Asset Purchase Agreements in Malaysia: What the Document Must Actually Cover

A Malaysian asset purchase agreement has to schedule every asset, contract, licence and employee changing hands, secure every third-party consent the transfer needs, and state exactly which liabilities stay behind with the seller — anything left off the schedule simply does not transfer, and anything left unaddressed usually ends up as the buyer’s problem by default. This guide sets out what the document must cover, which parts of the transfer need someone else’s consent, what happens to the employees, and how stamp duty is worked out.

Most buyers only discover the gap at completion — the lease was never assigned, the largest customer contract needed a consent nobody asked for, or the operating licence does not survive a change of owner. An asset purchase looks like the simpler route into a business, because the buyer picks what it wants and leaves the rest. In practice it is usually the more paperwork-heavy structure, not the lighter one.

What has to go into a Malaysian asset purchase agreement?

An asset purchase agreement sits alongside the alternative structure — buying the company itself. Our guide to share purchase agreements in Malaysia covers that route. Where a share sale transfers the company as a whole, with its history intact, an asset sale transfers only the specific assets identified in the agreement — which is precisely why the drafting has to be exhaustive rather than general.

At minimum, the document needs to cover:

• A full schedule of the assets transferring — premises, plant and equipment, stock, IP, contracts, licences and permits, and goodwill

• How the purchase price is allocated across those assets, because allocation drives the stamp duty and tax treatment of each one

• Which contracts transfer, and by what method — assignment, novation, or a fresh agreement with the counterparty

• What happens to the employees connected with the business being sold

• Which liabilities stay with the seller, stated affirmatively rather than left to be inferred

• Completion mechanics — the order of consents, filings and payments on the day

• Warranties on title to the assets, and indemnities for the liabilities the buyer is not taking on

Which assets transfer automatically, and which need someone else’s consent?

Nothing transfers automatically just because the agreement says so. Each category of asset moves by its own legal method, and several of them depend on a third party who is not a signatory to the agreement at all.

• Land and premises transfer by a registrable instrument, not by the sale agreement itself — the transfer has to go through the land registry process before the buyer’s title is secure.

• Movable assets — plant, equipment, stock — generally transfer on delivery under the sale agreement, which is more straightforward but still needs a clear schedule to avoid disputes over what was actually included.

• Contracts generally cannot simply be handed over. Assigning the benefit of a contract does not usually need the counterparty’s consent unless the contract itself says otherwise, but passing on the obligations under it — which is what a business transfer normally requires — needs a novation: a three-way agreement between seller, buyer and counterparty. Novation has a statutory footing in section 63 of the Contracts Act 1950, which provides that where the parties agree to substitute a new contract for the original, the original need not be performed. Assignment is not dealt with by the Contracts Act at all — it is governed by common law and, for the legal assignment of a debt or other chose in action, by the Civil Law Act 1956. Either way, the first document to read is the contract’s own assignment and change-of-control clause.

• Licences and permits are frequently non-transferable outright — the buyer may need to apply afresh in its own name, which can drive the completion timeline more than any other single item.

• Intellectual property needs its own deed of assignment, separate from the general sale agreement, particularly for anything registrable.

The consent list should exist before drafting starts, not be discovered during it — which is exactly the gap our guides to red flags in legal due diligence and running the due diligence process step by step are written to close.

What happens to the employees?

Employment contracts do not transfer automatically with the business, because Malaysian law treats a contract of service as personal to the parties. The Federal Court applied that principle in Affin Bank Bhd v Mohd Kasim @ Kamal bin Ibrahim, adopting the House of Lords’ reasoning in Nokes v Doncaster Amalgamated Collieries Ltd: an employee cannot, against their will, be made to serve a new employer simply because the business has changed hands.

In practice the transfer runs as a staged process:

• The seller terminates the affected employees with notice. Section 12(3)(f) of the Employment Act 1955 deals with this situation expressly: where the termination is attributable to a change in the ownership of the business, the employee is entitled to notice of not less than the statutory minimum — four weeks if employed for less than two years, six weeks for two years but less than five, eight weeks for five years or more — regardless of anything to the contrary in the contract of service. A longer contractual period still applies; a shorter one is void under section 7 and the statutory period is substituted.

• The buyer then has seven days from the change of ownership to offer employment on terms and conditions not less favourable than those the employee had before, under regulation 8(1) of the Employment (Termination and Lay-Off Benefits) Regulations 1980. If the offer is accepted, regulation 8(3) deems the employee’s prior service to be service with the buyer — the change of employer is not a break in continuity.

• If no conforming offer is made, regulation 8(2) deems the contract terminated and the seller, as the employer immediately before the change, is liable for the termination benefits. Note the converse: an employee who reasonably refuses a conforming offer still keeps the entitlement. Only an unreasonable refusal removes it. This exposure needs to sit explicitly in the agreement’s allocation of liabilities rather than be assumed away.

• The statutory mechanism does not cover everyone, and this is where asset deals go wrong. The 1980 Regulations are made under section 60J of the Employment Act, and paragraph 1A of the First Schedule disapplies section 60J to an employee whose wages exceed RM4,000 a month. The regulation 8 seven-day protection therefore does not reach senior staff at all — for them, continuity and severance are whatever the sale agreement and their own contracts provide. Regulation 3 also requires twelve months’ continuous service before termination benefits accrue, and regulation 7 excludes out-workers.

Since 1 January 2023 the Employment Act 1955 has applied to any person who has entered into a contract of service, with no wage ceiling on coverage. The RM4,000 monthly figure is not a coverage threshold — it is a carve-out. Paragraph 1A of the First Schedule disapplies six provisions to employees above it: subsections 60(3), 60A(3), 60C(2A), 60D(3) and 60D(4), and section 60J. The first five are rest-day, overtime, shift and public-holiday pay. The sixth, section 60J, is the one that matters in a business sale, because it is the power under which the termination-benefit regulations are made. Note also that the Act applies to Peninsular Malaysia and Labuan; Sabah and Sarawak have their own Labour Ordinances. Any new contract the buyer issues on completion should be a properly drafted one; see our guide to employment agreements in Malaysia for what that document needs to cover.

Does the seller’s board need shareholder approval to sell the assets?

Often, yes — and the section cuts both ways, because it catches the buyer’s side too. Section 223 of the Companies Act 2016 provides that, notwithstanding anything in the constitution, directors shall not enter into or carry into effect an arrangement or transaction for the acquisition of an undertaking or property of a substantial value, or the disposal of a substantial portion of the company’s undertaking or property, unless it has been approved by the company by way of a resolution.

What counts as substantial depends on the company. For a company whose shares are quoted on a stock exchange, or its subsidiary, section 223(2)(b) applies the threshold set by that exchange’s listing requirements — not a 25% figure in the Act. Section 223(2)(c) adds that where an unlisted subsidiary of a listed holding company enters the transaction, the holding company’s directors must also procure the holding company’s shareholders’ approval. For every other company — which covers most private Malaysian sellers — section 223(3) sets three measures: the value exceeds twenty-five per centum of the company’s total assets; the net profits attributed to it, after deducting all charges except taxation and excluding extraordinary items, amount to more than twenty-five per centum of the company’s total net profit; or its value exceeds twenty-five per centum of the issued share capital. The subsection closes with the words “whichever is the highest”. In practice that means running all three rather than picking the most convenient one.

Getting it wrong is not a paperwork slip. Under section 223(4) the Court may, on the application of any member, restrain the directors from entering into or carrying into effect a transaction that contravenes the section. Under section 223(7) a director who contravenes it commits an offence and is liable on conviction to imprisonment for up to five years, a fine of up to three million ringgit, or both — the liability sits on the director personally. Section 223(6) puts receivers, receivers and managers, and liquidators in a voluntary winding up outside the section altogether.

Section 223(5) is the provision a buyer needs to read closely. It is the arrangement or transaction that is void for contravention, not merely the resolution — but it is void “except in favour of any person dealing with the company for valuable consideration and without actual notice of the contravention”. A buyer who pays value and genuinely does not know of the defect is therefore protected. The difficulty is that diligence is what destroys the protection: once the buyer has seen the seller’s accounts and can work out that a threshold is crossed, it is no longer a party without actual notice. The practical answer is to ask for the members’ resolution, or for a properly reasoned confirmation that none was required, and to close that point before signing rather than to rely on the statutory saving.

How is stamp duty calculated on an asset purchase?

There is no single flat rate for an asset purchase agreement. Duty follows the instrument that actually moves each asset, so the calculation has to be done asset by asset, not on the deal as a whole.

The practical consequence is that how the price is allocated across the schedule of assets changes the duty bill. Allocating value to intellectual property, which is exempt, is not the same as allocating it to goodwill, which is charged at the full tiered scale. Allocation has to be defensible on the facts — it is not a dial to be turned — but it should be decided deliberately rather than fall out of the drafting by accident.

One further point worth planning around rather than being caught by: Malaysia is phasing in stamp duty self-assessment, moving the assessment obligation from LHDN onto the taxpayer. On LHDN’s published schedule, Phase 1 took effect on 1 January 2026 and covers rental and lease instruments, securities, and general stamping. Phase 2 takes effect on 1 January 2027 and covers transfers of real property that do not require a JPPH valuation — transfers that do require one fall into Phase 3, which takes effect on 1 January 2028 and picks up everything not already captured. As at August 2026, only Phase 1 is live, so an instrument outside it is still assessed by LHDN in the usual way. What LHDN’s published table does not spell out is exactly which instruments sit inside the Phase 1 “general stamping” category, so check the position for the specific instrument at the time of stamping rather than assuming an answer.

What does getting this wrong actually cost?

Not one cost, several, and they tend to compound. A contract that was assumed to transfer but needed consent leaves the buyer without its biggest customer relationship on day one. A licence that does not survive the change of ownership can stop the business trading until a fresh application clears. An employee liability that was assumed to pass to the buyer but did not, because the seven-day offer window was missed, lands back on the seller as a termination benefit claim after the deal has already closed. A shareholder approval defect on the seller’s side under section 223 makes the transaction itself void, and while section 223(5) protects a buyer who gave value without actual notice of the contravention, a buyer who ran proper diligence may struggle to say it had none. None of these show up in the purchase price. All of them show up in the weeks after completion, when the leverage to fix them cheaply has already gone.

Frequently Asked Questions

Which is better for a buyer — an asset purchase or a share purchase?

It depends on the liabilities in the business, the tax position, and how many third-party consents the deal needs. Buyers often prefer an asset purchase because it lets them leave unwanted liabilities behind; sellers often prefer a share sale because it is cleaner for them. The answer turns on the specific deal, not a general rule.

Do all the contracts transfer automatically to the buyer?

No. Most contracts need either the counterparty’s consent to assign the benefit, or a full novation to pass on the obligations as well. Identifying which contracts actually matter to the business, and securing those consents before completion, is one of the largest parts of this work.

What happens to the employees in an asset purchase?

They do not transfer automatically. The seller has to terminate them, and on a change of business ownership section 12(3)(f) of the Employment Act 1955 fixes the notice at the statutory minimum of four, six or eight weeks by length of service regardless of what the contract says. The buyer then has seven days from the change of ownership to offer employment on terms and conditions not less favourable, under regulation 8 of the Employment (Termination and Lay-Off Benefits) Regulations 1980. If it does not, the contract is deemed terminated and the seller is liable for the termination benefits. This statutory route does not apply to employees earning more than RM4,000 a month, because section 60J of the Act — the power the regulations are made under — does not apply to them.

Do we need shareholder approval to sell the assets?

For a private company, section 223(3) of the Companies Act 2016 treats an undertaking or property as substantial where its value exceeds 25% of total assets, the net profits attributed to it exceed 25% of total net profit, or its value exceeds 25% of issued share capital — taking whichever is the highest. Above that, section 223(1) requires the members’ approval by resolution before the directors enter into or carry into effect the transaction, and the same applies to a buyer company making a substantial acquisition. Listed companies and their subsidiaries follow the stock exchange’s listing requirements threshold instead. A transaction in contravention is void under section 223(5), except in favour of a person dealing with the company for valuable consideration and without actual notice of the contravention, so a buyer should obtain evidence of the resolution rather than rely on that saving.

How is stamp duty worked out on an asset purchase?

Asset by asset, on the instrument that moves each one, not as a single rate on the deal. Land follows the tiered ad valorem scale in Item 32(a) of the First Schedule to the Stamp Act 1949 — 1%, 2%, 3% and 4% by band — and a foreign or non-resident buyer pays a flat 4%, or 8% on residential property from 1 January 2026. Shares are charged at RM3 per RM1,000 (0.3%). Goodwill and other property fall under the same Item 32(a) scale, while a transfer or assignment on sale of copyright, trade marks or patents is exempt under the Item 32 exemptions.

Getting this documented properly

An asset purchase agreement is only as strong as the schedule behind it — the assets it actually identifies, the consents it actually secures, and the liabilities it actually excludes. Legal That Works advises Malaysian buyers and sellers on business and asset purchase agreements — from structuring the deal and identifying every consent required, through to drafting the agreement and running completion. If you are looking at an asset purchase now, get the schedule and consent list built before the terms are agreed, not after.

This article is for general information only and does not constitute legal advice. Every transaction and every set of facts is different. Obtain specific advice from a qualified adviser before acting on any part of it.

Related guides

• Asset Purchase vs Share Purchase in Malaysia

• Investor Readiness Legal Audit

• Nominee Shareholder and Bare Trust Arrangements in Malaysia