As a startup lawyer, I get asked a lot on how to structure sweat equity where the company issues new shares to someone (usually with certain skills or expertise) in exchange for his or her contribution to the company.  Whether you’re planning to give out sweat equity shares to an experienced adviser or mentor or a new cofounder candidate for your startup, it is crucial to structure it correctly and formalise it in writing.  Therefore, I have made a checklist covering the usual common structuring sweat equity issues that we have come across in our past experience. We usually go throug ..read more

Following a new gazette on 29 December 2023, the effective date for the capital gains tax on gains or profits received from the disposal of shares of unlisted companies formed in Malaysia will start from 1 March 2024, in line with the original announcement in the Malaysia’s Budget 2024. To recap, a capital gains tax of 10% will be enforced against gains or profits received pursuant to the shares disposal. There are still many questions that need to be answered with respect to the proposed capital gains tax. For example, it is unclear if founders and angels may also be subject to capital gains ..read more

Earlier this week at the Malaysia Venture Forum 2023  the SC chairman said that an exemption will be introduced to further clarify the use of the Simple Agreement For Future Equity (‘SAFE’) agreements and convertible notes by investors investing in local startups in Malaysia.  To summarise, SAFE notes including convertible notes are the usual funding agreements used by investors and VCs when making early stage investments in Silicon Valley such as by Y Combinator. The funding terms will defer dilution as the investor converts their investment into equity at a later date.  The pl ..read more

The recent budget 2023 by the Malaysian prime minister mentioned that a new capital gains tax (CGT) will be imposed on all shareholders selling shares in private companies. Starting 1 March 2024, any disposal of shares will be subjected to capital gains tax (CGT) of the indicative 10% tax rate on the gains of the shares sold from an unlisted equity.  The rest of the details such as what type of unlisted equities will be subjected to the CGT will be issued by the government in the future statement in due course (for instance, more clarity as to what type of “unlisted equities” will be subj ..read more

The term sheet is a critical document that gives a ‘snapshot’ of the key terms and conditions of  the proposed funding by an investor. It also serves as a ‘blueprint’ that will be used by the startup lawyer  engaged to prepare the fundraising documents and shareholders agreement that will govern the relationship between the startup, its present shareholders and the investors.  The question of who should issue a term sheet in a startup funding round is an important one, as it can have a significant impact on the negotiation process and the overall success of the funding round.In ..read more

“Should you accept an investment offer from a non-accredited angel investor in Malaysia?” “Do you need to get accredited as an angel investor?” “What if the angel who invested in my startup wasn’t an accredited investor? Will I get into trouble?” No, there is no law requiring an investor to get accredited before he or she can invest as an angel in Malaysia. But receiving capital from an accredited angel as opposed to a non-accredited angel is generally a better decision from an ESG (especially on the “G” side) corporate governance standpoint. Here’s a simple reason why. An accredited angel is ..read more

Capital Markets Malaysia (CM), a capital market promotional entity under the Securities Commission Malaysia (SC) has launched  a corporate venture capital (CVC) programme to get more companies, especially local public listed companies, to invest in startups and small and medium enterprises. Legal framework for CVC It is unclear if the SC is going to come up with any guidelines including tax incentives similar to the present tax incentives for CVC set ups. Management fees and carried interest received by the registered fund managers are tax exempt whereas investors investing in a venture f ..read more

Any sensible investor would want to minimise their downside risks when making an investment especially in a risky asset class portfolio such as when investing in an early stage startup. The common way on how this may be achieved is by inclusion of veto rights over certain major company actions. With the exceptions to angels, families and friends, most financial investors (i.e. people that spend their full time daily as an investor) such as corporates and venture capitals will want to dictate the investment terms before sending the cash over to your business. They will expect some degree of con ..read more

Starting a new company can be stressful and confusing especially for a first time founder. So I’m excited to hear recently that the Founder Institute Malaysia 2023 programme is finally going live again this year. Founder Institute prefaces itself as the ‘world’s largest pre-seed startup accelerator’ with presence in over 180 countries (also known as chapters). Our law firm Izwan & Partners has been involved as a legal partner since 2020 where we cover on legal and compliance topics during the progrmame. Starting this year, the chapter will be led by Kevin Brockland venture partner after a ..read more

There are several things that founders should know before raising funds for their startup. 1. Understand the different types of funding available. Selling your company’s shares in exchange for money is just one usual way of raising funds. There are various ways to raise capital, including debt financing, equity financing, or even crowdfunding (see Oxwhite’s pre-order model as a case study). Each option has its own pros and cons so you need to decide which one is best for your business. 2. Know your company’s valuation. Even though it may be hard to come up with the exact value especially when ..read more