One of the most common questions business owners ask us when negotiating a deal is:
“Do I pay for these legal fees, or does the other party?”
Below, we clarify standard practices for legal fees, stamp duties, and Capital Gains Tax (CGT) for corporate transactions in Malaysia, be it purchasing a company, selling a factory, or securing Series A investment.
Summary
To help you budget, here is the standard cost allocation for Malaysian deals:
| Item | Responsible Party | Market Practice Notes |
| Buyer’s Legal Fees | Buyer | Fees are negotiable. Typically each party pays their own. |
| Seller’s Legal Fees | Seller | Fees are negotiable. Typically each party pays their own. |
| Stamp Duty (Shares) | Buyer | 0.3% on the higher of Price or Value. |
| Stamp Duty (Assets) | Buyer | 1% – 4% tiered rate on Land, Goodwill & Receivables. |
| Capital Gains Tax (Shares) | Seller (Corporate) | 10% on net profit from selling unlisted shares. Individual sellers are exempted. |
| RPGT (Real Property) | Seller | Tax on profit from real property disposal. |
| Due Diligence | Buyer | Costs for financial/legal audits and SSM searches. |
The separate representation rule
The “golden rule” in Malaysian corporate law is strictly enforced: Each party must bear their own legal fees.
Unlike standard housing loan transactions where the borrower might absorb all costs, in business acquisitions (Share Sales or Asset Sales), the legal representation is strictly separate.
Can we use one lawyer to save money?
No. Under the Solicitors’ Remuneration Order and Bar Council rulings, a lawyer is generally prohibited from acting for both the buyer and seller in a transaction as interests are in clear conflict:
- the buyer’s lawyer focuses on due diligence and adding warranties to protect the buyer
- the seller’s lawyer focuses on limiting liability and ensuring the purchase price is paid
If we represent you as a buyer, our job often means pushing back against the seller’s warranties or indemnity caps, and we can’t fight for you while also billing them!
Who pays tax (stamp duty & CGT)
The tax burden depends on what you are selling and who is selling it.
- Stamp Duty (The Buyer’s Cost):
- Share Sale: Buyer pays 0.3% duty on the share transfer form
- Asset Sale: Buyer pays 1% – 4% duty on assets (land, goodwill, IP)
- Capital Gains Tax (The Corporate Seller’s Cost):
- Share Sale: As of 2024, Companies, LLPs, and Trust Bodies are liable for capital gains tax on the disposal of unlisted shares
- Exemption: Individual sellers are exempt from this tax
- RPGT (The Property Seller’s Cost):
- Asset Sale: If the assets include real property (land/factory), the seller (individual or company) pays real property gains tax
The investor fees exception
If you are raising capital, you will encounter a conflict between market practice and Malaysian company law.
While investors expect the company (you) to reimburse their legal fees for due diligence and drafting the Subscription Agreement, Section 123 of the Companies Act 2016 generally prohibits a company from providing “financial assistance” for someone to buy its shares
The Solution:
To legally pay your investor’s fees, your Company Secretary must execute the “Whitewash” Procedure (Section 126). This involves:
- Board Resolution: Directors confirm the payment is in the company’s best interest
- Solvency Statement: Directors declare the company will remain solvent after paying the fees
- Shareholder Approval: A Special Resolution is passed to authorize the payment
Takeaways
In Malaysian corporate deals, buyers typically bear stamp duty and due diligence costs, sellers shoulder CGT or RPGT depending on the asset, and both sides must engage their own lawyers due to strict conflict-of-interest rules.
