Why Early Documents Matter
We Have Read That Term Sheet Before
Most Malaysian founders do not come to us when things are going well. They come when an investor's lawyer has sent through a subscription agreement with liquidation preference terms nobody explained. When a co-founder is leaving and there is no vesting. When diligence turns up an option pool that was promised in a WhatsApp message and never constituted. None of that is unusual, and none of it means you did anything stupid. All of it is far cheaper to fix before the round than during it.
How We Support Founders
From incorporation to your next round.
Incorporation and constitution, founder and shareholders agreements with vesting that actually works, cap table structuring, employee share scheme documentation, convertible notes and SAFEs, term sheet review, subscription agreements, and the investor readiness work that stops diligence from stalling a round.
Choose Where You Are Now
Select the service that fits your stage.
Incorporating, hiring, raising or exiting. Pick the one that matches where you are and we will take it from there.
Malaysian startups hit legal problems in a fairly predictable order: an undocumented founder arrangement, an employee share scheme promised but never constituted, and then a fundraise where diligence surfaces both at once. The company itself is governed by the Companies Act 2016. The moment you raise beyond a small circle, the Capital Markets and Services Act 2007 and the Securities Commission's rules come into play.
What documents should a startup have before its first raise?
Fewer than founders expect, but all of them properly done.
Document | What it prevents |
|---|---|
Constitution | Defaulting to statutory positions that do not match what the founders agreed |
Founders / shareholders agreement | A co-founder leaving in month eight with full equity and no vesting |
IP assignment from founders and contractors | Core IP sitting personally with someone who is no longer involved |
Employment and contractor agreements | Misclassification, and confidentiality that was never actually agreed |
Statutory registers and resolutions | A cap table that cannot be reconciled to the register of members |
ESOS documentation | Options promised in messages, with no scheme, pool or exercise mechanics |
How is startup fundraising regulated in Malaysia?
The Companies Act 2016 governs how shares are allotted, what the constitution can do, and directors' duties in approving a raise. Offering securities more widely is regulated under the Capital Markets and Services Act 2007, administered by the Securities Commission Malaysia.
Equity crowdfunding platforms operate as recognised market operators registered with the SC under its Guidelines on Recognized Markets. Only locally incorporated private companies — excluding exempt private companies — and limited liability partnerships may raise on them, and both issuer fundraising limits and investor investment limits apply. Those limits are set by the SC's guidelines and are revised from time to time, so confirm the current figures before you structure a campaign. Bursa Malaysia's LEAP Market is a separate route aimed at sophisticated investors. Our guide to ECF fundraising in Malaysia walks through the process.
What does a founders or shareholders agreement need to cover?
Vesting and a cliff, first — including reverse vesting on shares already issued, which is the part founders most often miss. Then IP assignment, defined roles and time commitment, reserved matters requiring investor or unanimous consent, transfer restrictions and rights of first refusal, drag-along and tag-along, good leaver and bad leaver treatment, deadlock resolution, and a deed of adherence so new investors join on the same terms.
Our guides on key clauses in a shareholders agreement and shareholder agreements for Malaysian founders cover each of these.
What actually stalls a round at diligence?
Rarely the business. Usually the paperwork: statutory registers that were never maintained, IP owned personally by a founder or by a freelance developer who never signed an assignment, an ESOP referenced in the deck but never constituted, employees engaged as contractors on employment-like terms, customer relationships running on purchase orders with no signed contract, and no personal data handling framework in a product that collects personal data. Each one is fixable. Fixing them while an investor's lawyer waits is where founders lose both leverage and time.
Frequently Asked Questions
Do we need a shareholders agreement if we already have a constitution?
They do different jobs. The constitution is a public document governing the company's internal rules. A shareholders agreement is private and governs the relationship between the shareholders — vesting, leaver terms, veto rights and exit. Most startups need both, drafted so they do not contradict each other.
Can a Malaysian startup use a SAFE or convertible note?
Both instruments are used in the Malaysian market, but they must be drafted against the Companies Act 2016 and the company's constitution rather than adopted wholesale from a foreign template. Conversion mechanics, valuation caps and discount interaction all need to work under Malaysian company law.
When should we set up an ESOP?
Before you promise options, not after. Constituting a scheme properly — pool size, vesting, exercise price, leaver treatment and the corporate approvals — is straightforward in advance and awkward once expectations have already been set informally.
Where to start
If you are setting up, begin with company incorporation and structuring and a shareholders agreement for startups. If a term sheet has landed, see term sheet review and negotiation. If you are preparing to raise, an investor readiness legal audit is the cheapest hour you will spend. For ongoing cover, look at the startup counsel programme.
This page is general information about Malaysian law and does not constitute legal advice. Regulatory limits and guidelines change. Confirm the current position before acting on any part of it.
