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Q：
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What are pre-emptive rights?
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A：
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Pre-emptive rights give current shareholders the right to purchase new shares issued by the company before they are offered to external investors. This allows existing shareholders to maintain their proportional ownership in the company and avoid dilution of their stake. Pre-emptive rights are typically governed by the company’s constitution or the Companies Act 2016.
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Q：
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Are pre-emptive rights mandatory for all companies in Malaysia?
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A：
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No, pre-emptive rights are not mandatory under Malaysian law. They are not automatically provided for in all companies but can be included in a company’s constitution. If a company does not have a provision for pre-emptive rights, the shareholders will not have the right to purchase new shares before they are offered to outsiders.
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Q：
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How do pre-emptive rights affect the issuance of new shares in a Malaysian company?
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A：
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If pre-emptive rights are in place, a company must offer its existing shareholders the opportunity to buy additional shares before offering them to new investors. The company must send a notice to shareholders with details of the new share issuance, including the number of shares being issued and the subscription price. Shareholders can then decide whether to exercise their rights and purchase the new shares proportionate to their existing holdings.
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Q：
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Can pre-emptive rights be waived or excluded in Malaysia?
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A：
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Yes, pre-emptive rights can be waived or excluded if shareholders agree to do so. For example, a company may pass a special resolution at a general meeting to amend the constitution to remove or limit pre-emptive rights. Additionally, pre-emptive rights may also be waived in certain circumstances, such as when shares are issued to employees or in a rights issue where shareholders may opt not to participate.
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Q：
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What happens if a shareholder does not exercise their pre-emptive rights in Malaysia?
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A：
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If a shareholder does not exercise their pre-emptive rights within the specified period, the company is free to offer the remaining shares to other investors, either at the same price or under different terms. The shareholder’s percentage of ownership in the company will be diluted as a result of the issuance of new shares to others.
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FAQ
