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Guidelines & Procedures on Incentive of Stamp Duty Exemptions on M&A by SMEs

Many SMEs are currently fragmented and dominated by small business entities wherein about 80% of those business entities are microenterprises. These business entities need to build up capacity in view of the ongoing liberalisation of the services and manufacturing sectors in order to avoid hollowing out of companies and to be globally competitive.

 

Mergers and rationalisation with the industry will help building the domestic capacity, among others: -

  • Obtaining quality staff or additional skills, knowledge of industry or sector and other business intelligence.
  • Accessing funds or valuable assets for new development.
  • Accessing a wider customer base and increasing market share.
  • Diversification of the products, services and long-term prospects of your business.
  • Reducing costs and overheads through shared marketing budgets, increased purchasing power and lower costs.

To encourage mergers and acquisitions among SMEs, it is proposed that the merged entities be given appropriate incentives.

 

Objective

These guidelines are to draw a process flow on the steps taken to vet through the applications and to verify the authenticity of the merger and acquisition exercise.

 

  • Stamp duty exemption on the merger and acquisition related instruments, namely: 
    • Contracts or Agreements for sale or lease of properties (including land, building, machinery and equipment)
    • Instrument of Transfer and Memorandum of Understanding
    • Loans or Financing Agreements
    • First Tenancy Agreements
  • List of Services Eligible

    All economic sectors are eligible for the incentives, including but not limited to:

    • Manufacturing sector
    • Agriculture sector
    • Tourism sector
    • Mining and quarrying sector
    • Accounting services 
    • Taxation services
    • Legal services
    • Specialised medical practices
    • Specialised dental practices
    • Architectural services
    • Engineering services
    • Technical and vocational secondary education services
    • Skills training services
    • Courier services
  • Eligibility Criteria
    • The eligibility criteria are as follows:
      • 100% Malaysian owned; and
      • Have annual sales turnover of less than RM50 million or full-time employees of less than 200, as per the definition of SMEs in the manufacturing sector; or
      • Have annual sales turnover of less than RM20 million or full-time employees of less than 75, as per the definition of SMEs in the services sector.
    • All applications must be validated of its SME Status through the SME Registration Status System, a registration system platform developed by SME Corp. Malaysia.
    • Eligible applications are for merger and acquisition exercises undertaken from 1st July 2020 until 30th June 2021.
  •  The initiative is led by the Ministry of Entrepreneur Development and Cooperatives (MEDAC) and SME Corp. Malaysia is the Secretariat to the Joint Verification Committee (JVC) meeting. 


    All applications shall be submitted to SME Corp. Malaysia for verification process. The applications shall be vetted through to verify whether the proper merger and acquisition process has taken place. 

    Qualified and eligible applications shall be tabled at the JVC for endorsement and approval.  

    JVC shall be chaired by the Secretary General of MEDAC. The members of JVC meeting are as follows: - 

    • Permanent Members
      • Ministry of Finance (MOF)
      • Ministry of Entrepreneur Development and Cooperatives (MEDAC)
      • Inland Revenue Board (IRB)
      • Companies Commission of Malaysia (CCM)
      • SME Corp. Malaysia


    • Representatives to be Called When Necessary
      • Representatives from relevant Ministries, Agencies, Associations and Professional Bodies, including but not limited to, as follows: 

      Sector / Area

      Representative/ Authority

      Accounting Services

      Malaysian Institute of Accountants (MIA)

      Taxation Services

      Malaysian Institute of Accountants (MIA)

      Specialised Medical Practices

      Malaysian Medical Council (MMC)

      Specialised Dental Practices

      Malaysian Dental Council (MDC)

      Advocates and Solicitors

      Malaysian Bar

      Architectural services

      Board of Architects Malaysia (LAM)

      Engineering Services

      Board of Engineers Malaysia (BEM) &
      Institution of Engineers Malaysia (IEM)

      Technical and Vocational Secondary Education Services

      Ministry of Education (MOE)

      Skills Training Services

      Ministry of Human Resource (MOHR), Human Resources Development Fund (HRDF) or Ministry of Education (MOE)

      Courier Services

      Malaysia Communications and Multimedia Commission (MCMC)

      Manufacturing

      Federation of Malaysian Manufacturers (FMM)

      Tourism

      Ministry of Tourism, Arts and Culture (MOTAC)

      Agriculture

      Ministry of Agriculture and Food Industry (MAFI)

      Others

      Any other members that JVC deems fit and suitable

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     









     

    • Business entities can merge from different sectors but related disciplinary.
    • In the JVC meeting, regulatory authorities are consulted to further verify the applications.
    • Upon approval/rejection from the JVC, MEDAC shall issue a letter notifying the approval/rejection of the application to the applicants. Upon rejection, applicants may resubmit application.
    • The successful applicants shall submit the relevant chargeable and eligible instruments together with a copy of the approval letter to IRB for incentive approval. Upon approval from IRB, the applicants shall receive a stamp certificate endorsement.
  • Types of Elibible Merger & Acquisition

    OPTION 1

    a. Two business entities merged to become a new business entity:

    option1
    Scenario:
    Business Entity A merged with Business Entity B to become a new Business Entity C. Both individual business entities A & B will be dissolved to form business entity C. In order to enjoy the incentive, the existing business entities A & B need to be dissolved to form business entity C. This applies to all existing sole proprietorships, partnerships, LLPs and private limited companies in the eligible service sub-sectors or areas.

    b. Documentation checklist for merger activity:

    • Memorandum of understanding (MOU) or legal contract between the interested parties to formalise the merger process;
    • Notice of termination for registered business for sole proprietor, partnership (Form C), LLP or private limited company;
    • Certificate of Incorporation of Private Company (Form 9);
    • Latest audited or management accounts of existing business entities;
    • New license / permit / approval from Ministries & Agencies, professional bodies, regulatory boards and associations under the new entity;
    • A copy of the latest corporate information (business information / LLP information / company information) and organisation chart of the business entity.

    OPTION 2

    a. Merger of two or more existing business entity

    option2
    Scenario:
    Business entity A acquires Business entity B to become a new bigger Business entity A. Business entity B need to be dissolved for business entity A to qualify for this incentive. This applies to all existing sole proprietorships, partnerships, LLPs and private limited companies in the eligible service sub-sectors or areas.

    b. Documentation checklist for acquisition activity

    • Memorandum of understanding (MOU) or legal contract between the interested parties to formalise the acquisition process
    • Notice of termination for registered business for sole proprietor, partnership (Form C), LLP or private limited company
    • Latest audited or management accounts of existing business entities
    • Valid license / permit / approval from Ministries & Agencies, professional bodies, regulatory boards and associations
    • A copy of the latest corporate information (business information / LLP information / company information) and organisation chart of the business entity.

     

     

  • Process Flow Chart

    process flow

CONTACT US

SME Corporation Malaysia
Level 6, SME 1, Block B 
Platinum Sentral
Jalan Stesen Sentral 2
Kuala Lumpur Sentral
50470 Kuala Lumpur

Info Line: 1300-30-6000
Fax Line: 03-2775 6001
Emel: info[at]smecorp[dot]gov[dot]my

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