Like certain U.S. states, the country of Malaysia does not give dissenting shareholders any right to appraisal of the value of their shares. Instead, the Malaysian Capital Markets and Services Act of 2007 (“Act”) provides that in a “compulsory acquisition,” dissenting shareholders may seek what Americans might refer to as equitable relief.
Pursuant to the Act, a “compulsory acquisition” may occur when a person (i.e. the offeror) has made a take-over offer to the shareholders of a target company and has acquired at least 90% of the target company’s shares. At that point, the offeror may compel the dissenting shareholders to sell their shares on the same terms originally offered by issuing a notice to them. The offeror’s right to compel is more commonly known as the “squeeze out” right.
Any dissatisfied dissenting shareholder may, within one month from the date of the offeror’s notice, make an application to a court of competent jurisdiction for an order either (a) stating that the offeror shall not be entitled to acquire the dissenter’s shares, or (b) requiring that different terms of acquisition shall apply to the dissenter’s shares.
The statute does not prescribe a test the court is supposed to apply in deciding whether to grant the dissenter’s application or, if it is granted, on what terms—the statute instead leaves these decisions to the court’s discretion.
Case law, however, does provide some guidance. For instance, under the cases the court may consider if the dissenting shareholders are bona fide, if there is “patent unfairness” in the terms of the proposed compulsory acquisition, and whether there has been a breach of law or the Malaysian Code on Take-Overs and Mergers of 2016 by the offeror or the majority shareholders. In practice, though, the court may be reluctant to impose its own view of the fairness of the terms of the compulsory acquisition, because by this point the offeror has already acquired at least 90% of the target company’s shares on the basis of the offer which now claimed to be unfair. That is, the court might treat reaching the 90% threshold as prima facie evidence of a fair offer.
That said, the Code on Take-Overs and Mergers provides that all shareholders (especially the minority shareholders) should not be subject to any oppression or disadvantage by the treatment or conduct of an acquirer, offeror, or the directors of the target company in a takeover or merger transaction.
There are also additional remedies available to minority shareholders under the Malaysian Companies Act of 2016. In cases of oppression, the minority shareholder has the right to seek a court order for remedy on the grounds that his or her rights or interests have been affected. Such an aggrieved minority shareholder may also seek leave of the court to initiate a derivative action on behalf of the company against any alleged wrongdoer directors or shareholders who are not acting in the best interest of the company.
** Rolnick Kramer Sadighi LLP thanks these authors for their contribution. Rolnick Kramer Sadighi LLP does not practice outside the United States.
 Based on Section 216 (1) of the Capital Markets and Services Act 2007 and the Rules on Take-Overs, Mergers and Compulsory Acquisitions (issued on 15 August 2016; Revised on 5 December 2017), a target company includes:
- A listed corporation;
- An unlisted public company with more than 50 shareholders and net assets of RM15 million or more;
- A business trust listed in Malaysia; and
- A real estate investment trust (REIT) listed in Malaysia.
 “Dissenting shareholders” includes any shareholder and convertible securities holder, who has not accepted a take-over offer and any shareholder who has failed or refused to transfer shares to an acquirer in accordance with a take-over offer as provided under Section 216(6) of the Capital Markets and Services Act 2007.
 Section 222 of the Capital Markets and Services Act 2007 .
 Section 224 of the Capital Markets and Services Act 2007.
 Amin Halim Rasip & Anor v Tenaga Nasional Bhd & Other Cases  1 LNS 591 at para 90.
 General principle 2 at para 4(2) of the Code on Take-Overs and Mergers 2016 .
 Sections 347 and 348 of the Companies Act 2016.
 Section 346 of the Companies Act 2016.