Explanation of the commonly encountered legal terms.

The country declared independence from the British Empire in 1957
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Accelerated Vesting:  

This is a form of vesting which takes place at a much faster rate – think of it as the Lamborghini of vesting. This allows the option holder to receive the monetary benefit from the option much sooner than usual.

Acceleration Clause:

A contractual provision which stipulates that some or all obligations under a contract become due immediately or before the stipulated time of performance in the event of a default by one party.


Refers to an unconditional agreement to an offer. An offer can be withdrawn by the offering party before any acceptance, but a contract is formed upon an acceptance and will be binding on both parties.

Accredited Investor:

In Malaysia, Accredited Investor means any of the following:

  • Central Bank of Malaysia established under the Central Bank of Malaysia Act 2009.
  • A holder of a Capital Markets Services Licence.
  • An executive director or chief executive officer of a holder of a Capital Markets Services Licence.
  • A unit trust scheme or a prescribed investment scheme.
  • A closed-end fund approved by the Securities Commission of Malaysia.
  • A licensed bank as defined in the Financial Services Act 2013 or a licensed Islamic bank as defined in the Islamic Financial Services Act 2013.
  • A Labuan bank as defined in the Labuan Financial Services and Securities Act 2010.
  • A licensed insurer as defined in the Financial Services Act 2013.
  • An insurance licensee as defined in the Labuan Financial Services and Securities Act 2010.
  • A takaful licensee as defined in the Labuan Islamic Financial Services and Securities Act 2010.
  • A licensed takaful operator as defined in the Islamic Financial Services Act 2013.
  • A private retirement scheme as defined in the Capital Market & Services Act 2007.


The gradual accumulation of an increase in payment obligations at an agreed rate over a period of time.


The process of acquiring all or a controlling portion of equity, and/or all or a substantial part of the assets of a business or company, giving a party control over the business or company.


A court-appointed person to manage the estate of a person who died intestate (i.e. without leaving a valid will) or, if there is a valid will, one who failed to appoint an executor to manage the estate.

Adventure Capitalist:

Similar to a venture capitalist, but more accessible. Adventure Capitalists invest in startups. They are less common than a traditional capitalist and they have less money. However, they tend to take more risk and invest in risky startups. Usually they also play a role in the management of the company.


A written statement made/sworn under oath or affirmation before a Commissioner for Oaths or any other authorised person. Usually prepared for the use as evidence in court


A person appointed to act for and on behalf of someone, i.e. a principal. The level of authority / power given to an agent is subject to the agreement between the agent and the principal.

However, in general practice, unless expressly told, a third party can assume the agent has full powers to act for the principal.


A standalone document to set out the terms of the agreement between the contracting parties, prepared to include specific conditions tailored to suit the needs of the contracting parties. An agreement is sometimes referred to as a contract.


The process of distribution to give an amount or share of a business to someone or some entity.

Allotment of Shares:

The issuance of new shares to the existing shareholders or to third parties.

Alternate Director:

An individual who is appointed by a director of a company to attend a board meeting on his behalf where he (as the principal director) is unable to attend. The appointment is made pursuant to the constitution of the company.


The process of combining two or more companies into a new entity as part of a merger between the companies.


Making changes to an existing written agreement by virtue of adding new provisions and/or removing existing provisions.

Angel Financing:

The money provided by an angel investor to invest it in a startup. That money comes from one’s personal earnings rather than from a common fund.

Angel Fund:

A group of angel investors who collaborate together to invest in startups.

Angel Group:

Thanks to this group, angel investors consolidate their funds, share their expertise and coordinate their investments.

Angel Investor:

In Malaysia, Angel Investor refers to an investor who is a resident in Malaysia and meets one of the following qualifying criteria:

  • a high-net-worth individual whose total net personal assets exceeds RM 3,000,000;
  • a high-net-worth individual who has a gross total annual income exceeding RM 180,000 per annum in the preceding twelve (12) months; or
  • a high-net-worth individual who, jointly with his or her spouse, has a gross total annual income exceeding RM 250,000 per annum in the preceding twelve (12) months.

Anti-Assignment Clause:

A contractual provision which restricts the rights of a contracting party from delegating its contractual obligations to a third party without the consent of the other contracting party/parties.

Anti-Dilution Provision:

Usually found in option, security, or merger contracts, this clause warrants and protects the position of equity holders (investors or shareholders) from events which would cause their equity in a company to become less valuable.

An example of how this is used is by giving equity holder the right to maintain his or her percentage of ownership in a company by buying a proportionate number of shares at a discounted rate in the event of any future issuance of shares.

Anti-Layering Provision:

A provision in a subordinated debt agreement prohibiting the creation of additional debt that is senior to that subordinated debt but junior to the senior debt.

Annual Return:

A yearly statement which gives essential information about a company’s composition, activities, and financial position, and which must be filed by every active incorporated or registered company with the Companies Commission of Malaysia (SSM).


A legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (referred to as the “arbitrators”), by whose decision (referred to as the “award”) they agree to be bound.

Arm’s Length Basis:

Used to describe business transactions between buyers and sellers who act independently and are not affiliated with each other. It is also the case that the transactions are free from collusion and third party pressure or influence.


The transfer of the rights and/or obligations under an existing contract by one party (an ‘assignor’) to another party who is a third party to the contract (an ‘assignee’).


A person who conducts an arbitration and serves as a judge who conducts a “mini-trial”, somewhat less formally than a court trial.


A process which Involves performing procedures in order to obtain audit evidence about the amounts and disclosures in the financial statements of a company.

Authorised Capital:

The registered capital of a company in Malaysia. This is the maximum amount of the share capital in which a Sdn Bhd Company is allowed to issue to its shareholders.


Balance of Probabilities:

The burden of proof in a civil trial. It is also known as preponderance of evidence. The common distinction is made with the burden of proof in a criminal trial, which is beyond a reasonable doubt. In a civil trial, one party’s case is needed only be more probable than the other.

Balance Sheet:

A statement of the assets, liabilities, and capital of a business or other organisation at a particular point in time, detailing the balance of income and expenditure over the preceding period.


This situation occurs when a company cannot pay its debts. Usually it lasts around one year. A company has the possibility to stay in business while it negotiates its debts with its creditors.


A process to measure the success of a startup. It is a goal that a startup needs to achieve. For instance, if a startup succeeds in reaching a certain amount of money for a certain period of time, the startup meets the benchmark. This tool allows the investors to determine if the startup needs more funds or not.

This is of the quality of a business’s policies, products, or strategies. They tend to be used as a comparison to weigh your business against peers.

Beneficial ownership:

Also called “equitable ownership”. Refers to the indirect interest in a property. Agents, under a legal instrument such as a trust, are the registered owners of a property or asset on behalf of its principal. The principal would be the beneficial owner of such a property or asset.

Also refers to companies in a parent-subsidiary company relationship, where the parent company has a beneficial interest over its subsidiaries’ assets.


A person whose benefit property (for e.g. shares in a company or real estate) is held under a trust, will, insurance policy etc.

Best Efforts:

An underwriter, who is usually an investment bank, commits to distribute as much as it can in securities offering. The unsold securities are returned to the company which has issued the shares.

Beyond a Reasonable Doubt:

The burden of proof in a criminal trial, the burden of which is only discharged where there is no other logical explanation which can be derived from the facts except that the defendant committed the crime, thereby overcoming the presumption that a person is innocent until proven guilty.

Blanket lien:

A lien on all of a person’s existing and future assets, giving the lienholder the right to seize in the event of non-payment.

Blind Pool:

A type of limited partnership which doesn’t specify its investment goals. Investors are ‘blind’ in a blind pool and don’t benefit from many safeguards.

Board Meeting:

A board meeting is a formal meeting of the board of directors of a company which is held at regular intervals to discuss major problems and policy issues within the company.

Board of Directors:

A group of individuals elected to represent the shareholders of a company. A board’s mandate is to establish policies for corporate management and oversight, making decisions on major company issues.

Board Resolution:

A way of documenting a significant decision made by a company’s board of directors usually at a board meeting, on behalf of the company.

Boilerplate Clauses:

Such clauses usually appear towards the end of a contract and are incorporated as general or standard contract clauses. Some examples include entire agreement clause, force majeure clause, severability clause, assignment clause and etc.

Bona Fide:

The term means “in good faith” in Latin.


A long-term debt instrument used to raise capital. It is essentially a loan agreement between the issuer of a bond (a party who is seeking financing) and an investor. The investor will purchase the bond(s) from the issuer at a premium, while the bond issuer will be placed under an obligation to pay the investor a specified sum of money at specified future dates.

Bootstrap Startup:

Ever heard the phrase ‘pulling yourself up by your bootstraps?’ This phrase defines what bootstrapping is. It basically means, starting a business with no money — or, at least, very little money.


An act of breaking or failing to observe a law, agreement or code of conduct.

Breach of Contract:

The failure of one party to uphold the terms and/or conditions agreed in a contract.

In Malaysia, the usual remedy for breach of contract is an award of damages. Section 74 to 76 of the Contracts Act 1950 provide the innocent party three types of damages:

  • Compensation for loss or damages caused by breach of contract;
  • Compensation for failure to discharge obligations resembling those created by the contract; and
  • Compensation for breach of contract where a penalty is stipulated for.

Bridge Financing:

A short-term loan used until a person or company secures permanent financing or removes an existing obligation. This type of financing allows the user to meet current obligations by providing immediate cash flow.

Bridge Loan:

A temporary short-term loan.

Broker Dealer:

A broker is a third party that does transactions on securities or assets between buyers and sellers. When a transaction is done, the broker receives a commission.

Burden of Proof:

The duty placed upon a party to prove or disprove a disputed fact.

Burn Rate:

The rate at which the business is spending its investment before generating a positive cash flow.

Business Plan:

A business plan is a written document that describes your business’s objectives, strategies, sales, marketing, and financial forecasts. A business plan helps you to clarify your business idea, spot potential problems (and find potential solutions), set out your goals and measure your progress.


Call on Shares:

The demand made by the company on its shareholders holding partly paid shares to pay part or full unpaid amount on the shares.

Call Option:

Financial contracts that give the option buyer the right, but not the obligation, to buy an asset or instrument at a specified price within a specific time period.

Call Protection:

A contractual provision which prohibits or restricts the early redemption of a debt security.


A contract is generally not enforceable if the parties do not meet the necessary capacity. Thus, “capacity” means the parties must be of legal age and sound mind and are not being coerced into the contract, and that the subject matter of the contract is legal.


Refers to the financial wealth of a company. Typically used to describe the amount of money represented by the shares subscribed by the shareholders. Also used to refer to the financial assets of the company such as funds held in deposit accounts, and also physical assets and facilities such as buildings and manufacturing equipment.


The person presiding over an organised group such as a board or committee. Also used to refer to the appointed person presiding over a meeting.


A form of security as part of a debt payment, by way of mortgaging the assets of a company up until a period of which repayment is secured.


Any type of property other than real property

Circumstantial Evidence:

Evidence that tends to prove a fact by proving other events or circumstances which afford a basis for a reasonable inference of the occurrence of the fact at issue.


The act of requiring a payment previously paid out to be returned.

Clear days:

All the days in a stipulated time frame excluding the commencement date and the end date.

Collateral Contract:

A secondary agreement added to the original contract that is meant to ensure that the pre-contract promises are met.

Common Seal:

A metal stamp for stamping documents with the name of the company to show that they have been approved officially. It refers to the signature of the company to any document on which it is affixed and binds the company for all obligations undertaken in the document.

Company Limited by Guarantee:

A public company incorporated with the principal liability of its members limited by the constitution to such amount as the members undertake to contribute to the assets of the company if the company is wound up.

Company Limited by Shares:

A private company incorporated with the principal liability of its members limited by such an amount that is unpaid on their respectively held shares if the company is wound up.


The concept of exponential growth in value from a principal sum, through the reinvestment of accrued interest or capital gained.

Accumulated interest or capital gained periodically (say weekly, monthly, or yearly) is added to the principal sum invested or owed, and the process is repeated as the principal sum gets bigger and bigger as time goes on, and so does the accumulated interest and capital gained from that sum.

Condition Precedent:

A stipulation that defines certain conditions that must either occur or be met by either party to ensure progress or execution of a contract.

Conditional Contract:

A contract agreement that only requires performance once the delineated conditions are met. It is also called a hypothetical contract.

Confidential Information:

Any information or document that a business or an individual wishes not to make public.

Conflict of Interest:

A conflict of interest occurs when an entity or individual becomes unreliable because of a clash between personal (or self-serving) interests and professional duties or responsibilities.

Connected person:

Generally refers to a family member, or an associated body corporate, trustee of a trust, or partner to which the person relates.


Meeting of the minds (also referred to as mutual agreement, mutual assent or consensus ad idem) is a phrase used to describe the intention of the parties forming the contract. In particular, it refers to a situation where there is a common understanding in the formation of the contract.


Basically giving permission to allow a certain act to proceed. Used in contracts to protect a party’s interest in a matter. Clauses requiring ‘consent’ makes it mandatory for a party’s permission to be sought before the other party or parties can proceed on a matter.


Consideration is needed to form a legally enforceable contract. Usually this is the price paid by one party and the goods or services supplied by another party.

Consolidated Financial Statements:

The financial statements of an entity with multiple divisions or subsidiaries.


A company constitution In Malaysia (previously referred to as Articles and Memorandum of Association) is a legal document recognised by the Companies Act 2016 . It generally specifies the rules governing the relationship and activities of the corporation, its shareholders and directors.

Constructive Dismissal:

An act of an employee in terminating his employment due to a breach of contract committed by the employer. The breach committed must have been so severe that it had altered the essential terms of an employee’s employment contract, leaving the employee no choice but to resign.

Contract for Services:

Such a contract refers to a relationship akin to an agency. Generally, a person engaged via a contract for services is not an employee.

Contract of Service:

An agreement (whether orally or in writing) binding on parties who are commonly referred to as “employer” and “employee”.

Contributory Negligence:

A legal principle that an aggrieved or injured plaintiff may have contributed to his or her injury by being negligent of the obvious and known conditions. Careless driving and driving without using a seat belt are examples of contributory negligence.

Conversion Rights:

A right by which preference shareholders may convert their shares into ordinary shares based on a pre-agreed conversion rate.

Convertible Loan:

A loan which is structured in a way where it automatically converts into equity when a certain trigger event occurs or at maturity.

Corporate Veil:

A legal concept that separates the personality of a corporation from the personalities of its shareholders and protects them from being personally liable for the company’s debts and other obligations.


The other party to a contract. In a contract between A and B, A is the counterparty to B and vice versa.


An agreement by way of deed. Sometimes also used to refer to promises and stipulations in a contract.

Credit Facility:

The provision on financing by a lender (usually a bank) to a borrower. Can be in the form of revolving loans, term loans etc.

Credit Rating:

The rating given by a credit rating agency to a specific debt based on the creditworthiness of the debt issuer.


An entity (person or institution) that extends credit by giving another entity permission to borrow money which is to be repaid in the future.

Criminal Breach of Trust:

A person may be charged with an offence for a criminal breach of trust (CBT) if he dishonestly misappropriates, takes, uses or disposes of any property which he has control over.


The process in which a floating charge converts into a fixed charge when certain events occur.


The examination of a witness who has already testified in order to check or discredit the witness’s testimony, knowledge, or credibility.

Current Liability:

Refers to liabilities of an organisation which would, in the ordinary course of events, be payable within 12 months after the end of the financial year to which accounts or consolidated accounts relate. ]



Monetary compensation that is awarded by a court in a civil action to an innocent party who has been injured through the wrongful conduct of another party.


A situation, typically one involving opposing parties, in which no progress can be made.


A long-term security yielding a fixed rate of interest, issued by a company and secured against assets.

Debt Securities:

Debentures, bonds, notes, loan stocks or any other instrument representing indebtedness, whether secured or not, and whether convertible or not.


A party that owes money to another.


A written instrument, signed and sealed, which passes on an obligation or affirmation that is binding on the person who created it in favour of another. The subject of such an instrument can be an interest, right, or property.

Deed of Adherence:

A document by which a person or entity becomes a party to an existing shareholders’ agreement.


The failure to fulfil an obligation as part of a contract or under the law.

Definitive Agreement:

A document defining the final terms of an agreement between the concerned parties.


The diminution of value of assets or property.


A instrument creating an obligation to pay, with the value of which is dependent on a number of variable factors, making reference to external benchmarks, such as published interest rates, currency exchange rates, or trading prices.

Direct Dismissal:

A situation where an employer decides to end the employment of an employee resulting in dismissal of the employee, usually by way of a formal letter of termination.


A person appointed and authorized to manage and direct the affairs of a company.


The distribution of a portion of a company’s available profits to its shareholders, which will be decided by the board of directors of the company.

Domestic Inquiry:

A part of an internal process conducted by an employer to investigate whether an employee has committed an act of misconduct.

Drag-Along Rights:

A right which allows a majority shareholder to force a minority shareholder to join in the sale of a company. The majority shareholder who is ‘dragging’ the other shareholders must offer the minority shareholders the same price, terms and conditions that the majority shareholder has been offered.


The actual funding of a loan or equity investment released by the bank or investing party, whichever the case may be, when all conditions precedent are satisfied.

Due Diligence:

A thorough examination conducted on the business or a portion thereof in relation to a proposed transaction, looking into amongst other things, its accounts, assets and liabilities.

Duty of Care:

The responsibility or the legal obligation of a person to avoid acts or omissions (which can be reasonably foreseen) to be likely to cause harm to another person(s). ]


Economic Duress:

Wrongful or unlawful conduct that creates fear of economic hardship which prevents the exercise of free will in engaging in a business transaction.

Employee Share Option Scheme (ESOS):

A scheme which may be implemented by a company by way of giving a share option to eligible employees. This, in effect, gives them the contractual right to acquire shares of the company in the future at a pre-determined preferential price, normally referred to as the “offer price” or “exercise price”.

Employees Provident Fund (EPF):

A retirement plan for the private and public sectors in Malaysia, enacted by the Employees Provident Fund (EPF) Act of 1991, intended to help employees save a portion of their salary in the event of retirement, disability, sickness or unemployment.

Employment Contract:

An agreement specifying the terms and conditions under which a person consents to perform certain duties as directed and controlled by an employer in return for an agreed wage or salary.

Employment Insurance System (EIS):

A financial scheme in Malaysia aimed at helping employees who lost their jobs until they find new employment.

Engagement Letter:

The agreement under which a professional or professional firm’s services are retained.


An organisation that is recognised as a legal person in the eyes of the law. This includes partnerships, corporations, and trusts.


Value of an ownership interest in a company, usually in the form of shares.


The engagement of a third party to a transaction to act as an agent to hold important documents, money or property on behalf of the transacting parties in the interim whilst certain conditions precedent in the transaction are completed by the respective parties.

Ex Turpi Causa Non Oritur Actio:

Legal doctrine which states that a plaintiff will be unable to pursue legal remedy if it arises in connection with his own illegal act.

Exempt Private Company:

A private company in the shares of which no beneficial interest is held directly or indirectly by any corporation and which has not more than 20 members none of whom is a corporation.


The signing of the contract by the required parties, finalising the contractual process.

Exemption Clause:

A contractual term by which a party attempts to cut down the scope of its contractual duties or regulates the other parties’ right to damages or other possible remedies for breach of contract.


An attachment to a contract which is usually in the form of another agreement or a document.

Express Terms:

Terms that have been specifically mentioned and agreed by the parties at the time a contract is made. ]


Fair Value:

Estimated price at which an asset can be sold or a liability settled in an orderly transaction to a third party under current market conditions.

Fiduciary Duty:

A legal obligation of one party to act in the best interest of another.

Financial Statements:

Written records that convey the business activities and the financial performance of a company. Financial statements are often audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes. Financial statements may include balance sheet, income statement and cash flow statement.

Financial Year:

A period of twelve months, used by government, business and any other organisation in order to calculate their budgets, profits, and losses.

Fixed Charge:

A security interest over an identifiable real asset of a company that can be ascertained when the charge is/was created.

Fixed-Term Employment Contracts:

Contracts of service for a specified period of time. Case law has interpreted a genuine fixed term contract to be one where “both parties recognize there is no understanding that the contract will be renewed on expiry”.

Floating Charge:

Also known as a floating lien, it is a security interest or lien over a group of non-constant assets.

Force Majeure:

An event or sequence of events beyond a party’s reasonable control (which could not reasonably have been anticipated and avoided by a party) preventing or delaying it from performing its obligations under a contract.


The legal process in which a lender attempts to recover monies owed to him by a defaulting borrower by selling the collateral property as part of the loan, and the proceeds of sale of which is used to satisfy the owed debt.

Foreign Company:

A company doing business outside the jurisdiction it is incorporated.

Fraud / Fraudulent:

The use of unfair, unlawful or wrongful means to achieve a purpose.

Fraudulent Misrepresentation:

A type of misrepresentation where a false statement of fact was made by a person, who was aware that it was false, and such statement caused or induced someone to enter into a contract.


A doctrine which sets aside contracts where an unforeseen event either renders contractual obligations impossible, or radically changes the party’s principal purpose for entering into the contract. ]


General Meeting:

A meeting of a company’s shareholders.

Generally Accepted Accounting Principles:

Self-explanatory really. This refers to the rules of accounting employed by certified public accountants. Also abbreviated as “GAAP”.

Governing Law Provision:

A contractual provision which stipulates which jurisdiction’s law governs the interpretation and enforcement of the said contract, for the avoidance of any doubt.

Grace Period:

A period of time during which a party can cure a breach before it gives rise to a remedy. Also referred to as a “cure period”.

Gross Negligence:

An extreme indifference to or reckless disregard for the safety of others.

Guarantee / Guaranty:

An agreement under which a guarantor agrees to be liable for the payment or performance of the obligations of another.


A person or organisation, whether in the capacity as an individual or a corporation, who provides a guarantee (see above). ]



Information gathered by one person from another person concerning some event, condition or thing of which the first had no direct experience. When submitted as evidence, such statements are called hearsay evidence. Hearsay evidence is generally not accepted in court.

Hedging / Hedge Agreement:

A derivative agreement or instrument that protects against financial risks. Common examples are credit swaps and interest rate swaps.

Hire Purchase:

An arrangement for buying expensive consumer goods, where the purchaser makes an initial down payment and pays the balance in instalments (usually with interest incurred).

Holding Company:

A company established for controlling and managing another company’s investment policies and assets. A holding company in Malaysia is a type of company that does not offer any services, nor produce any goods on its own ]


Implied Terms:

Words or provisions that a court assumes were intended to be included in a contract.

In arrears:

Refers to the payment accrued over time that is due and payable at the end of such a period.


The successful registration of a body corporate with the relevant authorisation body. In Malaysia, a company is incorporated upon the issue of a Notice of Registration (‘NOR’) by the Registrar of Companies, in which a unique registration number is assigned to the body corporate. An incorporated body exists from the date of the NOR and has the capacity to sue and be sued and carry out functions as a separate legal entity.


Also more commonly known simply as “debt”. Refers to the liability of owing money and arrears, which include borrowings, all debt instruments, and even letters of credit.


A comprehensive form of insurance compensation for damages or loss, and in the legal sense, it may also refer to an exemption from liability for damages.

Independent Contractor:

A person or entity contracted to perform work for, or provide services to, another entity as a non-employee.

Initial Public Offering (IPO):

A process of a company (which is not yet listed on the stock exchange) seeking to offer its shares to the general public, and have its shares listed on a stock exchange. Such a process is highly regulated by the Securities Commission of Malaysia and Bursa Malaysia Securities Berhad.


A judicial order restraining a person from beginning or continuing an action threatening or invading the legal right of another or compelling a person to carry out a certain act.

Innocent Misrepresentation:

A misrepresentation made by someone who had reasonable grounds for believing that his false statement was true.


A situation in which an individual or a company is not able to pay off his or its bills and debts.

Integration Clause:

A contractual provision which states that the agreement represents the entire agreement between the parties and its purpose is to supersede prior and contemporaneous agreements thereby not included in the written contract.

Intellectual Property:

Some examples of intellectual property include patents, trademarks, copyright, industrial designs and other similar rights. The rights are “intellectual” in the sense that they protect intangible subjects, usually arising out of some form of human creativity. These rights are “property” in the sense that they are based on the legal right to exclude others from using the property and the exclusive legal right to transfer ownership.

Intention to Create Legal Relations:

The intention of the parties to enter into a legally binding arrangement in which the rights and obligations of the agreement are enforceable.

Interest Rate:

The rate of interest to be paid on top of the outstanding principal amount (which can be a loan or any debt obligation) as part of repayment of the said loan or financing. The rates can be fixed, which don’t change over time, or it can be floating, which will depend on the prescribed market rates as agreed.

Invitation to Treat:

A mere declaration of willingness to enter into negotiations. It is not an offer and cannot be accepted so as to form a binding contract.

Involuntary Dissolution:

A forced dissolution of the legal existence of a company pursuant to administrative or judicial proceeding rather than being voluntarily decided by the company.

Issued Share Capital:

The number of authorised shares that a company has issued to its shareholders. The shares to be issued shall not exceed the number of authorised share capital.


A party that issues debt or equity securities.


Joint and Several Liability:

A contractual arrangement whereby two or more parties are each responsible for the same obligation under the contract.

Joint Venture:

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.

Judicial Management:

A method of debt restructuring where an independent judicial manager is appointed to manage the affairs, business and property of a company under financial distress. The company is also temporarily shielded from legal proceedings by third parties, giving it the opportunity to rehabilitate.

Judicial Notice:

A doctrine which enables a judge to accept a fact without the need of a party to prove it through evidence.

Judicial Precedent:

A process whereby judges follow previously decided cases where the facts are of sufficient similarity.



The agreement by which the rightful and legal owner of a property (the ‘lessor’) grants the right of use and/or possession of the said property to another party (the ‘lessee’).

Leases are usually held in the longer term (more than 3 years in Malaysia), while tenancies, operating under the same concept, are for short-term ownership (less than 3 years in Malaysia).

Legal Due Diligence:

The process of collecting, understanding and assessing all the legal risks associated during a merger and acquisition process. During this process, the acquirer often reviews all the documents pertaining to a target company for the purpose of understanding whether there will be any future legal problems.

Letter of Credit:

Commonly used in international trade, or large construction projects which involves advance payment of large sums of money to protect the seller’s or buyer’s interest.

This involves at least three (3) parties: the issuing bank, the account party (holding an account with the issuing bank), and the creditor of the accounting party (usually another bank, and also usually one that is overseas).

In certain prescribed conditions, where the account party is unable to directly pay its creditor, a Letter of Credit is authorised and issued by the issuing bank on behalf of the account party to guarantee payment in favour of the creditor.

Letter of Intent:

A document to facilitate the start of a business deal or project between the parties involved by identifying the key business and contractual understandings that will form the basis of the final contract.


An official document that gives you permission to own, do or use something, usually after you have paid a fee and/or taken a certain test.


An official order that allows someone to keep the property of a person who owes them money until it has been paid.

Limited Company:

The most common type of private companies. It is a company incorporated which is limited by shares or by guarantee. The shareholders or members of the company has limited liability, restricted to the value of the paid-up share capital of the company.

Limited Liability Partnership:

An alternative business vehicle to carry out business which combines the characteristics of a private company and a conventional partnership. LLP provides limited liability status to its partners and offers the flexibility of internal arrangement through an agreement between the partners.

Liquidated Damages:

Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. Such damages are meant as a fair representation of losses in situations where actual damages are difficult to ascertain. A liquidated damages clause must represent a genuine estimate of the damages.


The process of bringing a company business to an end and distributing its assets to the creditors.


A person appointed to wind up the affairs of a company.

Lis Pendens:

An official notice to the public that a lawsuit involving a claim on a property has been filed.

Listed Company:

A company whose shares are listed (quoted) on a stock exchange for public trading.


Majority Shareholder:

A shareholder in a company who holds more than fifty per cent. of the company’s shares and has the voting control of the company.

Mala Fide:

Means “in bad faith” in Latin.

Material Adverse Clause / Effect:

A term used to modify contract provisions in the event that a particular scenario, act, or circumstance occurs, and causes both material and adverse effects to a party or parties’ position under a contract.

A situation which is material and adverse basically means one which puts a party at a major disadvantage not initially intended under the contract, or one which renders the original purpose of the contract to be impossible or not worthwhile to carry out.


Refers to the final payment date of a loan or other financial instrument in which all that owed (the principal amount including any interest payable) becomes due to be paid.


A form of alternative dispute resolution (ADR) in which the parties to a lawsuit meet with a neutral third-party in an effort to settle the case.


Owner of a company. It is also referred to as a “shareholder”.

Memorandum of Understanding:

An agreement between two or more parties outlined in a formal document. It is not a legally binding document but indicates the intention of the concerned parties to move forward with a contract.

Merger & Acquisition (M&A):

The acts of consolidating companies or assets for the aim of stimulating growth, gaining competitive advantages, increasing market share or influencing supply chains. A merger describes two companies uniting, where one of the companies ceases to exist after becoming absorbed by the other. An acquisition occurs when one company obtains a majority stake in the target firm, which retains its name and legal structure.


Minutes are the written records of transactions taken or authorised by the board of directors or shareholders of a company.


A false statement of a material fact made by one party which affects the other party’s decision in agreeing to a contract. If the misrepresentation is discovered, the contract can be declared void and, depending on the situation, the adversely impacted party may seek damages.


A temporary prohibition of an activity for an agreed amount of time.


In money lending situations, an agreement by which a lien or charge on a borrower’s real properties is granted in favour of the lender (the creditor) and is so held until the satisfaction of the debt. The borrower in this case is the ‘mortgagor’ and the lending institution (usually a bank) is the ‘mortgagee’.

Mutatis Mutandis:

In simple terms, making the necessary alterations and/or modifications whilst preserving the original meaning of a phrase or provision adopted from another source.

Commonly used in contracts where a provision from another contract is being incorporated by reference, this phrase is used to indicate that the provision is modified as necessary to fit the context in which it is being used.


Natural Person:

An individual, and not a legal entity, body or organisation.

Negative Covenant:

As the name indicates, a covenant is the promise of taking a certain action or inaction. Negative refers to the opposite of doing that. Therefore, this is a contractual promise not to do something.

Negative Pledge:

A type of negative covenant, a negative pledge usually is the agreement by a borrower not to pledge (i.e. charge) any of its assets to other parties in view of protecting its lender’s security.


A failure to behave with the level of care that someone of ordinary prudence would have exercised under the same circumstances.

Negligent Misrepresentation:

A type of misrepresentation in which someone makes a statement without regard to the true facts.


The balance sum remaining after deducting other amounts. The amount before any such deduction is called the “gross amount”.

Non Est Factum:

A plea that a written agreement is invalid because a party was mistaken about its character when signing it.

Notice of Demand:

A formal notice demanding a party to perform an alleged legal obligation such as rectifying an issue, paying a sum of money or acting on a contractual commitment.

Novation Agreement:

A legal instrument that formalises an arrangement to substitute one party for another in a contract ]


Obligor / Obligee:

A person who owes a certain payment or performance (the ‘obligor’) to another party (the ‘obligee’)


An explicit proposal to contract which, if accepted, completes the contract and binds both the party that made the offer and the party accepting the offer to the terms of the contract.

Official Receiver:

The Official Receiver of Malaysia acts as the default liquidator in any liquidation where a private liquidator is not appointed and is ultimately responsible for supervising all private liquidators.


In relation to a corporation, under the Companies Act 2016, an officer generally refers to and includes the director, secretary, manager, or any other person appointed by a corporation to hold executive functions and capacity.

Oral Agreement:

A type of contract that is outlined and agreed upon by way of spoken communication, but not put into writing. Although it can be difficult to prove the terms of an oral contract in the event of a breach, this type of contract is legally binding.

Ordinary Shares:

Generally shares which give the shareholder a right to attend, participate and speak at a shareholders’ meeting, a right to vote on shareholders’ resolutions, and to participate equally in any dividends or surplus profits/assets (after preference shareholders are paid). ]


Paid-Up Capital:

The actual amount of funds/capital injected into a company by the shareholder(s), usually in exchange for shares in the Company. The said funds may then be utilised for the day to day operations of the company to pay salaries, debts and other expenses.

Parent Company:

A company that has a controlling interest in another company, giving it control of its operations.

Parri Passu:

A term that indicates that two or more claims against a single obligor has the same level of priority.


A relation which subsists between persons or entities carrying on business in common with a view of profit.

Payment in Kind:

A feature of a security whereby dividends (for equity investments) or interest payable (in debt instruments) to the creditor is paid in the form of additional securities of the same type (i.e. shares or bonds) rather than in cash. Also commonly abbreviated as ‘PIK’.

Per Annum:

Per year. A common term used to denote rates of interest. For example, let’s say the interest rate of a loan facility is 5% per annum, which basically means that the amount of interest payable at the end of every year is the 5% of the loan facility amount.

Per se.:

By or in itself.


The steps taken to comply with legal and regulatory requirements (for example the filing of forms, or the lodgement of certain documents) to render an agreement or contract entered into enforceable in the eyes of the law.

Performance Bond:

A bond issued by one party to another party as a guarantee against the failure to meet obligations specified in the contract. It is also referred to as a contract bond.

Perpetual Succession:

Continuation of a company’s existence, unaffected by the death of any of its members or the transfer of its shares to a new entity.

Power of Attorney:

An legal instrument in which the executing party (the ‘donor’) of such an instrument granting/authorises a named person (the ‘attorney’) rights and powers stipulated under the instrument, which usually includes the right to act on behalf of the executing party. This instrument must be lodged with the courts for it to have legal binding effect.


An existing document (can be a form or an agreement) which is used as reference and as the starting point of drafting a new form or agreement.

Pre-Emptive Rights:

A right which allows the shareholders of a company to buy additional shares in any future issue of the company’s shares before the shares are offered to any third party. Such right is sometimes called an “anti-dilution provision.” It gives the shareholders the option of maintaining a certain percentage of ownership of the company as it grows.

Preference Shares:

Shares which do not entitle the holder to a right to vote or to participate beyond a specific amount in distribution of dividend, redemption or winding up. Preference shares can have both equity and debt characteristics, favoured by investors who have different priorities and interests to safeguard.


The price of an item or interest which is higher than its face value.


The payment of all or part of a loan or debt security before the maturity date where such repayment is due. Can be optional or mandatory depending on what was stipulated in the contract, and whether there was any event of default.


The status of one security or one creditor having a claim against a common obligor that ranks higher in preference and superiority over other securities or creditors.

Private Limited Company:

A private limited company by shareholding is known asSendirianBerhad(SdnBhd) Company in Malaysia. This type of company is a separate legal entity from its owners, which means such company is considered as a legal ‘person’ that can buy or sell property, present into legal contracts, sue or get sued in courts of law.

Privity of Contract:

A relationship between the parties to a contract which allows them to sue each other but prevents a third party from doing so. The purpose of this doctrine is to prevent any person from seeking the enforcement of a contract, or suing on its terms, unless they are a party to that contract.

Pro Forma:

A financial statement that is so adjusted to reflect an event or transaction that was otherwise not taken into account.


A calculated estimate of the financial condition and performance of a company or business at a future time or date.

Promissory Note:

A signed document containing a written promise by a party (a ‘payor’) to pay a specified sum to the holder of such a note (the ‘payee’) at a specified date or on demand of the holder.


A company promoter is a person who does the preliminary work incidental to the formation of a company including its incorporation and soliciting people to invest in the company.

Pro Rata:

The apportionment based on relative amounts. Other words used to express this are, ‘ratably’ and ‘ratable’.


A formal document that provides details about an investment offering for sale to the public.


The authority given to a person to represent or act for someone else, such as voting on behalf another.


A clause that contains an exception to the concept it follows. The words ‘provided that’ are commonly used to reflect this.

Public Company:

A company whose ownership is distributed amongst general public shareholders where its shares are traded freely on a public stock exchange.

Put Option:

A contract which gives a person the right, but not the obligation, to sell a specified amount of an underlying security at a pre-determined price within a specified time frame.


Quantum Meruit:

A doctrine which determines the amount to be paid for services when no contract exists or when there is doubt as to the amount due for the work performed but done under circumstances when payment could be expected.


The minimum number of members of a corporation that must be present at any of its meetings to make the proceedings of that meeting valid.


Record Date:

This is the cut-off date established by a company to determine which shareholders are eligible to vote at a meeting, receive dividends or participate in any corporate action.


The introductory paragraphs of an agreement which usually describes the parties and the circumstances leading up to the transaction. Also known as the ‘whereas’ clause, or the ‘preamble’.

Redeemable Shares:

Shares that are issued by the company on the terms that the shares may be redeemed in some future date at the company’s option or subject to the terms of issue.


To finance something (i.e. to take a loan or mortgage) again, but with new terms at lower rates of interest. The proceeds of this financing is used to satisfy or terminate an existing financing. The benefit of this is two-fold, you repay the loan or mortgage at a lower rate of interest, and potentially even extend the period of which you are servicing that loan or mortgage.

Registered Office:

Every company in Malaysia needs to have a registered office in Malaysia where all communications and notices may be addressed and to store the company’s statutory documents and statutory books and files.


The Chief Executive Officer of the Company Commission of Malaysia shall be the Registrar and the Registrars’ powers are laid down in Section 20A Companies Commission of Malaysia Act 2001.


Regulations are administrative rules made and maintained by the authority which have the force and effect of laws. According to Section 613 (2) of the Companies Act 2016, any act or omission in contravention of the regulations will result in a penalty of fine not exceeding five hundred thousand ringgit or imprisonment for a term not exceeding three years or to both.


Returning a company that has its name struck off, to the register.

In accordance to Section 555 of the Companies Act 2016, any aggrieved person may apply to the Court within seven (7) years after the name of the company has been struck off, to reinstate the name of the company into the register.

Related Corporation:

Under Section 7 of the Companies Act 2016, related corporation means:-

  • it is a holding company of another corporation;
  • it is a subsidiary of another corporation; or
  • it is a subsidiary of the holding company of another corporation.


The transfer of funds to by a party to another.


In contractual terms, it refers to the statements of fact made by one party to another party, inducing that other party to rely on that statement and act upon it.


A document that documents the actions and decisions made by the company’s board of directors.

Retained Earnings:

Retained earnings are accumulated net income retained by the company that is not distributed to the shareholders after it has paid out dividends to its shareholders. Retained earnings are used either in reinvesting in the business or kept as a reserve for a specific objective of the corporation.


It is a form of dismissal that is justified on the basis that the roles of employees have appeared redundant. Hence, the proof of redundancy is required for retrenchment exercise to be valid and carried out.


The income that is generated from the sale of goods or services related to the corporation’s primary operations before any costs or expenses deduction.

Reverse Takeover/Back Door Listing:

An acquisition of a public company by a private company by transferring over 50 percent of its shares to the private company. The objective of a reverse takeover is that the private company can bypass the complex IPO process.

Revolving Loan:

A type of loan facility granted by financial institutions (i.e. banks) which enables the borrower to borrow, repay, and reborrow sums of money up to the prescribed limit.

Right of First Refusal:

A contractual right which the seller must give to the party (such as an existing shareholder) an opportunity to match (within a specified timeframe) a price at which a third party agrees to buy a specified asset (typically number of shares), on the same terms offered to the third party.


A payment made by a licensee to the licensor as part of a license agreement. Commonly used in franchise agreements. Royalties are usually part of the profits of the franchisee’s business as sort of a repayment for the use of the franchisor’s brand, product or system. ]


Second-Tier Subsidiary:

A subsidiary of a subsidiary (see below).

Secured Party/Creditor:

Refers to a creditor (i.e. a lender), generally a bank or other asset-based lender, which holds a fixed or floating charge over the assets of a company/business as security for the repayment of the company’s/business’ debt. In the event of insolvency or bankruptcy of the said company or business, the recovered money in respect of the sale of the specific charged property will be made in favour of the ‘secured creditor’.

Security Interest:

A conditional interest in the personal property of a debtor who grants/charges it in favour of a creditor to secure repayment of a debt obligation. In the event of a default by the debtor, depending on what was agreed, the creditor usually has the right to sell the property and use the proceeds to satisfy the debt.


It has the meaning assigned to it in the Capital Markets and Services Act 2007:-

  • debentures, stocks or bonds issued or proposed to be issued by any government;
  • shares in or debentures of, a body corporate or an unincorporated body;
  • units in a unit trust scheme or prescribed investments; or
  • any right, option or interest in respect thereof.

Securities Commission:

A statutory body entrusted with the responsibility of regulating and systematically developing the capital markets in Malaysia.


A provision allowing debts and obligations to be cancelled out against each other. For example, Ali is owed a certain amount of money by Bob, but at the same time owes Bob some money as well. This provision allows the difference between the amounts owed to each other to be “set-off”.

This provision is usually used in loan agreements where the Banks reserve the right recover debts owed to it by a borrower from a deposit account placed by the borrower at an earlier date.

Severance Agreement:

An agreement entered between an employer seeking to terminate the contract of an employee on a no-fault basis. This agreement usually provides for benefits and a healthy compensation to the employee. Often referred to as a “golden parachute”.


The unit into which the ownership interest in a corporation is divided.


An individual or institution or company that owns at least one share in a corporation.

Share Purchase Agreement:

A share purchase agreement is an agreement between the shareholders and the corporation to regulate the terms of the transfer and sale of corporate shares.

Side Letter/Agreement:

An agreement that is intended to modify or supplement a main agreement that is entered into at the same time. This is a separate agreement. The terms in this side letter/agreement is unenforceable if the main agreement contains an integration clause (see above).

Sole Proprietorship:

It is a business wholly owned by a single individual using personal name as per his/her identity name or trade name.

Special Purpose Entity/Vehicle:

An entity, usually a corporation, which is set up to conduct specific activities. It is usually limited by contract or its constitution to conduct other business/activities except for the specified activity.

Special Resolution:

A resolution passed by a majority of not less than 75% of the members entitled to vote at a general meeting, whether in person, or through proxies where required and allowed.


Statutes are laws passed by the Parliament or the Legislature of a State.

Stock Exchange / Market:

An organised and regulated financial market where securities are bought and sold.


Mostly used in insurance. Insurance carriers reserve the legal right to make a claim against a third party that caused an insurance loss to the insured.

For example: Ali’s car is insured by Bob’s Insurance Company (BIC). Ali gets into a car accident with Damien. Damien was the one who crashed into Ali’s car, and it was entirely Damien’s fault. Because Ali’s car is insured by BIC, Ali makes a claim from BIC for the repair of his car. BIC has the legal right to claim the monies paid to Ali from either Damien personally or Damien’s insurance provider (if he has one) as it was Damien’s fault which caused the accident.


Persons who agree under specific conditions to purchase shares in a corporation.

Subscription Agreement:

It is an agreement executed between a subscriber and the company to subscribe to the company’s shares. It usually details all the information about the transaction, such as the number of shares and the price, and confidentiality provisions.


Under Section 4 of the Companies Act 2016, a corporation that is either wholly owned or controlled by another company through the ownership of a majority of its shares (i.e. more than half of the issued share capital) by the holding company or the holding company controls the composition of the board of directors of the corporation.

Substantial Shareholder:

A person who has a substantial shareholding in a company is someone who has an interest or interests in one or more voting shares in the company and the nominal amount of that share, or the aggregate of the nominal amounts of those shares, is not less than 5% of the aggregate of the nominal amount of all the voting shares in the company.

Syndication / Syndicated Loan:

The process of which a loan or investment is taken part by a group of lending institutions or investors (a ‘syndicate’). A syndicated loan, usually involving big sums of money, is where a group of lending banks provide financing to the lender on an agreed pro rated basis. ]


Tag-along Rights:

Tag-along rights are contractual obligations that protect the minority shareholder. In the event the majority shareholder sells his portion of shares, the minority shareholders may exercise their tag-along rights to sell their minority portion of shares in the company.


A merger, acquisition or other change in the controlling interest of a corporation.

Target Company:

A company that is the subject of an attempted acquisition by a potential buyer.

Term Sheet:

A summary of the terms outlining a proposed transaction, usually attached to a letter of intent (see above) or commitment letter.

Ticking Fee:

Fee paid for a financing commitment usually accrued at a rate per annum prior to finalisation of the deal.

Title Search:

A search being conducted on a piece of real estate against governmental records, which displays information pertaining to that piece of real estate, and includes, among other things, the name of its owners, the size of the property, and any encumbrances or adverse claims lodged against it.


A tort is any wrongful act or omission to act which has caused harm or damage and amounts to a civil wrong, of which courts will impose liability.


Trademark is a type of intellectual property consisting of words or marks that distinctively indicates the ownership of a product or service. Trademark protection in Malaysia is governed by the Trademarks Act 2019.


Used to refer to a portion of a loan, usually used to distinguish different loan facilities under the same loan agreement.


In a non-legal context, this refers to the passing of an item from one hand to another.

In the legal context, this includes the transfer of legal title that comes along with that ‘item’ that is passed on, which includes real property, rights and shares.

Treasury Shares:

The shares in which a company keeps in its own treasury, under the name of the company and not held by individual or corporate shareholders. These treasury stock may have come from the repurchase or buyback for its shareholders.

These shares do not pay dividends, have no voting rights prescribed to them, and are not included in shares outstanding calculations. ]


Uberrimae Fidei:

A Latin word which means ‘of utmost good faith’.

Ultra Vires:

Refers to an act which is performed outside the authorised powers conferred upon an officer of a relevant body, a corporation or an organisation. These powers can be conferred either through statutory provision, authorisation by the Board of Directors or relevant authority, or listed in a company’s constitution.


Underwriter is a company that helps corporations to introduce their new securities to the stock market.

Undischarged Bankrupt:

A person who is a bankrupt under bankruptcy laws and provision, and is yet to be discharged and remains a bankrupt.

Unlimited Company:

A company that is founded and incorporated on the basis that there would be no limit as to the liabilities of its members/shareholders.

Unregistered Company:

In the Malaysian context, refers to a company or corporate body which is not registered under the Companies Act 1965 or Companies Act 2016. This includes foreign companies or partnerships. ]



An analytical process in determining the value or worth of an asset or a company.


The seller in a business transaction involving goods.

Vertical Market:

It means a market for a good or service which is confined to a specific demographic, generally do not serve the broader market.

Voting Share:

Voting shares are shares that give the shareholders the right to vote on the corporate policy making as well as those who will compose the members of the board of directors in the corporation.



The agreement by a party to give up his/her contractual right of enforcement on a matter pertaining to a contract or agreement.

Wholly-owned subsidiary:

Under Section 6 of the Companies Act 2016, a wholly-owned subsidiary means its only shareholder is a corporation or it is a wholly-owned subsidiary of another corporation.

Winding Up:

Winding up is the process of dissolving a company. The winding up of a company can be effected either by way of an order made by the Court or by way of a voluntary winding up

Responsibilities of Executor:

  • Apply for and extract the grant of probate.
  • Make arrangements for the funeral of the deceased.
  • Collect and make an accurate inventory of the deceased’s assets.
  • Settling the debts and obligations of the deceased.
  • Distributing the assets.

Note for Digital Executor:
If you wish to leave your digital assets to certain people in your Will, there are important steps that need to be taken to ensure that your wishes can be carried out:

  • Keep a note of specific instructions on how to access your username and password of your digital asset.
  • You are advised to store these private and confidential information in a USB stick, password management tool or write them down.
  • Please inform your executor or a trusted person of the whereabouts of the tools so that they will have access to your digital asset.