“We own the company 50–50. What happens when we stop agreeing?”

Two friends decide to start a business.

One handles sales. The other manages operations. They invest the same amount and each takes 50% of the shares in a Sdn. Bhd.

It feels fair.

“We’ve known each other for years. If anything comes up, we’ll discuss it.”

For the first year, that works. Then the business starts making money.

One wants to open another outlet. The other wants to keep the cash. One believes both founders should receive higher salaries. The other thinks they should hire more staff first.

Eventually, one says, “If you don’t agree, I’ll just proceed myself.”

Can they?

1. Owning half the company does not give you the final say.

Share ownership and authority to manage a company are different things.

Under the Companies Act 2016, the company’s business and affairs are generally managed by, or under the direction of, its board. Some decisions require shareholder approval. The company’s constitution, if any, and existing arrangements also need to be checked.

So, before asking who owns more shares, ask who has authority to make that particular decision.

Can one director approve the expenditure? Does it require a board resolution? Have certain decisions been reserved for both shareholders’ approval?

A 50–50 split does not automatically mean every disagreement stops the business. But where a necessary approval cannot be obtained, the company may become stuck.

2. “We registered the company. Doesn’t that cover everything?”

Registration establishes the company. It does not settle every arrangement between its founders.

For example, what happens if one founder stops working in the business but wants to keep all their shares?

What if the company needs another RM100,000 and only one founder can contribute?

If one wants to leave, must the other buy their shares? At what price?

These are matters the founders should agree on and record. Leaving them unanswered can turn an ordinary business disagreement into a dispute about what each person was supposedly promised.

3. This is where a shareholders’ agreement helps.

A shareholders’ agreement records the agreed rules between the shareholders. It should reflect how the business actually operates and work alongside the company’s constitution and applicable law.

For the two founders in our example, useful provisions would address:-

• Responsibilities: What is each founder expected to do, and how will their remuneration be approved?

• Major decisions: Which matters require both shareholders’ agreement, such as borrowing, expansion or bringing in an investor?

• Further funding: Will additional money be a loan or an investment for more shares? What happens if one founder cannot contribute?

• Unresolved disagreements: Who must meet, within what period, and when should mediation or an exit process begin?

• Leaving the business: Who may buy the departing founder’s shares, how will the price be determined, and when must payment be made?

The details matter. A clause saying “the parties shall resolve disputes amicably” gives little practical direction when they have already stopped speaking.

4. “If things go wrong, I’ll just take back my investment.”

That depends on how the money went into the company.

Money paid for shares is different from money lent to the company. Leaving the business does not, by itself, entitle a shareholder to demand repayment of their original investment.

The company also has its own legal identity. Its bank balance is not automatically available for either founder to withdraw as their personal share.

An exit arrangement therefore needs to deal with more than the share price. Outstanding shareholder loans, payment terms and any personal guarantees may also need attention. Selling your shares does not necessarily release you from a guarantee given to the bank.

5. “If things go wrong, I’ll just take back my investment.”

That depends on how the money went into the company.

Money paid for shares is different from money lent to the company. Leaving the business does not, by itself, entitle a shareholder to demand repayment of their original investment.

The company also has its own legal identity. Its bank balance is not automatically available for either founder to withdraw as their personal share.

An exit arrangement therefore needs to deal with more than the share price. Outstanding shareholder loans, payment terms and any personal guarantees may also need attention. Selling your shares does not necessarily release you from a guarantee given to the bank.