Sale and Purchase Agreement Subject to EPU Approval: What a Purchaser Must Protect Before Paying the Deposit or Signing

If a Malaysian property acquisition may require Ministry of Economy approval, the purchaser should not treat that approval as paperwork to be inserted into the SPA after the commercial terms are already fixed.

The approval condition should shape the transaction from the start.

The most important protections are usually straightforward: make the approval a properly drafted condition precedent to completion, keep the deposit protected until the agreed risk point, allocate responsibility for the application, set a realistic long-stop date, and decide in advance what happens if approval is refused, delayed or granted on conditions that change the deal.

The equity condition itself can move while a transaction is live, which is one more reason to draft around approval risk rather than an assumed outcome. See our 2026 update on the Bumiputera equity requirement.

Those provisions matter because the purchaser is normally the party whose money and acquisition timetable are most exposed if the agreement assumes an approval outcome nobody can guarantee.

For the broader question of what EPU approval is and when it applies, see our guide to what EPU approval is and why it applies to your property purchase.

Do not sign an unconditional completion obligation against an uncertain approval

The SPA should state clearly whether Ministry approval is a condition precedent to completion.

A vague clause requiring the parties to obtain “all necessary approvals” is often not enough for a high-value transaction. The agreement should identify the relevant approval, who must obtain it, what evidence satisfies the condition and whether completion can occur before the condition is fulfilled or waived.

For the current trigger, timeline and application framework, see our guide to EPU approval for a property sale and purchase in Malaysia.

Define the condition around the transaction you are actually signing

The Ministry of Economy’s current Guideline on the Acquisition of Properties, effective from 13 July 2022, applies to defined direct and indirect acquisition categories. The transaction documents should therefore use the actual structure of the deal rather than generic wording.

If the purchaser is buying the land directly, the SPA should identify the property and approval requirement relevant to that transfer.

If the purchaser is acquiring shares in a property-owning company and the indirect-acquisition limb may apply, the condition should reflect the share transaction and the control change rather than pretending the deal is a direct land purchase.

Where the buyer is unsure whether the guideline applies at all, that should be resolved before the agreement converts uncertainty into an unconditional payment obligation.

Allocate responsibility for the application

A good condition precedent says more than “the purchaser shall apply”.

The SPA should address:

• who prepares and submits the application;

• who signs the relevant Ministry forms and declarations;

• which party must provide corporate, ownership, financial, valuation and property information;

• how quickly each party must respond to requisitions or requests for further documents;

• whether the seller must provide board, shareholder or company-secretarial material;

• who pays application, valuation and professional costs; and

• who controls communications with the Ministry while keeping the other party informed.

The current Ministry application materials require transaction and corporate information. If the seller controls documents the purchaser needs but has no express duty to provide them promptly, the purchaser can be left responsible for an application it cannot complete.

The deposit needs its own risk allocation

A purchaser should not assume that “approval was refused” automatically means “the deposit comes back”.

The refund outcome depends on the SPA and the way the deposit is held.

For a transaction subject to Ministry approval, the agreement should answer at least four questions:

1. Who holds the deposit after signing?

2. When can it be released to the seller?

3. What happens if the approval is refused or not obtained by the long-stop date?

4. What happens if the purchaser itself causes the failure by not applying, withholding information or breaching an agreed obligation?

From the purchaser’s perspective, a stakeholder arrangement with clearly defined release and refund triggers is materially different from paying the deposit directly to the seller as immediately releasable money.

The commercial answer will depend on the deal, but the answer should be written before funds move.

Set a realistic long-stop date

A condition precedent that can remain outstanding indefinitely creates leverage problems for both parties.

The SPA should set a long-stop date after allowing realistic time for:

• preparing a complete application;

• obtaining any valuation or corporate approvals needed for the submission;

• responding to Ministry requisitions;

• considering conditions attached to an approval; and

• coordinating any separate State Authority or regulatory consent where relevant.

The Ministry publishes a target processing period for complete applications, but a contractual timetable should not treat an administrative target as a guaranteed completion date.

Decide whether extensions are automatic or negotiated

Transactions often reach the long-stop date with the application still active rather than expressly approved or refused.

The SPA should therefore say whether:

• the long-stop date extends automatically for a defined period if the application is still pending;

• either party can require an extension;

• both parties must agree to extend; or

• either party can terminate immediately after the deadline.

A purchaser that has spent months on due diligence, financing and application work may not want the seller to walk away the day after the deadline if approval is expected shortly. The seller, meanwhile, may not want its property tied up indefinitely.

That tension should be solved contractually, not at the deadline.

Approval with conditions is not the same as unconditional approval

The current guideline can result in ownership and paid-up-capital conditions. A transaction-specific approval may also create requirements that affect the buyer’s proposed structure.

The SPA should therefore define what counts as a satisfactory approval.

Possible approaches include:

• the purchaser must accept any lawful condition;

• the purchaser only needs to accept conditions that do not materially prejudice the agreed economics or control structure;

• specified expected conditions are deemed acceptable, while anything else requires purchaser consent; or

• the parties must attempt a restructuring for a defined period before either may terminate.

There is no single drafting answer for every deal. The important point is to avoid discovering after approval that the parties disagree about whether the condition precedent has actually been satisfied.

What if approval is refused?

The SPA should state the consequence of refusal expressly.

Common issues include:

• whether either party must first appeal or make a revised application;

• whether the parties must consider a lawful alternative structure;

• how long that process may continue;

• whether either party may terminate once refusal becomes final for the agreed purpose;

• how the deposit is dealt with; and

• which accrued rights survive termination.

The Ministry currently publishes an appeal form, but an SPA should never be drafted on the assumption that an appeal will necessarily succeed.

Protect against a purchaser-caused failure without giving away legitimate rights

The seller will normally resist a clause that allows the purchaser to recover its deposit after doing nothing to obtain the approval.

That is reasonable.

The solution is to distinguish between:

• a genuine regulatory refusal or delay;

• a failure caused by the seller not providing required cooperation;

• a failure caused by the purchaser not using the agreed level of effort; and

• a purchaser decision not to accept an approval condition that the SPA already said it must accept.

Clear conduct obligations make the termination and deposit provisions much easier to apply.

Do not let the approval condition freeze the rest of the transaction by accident

The SPA should also say what each party must do while approval is pending.

For the purchaser, that may include continuing financing work, completing agreed due diligence and preparing completion documents.

For the seller, it may include preserving the property, not creating new encumbrances, maintaining insurance, not entering inconsistent arrangements and providing reasonable access or information.

The approval period can last long enough for the commercial position of the property to change. Interim covenants matter for that reason.

Seller information used in the application should be contractually reliable

The application may depend on information about ownership, corporate status, property value and transaction structure supplied by the seller or target company.

The purchaser should consider whether the SPA needs warranties or specific confirmations that the information supplied for the application is accurate in all material respects and that the seller will promptly correct anything that becomes inaccurate before approval.

This does not replace purchaser due diligence. It addresses the narrower problem of an application being made on information the purchaser does not control.

Completion should start from the approval date, not from guesswork

Once satisfactory approval is obtained, the SPA should make the next steps mechanical.

That normally means identifying:

• when the approval condition is deemed satisfied;

• who must notify whom;

• how many business days later completion occurs;

• whether other conditions precedent must also be satisfied;

• what completion documents are delivered; and

• when the balance purchase price becomes payable.

The more precise the completion trigger, the less likely the parties are to renegotiate timing after the approval is already in hand.

EPU approval and State Authority consent are separate questions

A property transaction can involve more than one approval regime.

Ministry of Economy approval under the property-acquisition guideline is not the same as State Authority consent, title-restriction consent or another sector-specific approval.

The SPA should list each material condition separately where more than one is required, because they may have different application processes, decision-makers and timelines.

For a broader purchaser-side commercial-property document review, see our guide to what a corporate buyer’s commercial-property SPA should cover.

Purchaser checklist before signing

• Has the Ministry approval requirement been confirmed for the actual transaction structure?

• Is approval expressly a condition precedent to completion?

• Does the SPA identify who applies and who provides each category of information?

• Is the deposit held and released on terms the purchaser understands?

• Is the refund outcome clear if approval is refused or not obtained?

• Is there a realistic long-stop date?

• Are extensions dealt with?

• Does the SPA define what counts as an acceptable conditional approval?

• Is any appeal/restructuring obligation limited and time-bound?

• Are seller interim covenants in place while approval is pending?

• Does completion occur on a clear timetable after satisfactory approval?

• Have separate State Authority or sector approvals been identified independently?

Frequently asked questions

Should I pay the deposit before EPU approval is obtained?

That is a commercial decision, but the purchaser should understand exactly who will hold the deposit, when it can be released and when it must be refunded. The risk should be negotiated before payment.

Can we sign the SPA first and apply afterward?

A conditional SPA may be signed before approval, but the approval requirement should be properly built into the agreement before signature rather than added later.

What if the Ministry approves the deal but imposes conditions we do not want?

The SPA should define whether those conditions must be accepted, can be rejected if materially prejudicial, or trigger a restructuring/termination process.

What if the approval takes longer than expected?

The long-stop and extension clauses should govern the position. Do not rely only on an administrative target processing period.

Is the deposit always refundable if approval is refused?

No. The answer depends on the SPA, how the deposit is held and whether the refusal resulted from a party’s breach of its application obligations.

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.

Legal That Works can assess the approval pathway, structure the SPA around the condition precedent, protect the purchaser’s deposit and completion position, and prepare the Ministry submission through our Sale and Purchase with Economic Planning Unit Approval service.