Shareholders are often described as the “owners” of a company, but corporate ownership is more nuanced than owning physical property. A shareholder does not directly own the company’s assets. Instead, a shareholder owns shares, which represent a bundle of legal rights and interests in the company.
In Malaysia, these rights are primarily governed by the Companies Act 2016 (CA 2016), together with the company’s constitution (if any), shareholders’ agreements, common law principles, and for listed companies, the Bursa Malaysia Listing Requirements and the Malaysian Code on Corporate Governance.
1. Right to Vote
Voting is one of the most important ways shareholders influence the management and direction of a company. Generally, each ordinary share carries one vote at a general meeting.
Shareholder approval is commonly required for matters such as:
- Alteration or amendment of the company constitution
- Issuance of new shares (subject to existing authority granted to directors)
- Reduction of share capital
- Approval of directors’ fees and benefits
- Approval of substantial transactions, including acquisitions or disposals of substantial value under Section 223 of the Companies Act 2016
Resolutions are typically passed as:
Ordinary Resolution
Requires a simple majority of more than 50% of votes cast.
Special Resolution
Requires at least 75% of votes cast and is generally used for significant matters such as constitutional amendments and capital reductions.
2. Right to Be Informed and Receive Notices
Shareholders have the right to receive important company information, including:
- Notice of general meetings
- Audited financial statements
- Directors’ reports
- Auditors’ reports
For public companies, annual returns and financial statements must also be lodged and circulated within prescribed statutory timelines.
These rights ensure shareholders have sufficient information to evaluate the company’s performance and make informed decisions regarding their investment.
3. Right to Attend and Speak at General Meetings
Shareholders are entitled to:
- Attend general meetings
- Speak during meetings
- Ask questions regarding company affairs
These rights apply to both Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs).
Under the Companies Act 2016, virtual or hybrid meetings are generally permitted unless prohibited by the company’s constitution, providing greater flexibility for shareholder participation.
4. Right to Requisition Meetings and Propose Resolutions
Under Section 311 of the Companies Act 2016, shareholders holding at least 10% of the paid-up capital carrying voting rights may require the directors to convene a general meeting.
If the directors fail to do so within the prescribed timeframe, the shareholders themselves may convene the meeting.
Shareholders may also propose resolutions for consideration at general meetings, subject to the relevant statutory requirements.
5. Pre-Emptive Rights (Section 85)
When a company proposes to issue new shares that rank equally with existing shares in terms of voting rights or distributions, those shares must generally be offered first to existing shareholders in proportion to their current holdings.
This right helps protect shareholders from unwanted dilution of:
- Ownership interests
- Voting power
- Economic benefits
However, the company’s constitution may modify or exclude this right.
6. Right to Appoint and Remove Directors (Section 206)
Shareholders have the power to appoint directors and, importantly, to remove a director before the expiration of the director’s term.
Removal may be carried out through an ordinary resolution, provided:
- A special notice of at least 28 days is given to the company; and
- The affected director is given the opportunity to be heard at the meeting.
While a company’s constitution may impose additional requirements for appointment, it cannot reduce the statutory right of shareholders to remove a director by ordinary resolution.
7. Right to Receive Dividends
Shareholders may participate in the company’s profits through dividends.
However, dividends can only be paid when:
- The directors recommend or declare the dividend; and
- The company satisfies the statutory solvency requirements, meaning it can pay its debts as they fall due within twelve months after the distribution.
There is no automatic entitlement to dividends merely because a company is profitable. Dividends must be declared in accordance with the Companies Act 2016 and the company’s constitution.
In certain circumstances, persistent withholding of dividends in bad faith may give rise to an oppression claim.
8. Right to Transfer Shares
Shares are considered personal property and are generally transferable.
However, private companies commonly impose restrictions through:
- Pre-emption provisions
- Rights of first refusal
- Shareholders’ agreements
- Constitutional restrictions
These mechanisms help existing shareholders maintain control over who may become a shareholder in the company.
9. Right to Share in Surplus Assets Upon Winding Up
If a company is wound up and all outstanding debts and liabilities have been settled, shareholders are entitled to share in any remaining assets.
Distribution of surplus assets will be made according to the rights attached to the relevant class of shares.
10. Right to Apply for a Court-Ordered Meeting
In situations where it is impractical to convene or conduct a meeting according to the usual procedures—such as shareholder deadlock or procedural difficulties—the court may intervene.
Upon application by a director or shareholder, the court may order that a meeting be held and determine how the meeting should be conducted.
Conclusion
The Companies Act 2016 provides shareholders with a broad range of rights designed to protect their investment and ensure accountability within a company. These rights extend beyond simply receiving dividends and include voting rights, access to information, participation in decision-making, director oversight, and legal remedies where necessary.
Understanding these rights is essential for every shareholder, whether investing in a small private company or a large public corporation, as they form the foundation of effective corporate governance and shareholder protection in Malaysia.