Reorganising Your Group Before a Listing or Sale

Many Malaysian businesses grow into a collection of companies: an operating company, a company that owns the factory, a trading arm, sometimes with slightly different shareholders in each. That works day to day. But when the owners plan a listing, bring in an investor or sell, the structure usually needs tidying up first.

A group reorganisation brings the businesses that will be listed, invested in or sold under one holding company, and separates what will not.

Why reorganise?

• One holding company: investors and the stock exchange expect a single company that owns the whole business.
• Clear boundaries: non-core assets, such as a director’s personal property or an unrelated business, are moved out.
• Consistent ownership: shareholders’ interests in different companies are combined, so everyone holds shares in the same top company.
• Fewer related party issues: trading between companies owned by the same people becomes trading within one group, which is simpler to explain and to audit.

Common steps

1. Set up or choose the holding company.
2. Transfer the shares of the operating companies to the holding company, usually in exchange for new shares in the holding company (a share swap).
3. Move property or other assets into, or out of, the group.
4. Settle or capitalise amounts owed between related companies and directors.
5. Align financial year-ends and accounting policies across the group.

Watch the tax and stamp duty

Transferring shares and property between companies can trigger stamp duty, real property gains tax (RPGT) and, since 2024, capital gains tax on disposals of unlisted shares by companies. Reliefs are available for genuine reorganisations, for example:

• Stamp duty: relief under section 15 of the Stamp Act 1949 for reconstructions and amalgamations, and under section 15A for transfers between associated companies, generally where one company holds at least 90% of the other, or a third company holds at least 90% of both.
• RPGT: transfers of property within a group can be treated as giving rise to no gain and no loss, with the approval of LHDN.
• Capital gains tax: relief for qualifying internal restructurings of unlisted shares, subject to conditions.

These reliefs come with conditions, often including prior approval and a requirement that the companies stay in the same group for a period after the transfer, commonly three years. If the conditions are broken, the duty or tax can become payable later, with penalties. Plan the steps with your tax adviser before anything is signed.

Accounting and the track record

For a listing, regulators look at the group’s financial track record. A reorganisation of companies that were already under common control is usually accounted for as if the group had always existed, but the approach needs to be agreed early with your auditors and reporting accountants. Restructuring late in the process can complicate the numbers and delay the timetable.

Timing

A reorganisation typically takes several months: valuations, board and shareholder approvals, tax relief applications, stamp duty assessment and updated filings with SSM. Starting 12 to 24 months before a listing or sale gives time to do it properly, and lets the new structure appear in at least one set of audited financial statements.

In short

A clean group structure makes a business easier to list, invest in or sell. The tax and stamp duty reliefs can keep the cost of a reorganisation low, but only if the conditions are planned for from the start. WS Group advises on group reorganisations, from the structure and tax reliefs to the accounting and audit implications.