Selling Your Shares in a Malaysian Company: What Should the Seller Negotiate in the SPA?

The headline price is only one part of a share sale.

A seller can agree an attractive valuation and still end up with a poor commercial outcome if part of the price is difficult to collect, completion depends on conditions outside the seller's control, warranties are too broad, disclosure is weak, indemnities are open-ended, or post-completion obligations prevent the seller from making a clean exit.

That is why a seller should not read a Share Sale and Purchase Agreement as a long document containing standard legal clauses. The SPA is where the economics of the exit, the seller's continuing risk and the practical meaning of "completion" are converted into binding terms.

Start with the exit you actually want

Before negotiating individual clauses, be clear about the commercial result you are trying to achieve.

A founder selling 100% of the company and leaving immediately has different priorities from a shareholder retaining 20%, a seller staying on as managing director, or an owner accepting an earn-out linked to future performance.

Ask three questions first: how much value do you want to receive at completion, how much future exposure are you willing to retain, and what relationship—if any—do you want with the business after the sale?

Those answers should guide every major SPA negotiation.

Make sure the purchase price clause describes the deal you think you agreed

A headline purchase price can create false comfort.

The SPA may contain mechanisms that increase or reduce the amount ultimately received. Depending on the transaction, this may include completion accounts, cash and debt adjustments, working-capital adjustments, locked-box arrangements, leakage provisions or other price adjustments.

The seller therefore needs to understand not only the number written on the first page, but how that number can move between signing and final settlement.

The commercial question is simple: what amount is actually expected to reach the seller, and what can still change it?

Negotiate when and how you actually get paid

Price and payment certainty are not the same thing.

If the entire consideration is paid in cleared funds at completion, the seller's collection risk may be relatively limited. If part is deferred, paid by instalments, retained in escrow, held back against claims or linked to an earn-out, the seller remains exposed after ownership has changed hands.

That exposure should be understood before the structure is accepted. A seller may need to consider the payment dates, conditions attached to payment, rights of set-off, security for deferred amounts and what happens if the buyer later disputes the amount due.

An earn-out can preserve upside, but it can also turn a completed sale into a continuing argument about how the business is operated and how performance is measured. That subject deserves its own detailed analysis rather than being treated as a minor price clause.

Control conditions that can delay or prevent completion

Signing does not always mean the transaction is certain to complete.

A share sale may depend on approvals, third-party consents, financing arrangements, restructuring steps or other agreed conditions. The seller should identify which conditions are genuinely necessary and which give the buyer unnecessary discretion to delay or walk away.

Pay attention to who controls satisfaction of each condition, what effort each party must make, whether a condition can be waived, the long-stop date and what happens if completion has not occurred by then.

A seller should be particularly cautious about spending months preparing for completion while the buyer retains broad rights to exit for reasons the seller cannot control.

Treat warranties as risk allocation, not boilerplate

Seller warranties can cover a large part of the company's history and operations: ownership, accounts, contracts, employees, tax, intellectual property, disputes, regulatory matters and many other areas.

The issue is not simply whether the statements look reasonable. The seller needs to understand the factual burden of standing behind them and the consequences if one later proves inaccurate.

Negotiation may therefore focus on scope, materiality, knowledge qualifications, time periods, repetition at completion and whether particular statements should be absolute or qualified by what has been disclosed.

A seller who treats the warranties schedule as an administrative appendix can end up giving much more post-completion protection than intended.

Use disclosure to reduce avoidable warranty exposure

Disclosure is not the same as uploading thousands of documents into a data room.

The seller should identify matters that qualify the warranties and present them in a way that makes the intended qualification clear. A known contract dispute, an employee claim, an unusual customer arrangement or a historic compliance issue may need specific treatment rather than being left buried inside a folder.

Good disclosure forces the seller's team to ask a useful question before signing: what do we know that could later be characterised as a breach of warranty?

That exercise can expose issues early enough to negotiate them properly rather than fight about them after completion.

Separate general warranties from specific known risks

Not every risk should be handled in the same way.

General warranties often address the overall state of the company. A specific indemnity may instead be negotiated for an identified risk—for example, a known dispute, tax exposure, regulatory issue or contractual problem.

For the seller, this distinction matters because a specific indemnity can create a more direct route to recovery for the buyer and may be subject to different limitations from general warranty claims.

The seller should therefore understand which risks are being ring-fenced, why the buyer is asking for separate protection and whether the proposed financial exposure is proportionate to the identified issue.

Put real limits around post-completion liability

A sale is not a clean exit if the seller remains exposed indefinitely.

SPA negotiations commonly address financial caps, minimum claim thresholds, baskets, time limits for bringing claims, treatment of contingent claims, mitigation, recovery from third parties, no-double-recovery principles and control of third-party proceedings.

The appropriate position depends on the transaction, the bargaining strength of the parties and the risk profile revealed during due diligence. The important point is that seller liability should be deliberately designed rather than left as an afterthought.

A seller should be able to answer: what is the maximum exposure, how long can claims remain open, and what types of claim sit outside the ordinary limits?

Check restrictive covenants against what you want to do next

A buyer may reasonably want protection for the goodwill and relationships it is purchasing. The seller, however, needs to understand what the proposed restrictions mean in practice.

Non-compete, non-solicitation, customer, employee and confidentiality restrictions can affect what the seller is allowed to do after completion, for how long and in which markets.

Worth knowing on the legal side: section 28 of the Contracts Act 1950 voids most restraint-of-trade agreements in Malaysia, but a restraint tied to the sale of a business's goodwill is one of the narrow statutory exceptions. That is exactly the situation in a share sale, which is why a buyer's post-completion non-compete is generally enforceable here in a way an ordinary employment non-compete usually is not. It does not mean any scope or duration will hold — the restriction still has to be reasonable and tied to protecting what was actually bought — but the seller should not assume the covenant is toothless just because Malaysian law is generally hostile to restraints of trade.

This becomes especially important where the seller intends to remain active in the same industry, invest in related businesses or start another venture.

A financially attractive exit can become much less attractive if the seller discovers too late that the post-sale restrictions interfere with the next stage of their career or investment plans.

Negotiate completion so the seller actually exits

Completion is more than signing documents and transferring shares.

From the seller's perspective, the completion agenda should address everything that needs to happen for ownership, money and responsibility to move as intended. Depending on the transaction, this may include transfer documents, board changes, resignations, repayment of shareholder balances, release of guarantees or security, handover of records and other closing steps.

Personal guarantees deserve particular attention. A founder who has sold the company but remains personally liable to a bank, landlord or supplier has not achieved a complete exit.

Identify those obligations before completion and make their release part of the transaction plan where appropriate.

Identify every obligation that survives completion

Some seller obligations deliberately continue after the sale.

They may include transition assistance, consultancy or employment, records access, cooperation on tax matters, assistance with claims, confidentiality obligations or earn-out-related duties.

Each surviving obligation should have a clear purpose and, where possible, a clear duration and scope.

Open-ended obligations create uncertainty. A seller expecting to move on should know exactly what can still be required six months, one year or several years after completion.

Decide your deal-breakers before the drafting becomes complicated

By the time an SPA has gone through multiple negotiation rounds, it is easy to lose sight of the commercial objective.

A seller-side negotiation checklist should normally come back to these questions:

• What are the expected net proceeds?

• How much is paid at completion and how much remains at risk?

• Can the buyer delay or avoid completion too easily?

• Are the warranties broader than the seller can responsibly give?

• Has known risk been properly disclosed or separately allocated?

• What is the maximum realistic post-completion liability?

• How long can claims remain open?

• Do restrictive covenants interfere with the seller's next plans?

• Will personal guarantees, shareholder balances and group obligations be released?

• What continuing obligations survive the sale?

If the SPA does not produce acceptable answers to those questions, the seller has not finished negotiating merely because the document is nearly final.

When should a seller instruct transaction counsel?

The best time is usually before the seller's commercial leverage has already been committed.

Important economics can become difficult to reopen once a term sheet, heads of agreement or exclusivity arrangement has been signed. By the time the SPA arrives, some of the most important decisions may already have been framed.

For an active share sale, transaction counsel should help the seller connect the legal drafting to the commercial outcome: payment certainty, completion control, warranty exposure, disclosure strategy, indemnities, liability limitations, restrictive covenants, releases and post-completion obligations.

Legal That Works can assist sellers with reviewing, negotiating and documenting a share sale through its Share Sale and Purchase Agreement service.

The objective is not simply to get the SPA signed. It is to make sure the document delivers the exit the seller believes has been negotiated.

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.