the other hand, transactions involving share subscriptions will only incur nominal stamp duty on the share subscription agreement, as no transfer forms are involved in said transactions.


Malaysian competition law is governed by the Malaysian Competition Act 2010 (Act). The Act, which came into force on 1 January 2012, applies to any commercial activities within or outside Malaysia that have an effect on competition in the market in Malaysia. ‘Commercial activity’ is defined broadly, and it is likely that almost all business activities in Malaysia will be commercial activities. The Act prohibits both anticompetitive agreements (Chapter 1 Prohibition) and abuse of dominance (Chapter 2 Prohibition). Any agreements or conducts that commence or continue after 1 January 2012 will be caught under the Act.

The Malaysian Competition Commission (MyCC) is an independent body established to implement and enforce the Act, and was established on 1 April 2011 by the Competition Commission Act 2010. Among the functions of the MyCC are investigating complaints about anticompetitive behaviours, carrying out market reviews and imposing penalties on companies found to infringe the competition law. The MyCC also issues guidelines that serve as references to the public on how the MyCC interprets the Act. Enterprises are advised to read the guidelines and conduct a self-assessment exercise of their businesses in respect of their conduct, procedures, management and control.

EU case law is highly persuasive in the Malaysian context owing to the fact that the Act was modelled closely on the EU’s substantive provisions (the Treaty for the Functioning of the European Union). The Act, however, does not supersede existing sector-specific legislation that has anticompetitive provisions. Therefore, certain sector-specific legislation does not come under the purview of the Act since the same has been expressly excluded from its scope.

Although the Act does not provide for merger control regulations, Malaysia passed its first piece of legislation that contains a form of merger control. The Malaysian Aviation Commission Act 2015, which came into force in April 2015, provides that mergers that have resulted or may be expected to result in a substantial lessening of competition in any aviation service market are prohibited.23 Parties to an anticipated merger may notify the Malaysian Aviation Commission (MAC) of the anticipated merger and apply to it for a decision. Upon such notification, the MAC may decide whether the merger prohibition has been or will be infringed. However, such notification is not mandatory.


Analysts’ projections of M&A volume show that the momentum that began in 2014 continued in 2015.24 The main factors affecting Malaysia’s economic slump in 2015 included the fall of its oil and gas empire, as well as its palm oil industry – Malaysia is the second-largest palm oil producer and exporter, behind Indonesia. The issues that affected Malaysia in 2015, including the uncertainties surrounding the government-related entity 1MDB, may continue to do so throughout 2016.

The decline in oil prices continues to be a factor in most M&A decisions. Many companies have held off from IPOs in light of the drastic drop in oil prices, as oil and gas-based special purpose acquisition companies are currently feeling the pinch on the issue of ‘qualifying assets’. Further, the surge in M&A deals, and the consolidation of the oil and gas sector predicted in 2014 due to the depressed oil prices, have not entirely materialised, although the industry remains hopeful.

Overall, the energy sector in Malaysia remains solid for deals this year, similar to its position in 2013 and 2014, scoring 33 per cent of the total value of M&A transactions done in the market.25 Locally, besides the acquisition of Edra Global Energy, the next-largest oil and gas M&A was the acquisition of Perdana Petroleum Bhd by Dayang Enterprise Holdings Bhd for US$338.6 million. In addition to this, Malaysia aims to be an oil and gas hub via the RAPID and FLNG projects.

Other industries in which growth is predicted are insurance and shipping. It is reported that Malaysia’s insurance industry is expected to grow by 4 to 5 per cent in 2016.26 As for the shipping sector, it was reported that M&A activity in the sector, particularly within terminals, will increase in the future.27

Malaysia has made great strides and initiated massive revamps and updates of existing laws in an effort to keep abreast with other modern jurisdictions. In addition, Malaysia has been very welcoming of international treaties, having recently initiated the ASEAN Economic Community and being the first ASEAN country to have signed the Trans-Pacific Partnership Agreement. While it is too soon to tell the effects of these revamps and treaties, a recent survey shows that business confidence in Malaysia is strong.28 Nearly 70 per cent of respondents reported that they grew over the past 12 months and, even more significantly, 70 per cent said they would grow in the year ahead. This marks an increase of 10 percentage points from last year’s survey.


1 Rosinah Mohd Salleh and Norhisham Abd Bahrin are partners at Azmi & Associates.

2 Thomson Reuters, M&A Financial Advisory Review – Full year 2015 (31 December 2015).

3 The Star, news, 25 December 2015.

4 www.tnb.com.my/announcements/prime-minister-witnesses-finalisation-of-tnbs-investment-

5 Duff & Phelps Transaction Trail Annual Issue 2015: www.duffandphelps.com/assets/pdfs/publications/mergers-and-acquisitions/transaction-trail-annual-issue-2015-final.pdf.

6 www.pressreader.com/malaysia/the-borneo-post-sabah/20160101/282703341069166.

7 www.bloombergtv.my/chinas-ma-malaysia-busiest-record-2015.

11 Guidelines on Regulation of Market under Section 34 of CMSA (SC-GL/2-2015).

16 Section 61, Employment Act 1955.

17 Section 12(3) Employment Act 1955.

19 www.nbc.com.my/blog/budget-2015-self-assessment-real-property-gains-tax-rgpt.

20 Section 52 Stamp Act 1949.

21 Section 4a Stamp Act 1949.

22 Item 32(b) First Schedule, Stamp Act 1949.

23 Section 54(1) Malaysian Aviation Commission Act 2015.

24 www2.deloitte.com/uk/en/pages/corporate-finance/articles/deloitte-m-and-a-index.html.