Aligning Your Blueprint: Updating the Articles of Association for Your Customized SHA in Malaysia

Roger Pay
13 minutes ago
4 min read

Updating Malaysian Company Constitution

Aligning Your Blueprint: Updating the Articles of Association for Your Customized SHA in Malaysia

For Malaysian private limited companies (Sdn Bhd) with a customized Shareholders' Agreement (SHA), ensuring the company's Articles of Association (now collectively known as the Constitution under the Companies Act 2016) is fully aligned is not just best practice—it's a critical legal necessity.

While the SHA governs the contractual relationship between the shareholders, the Constitution is the company's public-facing rulebook, governing the company's internal affairs and its relationship with its members and directors. Where the SHA contains unique provisions (such as specific reserved matters, director appointment rights, or enhanced quorum requirements), these must be mirrored in the Constitution to be legally effective against the company and to avoid future conflicts.

The Primacy of the Constitution: Why Alignment is Key

Under Malaysian company law, specifically the Companies Act 2016 (CA 2016), a key principle governs the relationship between these two documents:

Statutory Supremacy: Any provision in the SHA that conflicts with the mandatory provisions of the CA 2016 is void.
Constitution's Authority: In the event of a conflict between a private SHA and the company's Constitution, the Constitution generally prevails, especially concerning matters that bind the company (such as the quorum for a general meeting or the procedure for share transfer).

The Takeaway: If your customized SHA grants a minority shareholder a right (e.g., a veto on major decisions) but this right is not explicitly incorporated or permitted by the Constitution, the company may not be legally bound to respect it, leaving the shareholder's protection vulnerable to dispute.

The Essential 4-Step Procedure to Update the Constitution

The process for updating the Constitution in Malaysia is governed by Section 36 of the CA 2016. Here is the streamlined procedure:

Step 1: Draft the Amendment

Legal Review & Drafting: The SHA's customized clauses (e.g., specific reserved matters, enhanced voting thresholds, detailed pre-emptive rights, director appointment/removal rules) must be meticulously translated into compliant provisions within a draft amended Constitution.
Conflict Resolution: Ensure the draft amendments do not conflict with any mandatory sections of the CA 2016.

Step 2: Pass a Special Resolution

Shareholder Approval: The amendment to the Constitution requires the passing of a Special Resolution by the company's members.
Required Majority: A Special Resolution requires a majority of not less than 75% of the members entitled to vote and who vote in person or by proxy at a general meeting.
Notice Period: The meeting at which the Special Resolution is proposed generally requires at least 21 days' notice.

Step 3: Lodge Notification with SSM

Mandatory Filing: Within 30 days from the date the Special Resolution is passed, the company secretary must lodge a notification of the alteration with the Companies Commission of Malaysia (SSM), along with the amended Constitution (or a consolidated version).
Required Form: The relevant form for this notification is the Notification of Alteration or Amendment to Constitution (under Section 36 of the CA 2016).

Step 4: Update Internal Records

New Constitution: The company must ensure that every officer and member has access to a copy of the new, officially adopted Constitution.
Effective Date: The alteration takes effect on the date the Special Resolution was passed or any later date specified in the resolution itself.

Critical SHA Clauses Requiring Constitution Mirroring

When aligning a customized SHA with the Constitution, special attention should be paid to the following areas:

SHA Clause	Constitutional Alignment Necessity
Reserved Matters	Must include the list of actions that require a specified shareholder/director approval threshold (e.g., veto rights) to bind the company.
Board Quorum	Quorum clauses should mandate the attendance of specific directors (e.g., investor director) for a board meeting to be validly constituted.
Share Transfer/Pre-emptive Rights	Detailed procedures for share transfer, including rights of first refusal (pre-emptive rights), must be clearly set out to be enforceable against a new member.
Director Appointment	Rules granting a specific shareholder the right to appoint, nominate, or remove a director must be explicitly mirrored.
Deadlock Resolution	While the mechanism itself (e.g., Russian Roulette) may remain in the private SHA, any related constitutional procedures (e.g., share valuation) must be aligned.

Next Steps

Updating your Constitution to reflect a customized Shareholders' Agreement is a task best handled by a qualified company secretary.

Bestar Asia: Corporate Secretarial Services & Governance Advisory

Aligning Your Blueprint: Updating the Articles of Association for Your Customized SHA in Malaysia

Bestar is a leading provider of Company Secretarial Services, Corporate Governance, and Constitutional Amendments support.

Why Choose Bestar for Corporate Governance in Malaysia?

Bestar provides a full spectrum of corporate secretarial services to help your company maintain full compliance with the Companies Act 2016 and the Malaysian Code on Corporate Governance. Our services include: