If you’re a business owner, your company shares are probably one of the assets you’ve thought least about when it comes to your Will even though they often represent years of hard work. They can be left in a Will, but naming a beneficiary doesn’t automatically make that person a shareholder. There’s a process to go through first, and understanding it now can save your Beneficiaries real delay and difficulty later.

Shares are not the same as the business 

A company is its own legal entity, separate from the people who own it. A shareholder owns shares in the company and not the company’s cash, property, or other assets directly

This matters when drafting a Will. Rather than a vague instruction like “I leave my business to my son,” the Will should clearly identify the shares being left: the company’s name, its registration number, and whether it’s all the shares held or only some of them.

Every private company restricts how its shares can be transferred

Under Section 42(2) of the Companies Act 2016, every private company (“Sdn Bhd”) in Malaysia is required by law to restrict how its shares can be transferred. This isn’t optional. Under Section 42(4) of the Companies Act 2016, a company that stops restricting share transfers is treated as having ceased to be a private company altogether.

These restrictions are usually set out in the company’s constitution and/or a shareholders’ agreement, wherever either of these exists.

Common restrictions include:

• other shareholders getting first right to buy the shares before an outsider can;

• the board needing to approve any transfer; and

• a set formula or process for valuing the shares.

Why this matters for the Will?

If these documents aren’t reviewed before the Will is finalised, the named Beneficiary could face delays, or in some cases may not be able to keep the shares at all even where the Will itself is perfectly valid.

What happens to the shares after the owner passes away

When a shareholder passes away, there’s a legal process the estate must go through before the shares can end up in the Beneficiary’s hands.

In short:

1. The person handling the estate ie the executor named in the Will, or an appointed administrator if there isn’t one, first needs to obtain the Grant of Probate or Letters of Administration.
2. This document is then presented to the company as proof of authority to deal with the shares.
3. From there, the company can proceed to register the shares in the name of the intended Beneficiary.

The exact steps and paperwork can vary between companies, and a company secretary will usually guide the process. What’s most useful for a business owner to know at the Will drafting stage is simply this: the smoother this process goes, the sooner and more certainly the shares reach the intended person and that smoothness depends heavily on whether the Will and the company’s own rules were coordinated in the first place.

The takeaway

A well prepared Will does more than say who should get the shares. It’s drafted with the company’s own restrictions in mind, so there are no surprises when the time comes to act on it. Good business succession planning means the Will, the company’s governing documents, and the family’s expectations are all working towards the same outcome.

Scope: This article concerns non-Muslim estates involving shares in Malaysian private companies in Peninsular Malaysia. Different laws may apply to Muslim estates and matters connected with Sabah, Sarawak or foreign jurisdictions.

This article is for informational purposes only and does not constitute legal advice. Consult qualified professionals in Malaysia for advice tailored to your specific personal, financial, and family circumstances.  

About the Author: Ho Yi Yern

Ho Yi Yern is an Advocate & Solicitor of the High Court of Malaya, Partner and Head of Family Law, Succession & Estate Administration in Messrs Azhar & Goh, proud member of Worldwide International Lawyers League (WILL), Malaysian Collaborative Practice Group (MCPG) and International Academy of Collaborative Professionals (IACP), guiding clients through Wills, inheritance, and family-related legal matters. She is dedicated to empowering individuals and families make informed strategic decisions that safeguard their loved ones and preserve their legacy.