While a company constitution and a shareholders’ agreement might cover some overlapping provisions, they each serve different purposes and address unique aspects of the business.
A company’s constitution applies broadly, binding the entire organization, including shareholders and directors. In contrast, a shareholders’ agreement is a private contract that applies only to the shareholders who are parties to it. Importantly, if the company itself is to be bound by the shareholders’ agreement, it must also be a party to that agreement.
The key distinctions between a company’s constitution and a shareholders’ agreement are set out below:
| Aspect | Constitution | Shareholders Agreement |
| Nature and Purpose | Outlines fundamental rules governing the company’s structure and operations. | A private contract between shareholders defining their rights, obligations, and arrangements. |
| Scope | Governs broad company governance, applicable to all shareholders equally. | Covers specific arrangements between shareholders, such as voting rights, profit-sharing, or exit strategies. |
| Parties | Binds the company and its members. | Binds the shareholders (and the company, if it’s a party to the agreement). |
| Amendments | Requires a special resolution (75% shareholder approval). | Amendments can be made privately with mutual agreement of the parties involved. |
| Typical Content | 1. Company’s name and registered address 2. Rules for issuing and transferring shares 3. Powers and duties of directors 4. Shareholder meeting procedures. | 1. Shareholder funding obligations. 2. Share transfer restrictions (e.g., pre-emptive rights, drag-along, tag-along) 3. Dividend policies. 4. Exit strategies for shareholders. |
| Filing Requirement | Public document filed with the Companies Commission of Malaysia. | Private agreement not filed with any regulatory authority. |
| Confidentiality | Accessible to public. | Private and confidential. |
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Author(s):
Ashley Yeo, Partner
E: ashley@yeoashley.com.my
Nicole Goh, Associate
E: nicole.goh@yeoashley.com.my
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Hello! This is Yeo Ashley & Partners, a law firm based in Bangsar South, Kuala Lumpur, Malaysia. We provide comprehensive services tailored to meet the complex needs of businesses. Our experiences include structuring of company shares for purposes of fundraising and incentivising employees, capital markets, mergers and acquisitions, regulatory compliance, anti-bribery and anti-corruption measures acquisitions, and other shares-related matters, ensuring efficient and compliant processes. Our dedicated team is committed to empowering companies with the tools and guidance needed to navigate these critical areas, enabling them to focus on growth and success with confidence.
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This article is intended to provide general information and does not constitute and/or should be relied on as any legal opinion or professional advice. For more information, you may reach out to Yeo Ashley & Partners, a law firm based in Bangsar South, Kuala Lumpur, Malaysia.
