PRINT THIS PAGE Guide to mergers & acquisitions: Malaysia30/08/2006. Source: Baker & McKenzie.
Although the legal framework for merger and acquisition activity in Malaysia is relatively straightforward, says Baker & McKenzie, administrative processes complicate matters, both for prospective acquirers and vendors. In particular, the regulatory approvals process can often be fairly lengthy and involve several regulatory bodies. For instance, the Foreign Investment Committee guidelines are always an issue, especially in transactions involving public companies. There are also relevant statutes to consider; depending on whether the target company holds an operating licence to carry out its business activities. For instance, a licensed telecommunication company will be regulated under the Communications and Multimedia Act and will be required to hold one of a number of licenses thereunder.
TYPES OF TRANSACTIONS
Share Versus Asset Purchase In Malaysia, the task of gaining control can be approached from a share purchase or an asset purchase perspective depending on the rationale for the acquisition, the resources of the acquirer, the financial health and viability of the target company and other more technical factors such as tax and stamp duty considerations.
The factors usually taken into consideration include the following:
Simplicity
Depending on the type and nature of the assets to be acquired, the complications of acquiring assets are sometimes less than those of acquiring a company. Generally, if a company is acquired, proper due diligence would need to be conducted to investigate all its assets and liabilities, including contracts it may have entered into and other actual or contingent obligations. It is usually possible to buy an asset such as a property by itself, without any legal complications, unless the property is charged or subject to other encumbrances. On the other hand, depending on the type and business operations of the target company, the purchase of shares may be simpler and involve less expense as the underlying assets and operational contracts of the target company will not have to be separately transferred to or assigned or novated in favour of the purchaser.
Stamp duties and other factors
In practice, stamp duties on the transfer of an asset can be greater than stamp duties payable on the transfer of shares. Stamp duties are generally payable by the purchaser but some parties may agree to split the duty payments equally between the purchaser and the vendor.
There is no capital gains tax in Malaysia other than in respect of the sale and purchase of real property. In this regard, profits on the sale of shares are tax-free to the vendors.
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