Shareholders' Agreement vs. Company Constitution: What's the Difference?
Understanding the difference between a Shareholders' Agreement and Company Constitution under the Malaysia Companies Act 2016.
Lawgistics January 1, 2025 5 min read
InsightsTaking on a co-founder, partner, or investor in your Malaysian company means you'll hear about both of these documents. Many founders assume one replaces the other. It doesn't — and confusing the two is a costly mistake.
The Company Constitution
Under the Companies Act 2016, a Malaysian company may adopt a Constitution (replacing the old Memorandum & Articles of Association). The Constitution is a public document filed with the Companies Commission of Malaysia (SSM) and governs the internal rules of the company — share classes, director powers, meeting procedures, dividend rights, and transfer restrictions.
Because it's a public document, commercially sensitive agreements between shareholders should never be placed in the Constitution.
The Shareholders' Agreement
A Shareholders' Agreement (SHA) is a private contract between shareholders. It sits alongside the Constitution and governs the relationship between shareholders in detail: board composition, veto rights, drag-along and tag-along rights, anti-dilution, exit mechanisms, and what happens when shareholders deadlock.
Key differences
- Privacy:SHA is private. Constitution is public.
- Flexibility:SHA can be amended by the agreeing parties. Constitution requires a special resolution of shareholders.
- Enforceability:Constitution binds all current and future shareholders. SHA only binds signatories.
In practice, most well-structured Malaysian companies have both — a Constitution setting out the basic governance framework, and an SHA containing the commercial arrangements between investors and founders.
More insights
Stay updated with quick, practical reads on legal safety, smart documentation, and modern business workflows.
What Every Malaysian SME Needs in a Service Agreement
The five key clauses every Malaysian service agreement must include to protect your business — scope of work, payment terms, IP ownership, termination rights, and liability caps.
LawgisticsMar 01, 2025
NDAs — When Do You Actually Need One?
When Malaysian businesses need non-disclosure agreements and what a legally sound NDA must include under Malaysian law.
LawgisticsFeb 01, 2025
Employment Contracts in Malaysia: What You Can't Afford to Skip
From probation clauses to restraint of trade — the provisions that protect your business under Malaysia's Employment Act 1955.
LawgisticsFeb 01, 2025