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Equity Crowdfunding in Malaysia: A Step by Step Guide

Equity crowdfunding offers a great alternative fundraising option for Malaysian businesses to raise capital in Malaysia. As a corporate law firm that regularly advises small business and startups that raises funds equity crowdfunding (“ECF”) campaigns, this post aims to guide you through the key steps involved, ensuring a smooth and compliant ECF campaign.

1. Deciding and Choosing an Equity Crowdfunding (“ECF”) Platform

Once you have decided that ECF is the best funding option for your company, the next step is to decide which ECF operator that you want to hire to host your ECF campaign. Once you have decided on an ECF operator, you will have to raise the funds on the ECF platform as the  SC guideline only permits you to raise funds on one platform at a time. 

If you are not sure if an ECF operator is regulated by the Securities Commission Malaysia (“SC”) or not, you can go to the SC’s website to get the latest list of the ECF operators on the SC’s website over here:  

During the initial discovery /introduction call, apart from asking on the usual questions like their fees and charges (the fee may vary depending on the targeted funding sum), you may want to check what makes one ECF platform differ from another in terms of its own unique strength like its investors’ base or the type of issuers that have raised on the platform previously. The selection of the ECF platform is crucial to increase your chances of getting funded and attracting the “right” type of investors.

2.  Onboarding and Assessment by the ECF Platform

The SC guidelines require ECF operators to conduct necessary due diligence on your company and assess if your company is suitable to raise funds on the ECF platform.

The SC guidelines requires a company to disclose the following information:

  • Purpose of fundraising 
  • Rights to the shares/equity offered to the investors
  • Targeted fundraising amount
  • Business plan of the company
  • Financial information including audited financial statements/or certified management accounts
  • Information on the key management, directors and promoters 
  • any conflict of interest involving the company/and any subsidiaries/or director/ shareholder in the company 

It is important that you decide on the funding sum carefully. ECF platforms in Malaysia operate on the “all or nothing” model. If you mention in the term sheet that RM500,000 is the minimum targeted sum, you must raise this sum before the deadline, or whatever sum you have raised will be refunded and you will receive nothing. Consequently, we may likely advocate for you to use a lower minimum targeted sum. 

 An experienced startup lawyer will be useful to guide you through the process in filling up the application form and fulfilling the required questionnaire and checklist by the ECF platform. We have advised clients in the past in preparing their offering documents to ensure that they are legally compliant and meeting the SC’s disclosure requirements.

3. Assessment and Due Diligence Stage

The documents that you provide to the ECF platform needs to be accurate and  complete. The ECF platform will be responsible to verify and highlight any potential risks.  In a recent transaction that we acted as the legal counsel, the ECF operator also conducted a third party check using CTOS search involving the directors and shareholders.

It may be hard to estimate the time frame needed. In our experience, the usual delay is usually caused by outstanding statutory compliance issues (eg, filing annual returns or audited accounts) or pending corporate exercises (eg, pending ESOS implementation or new shares issuance or shares transfers that have not been reflected in the statutory book). Any change in the ownership/shareholding structure will be a major issue as it will affect the equity stake to be issued to the crowdfunding investors.

Also, unavailability of documents such as statutory forms of the company or unfamiliarity of the company’s service providers with the crowdfunding process may also likely delay the fundraising campaign. 

4. Investment Term Sheet and Fundraising Agreements

Before a crowdfunding campaign goes live, you are expected to firm up an investment term sheet that will set out the terms upon which a crowdfunding investor will decide on his or her investment in the company. 

The term sheet will usually contain the following information:

  • Pre-money valuation 
  • Type of share i.e. investment instrument that will be subscribed 
  • Terms of subscription (including minimum investment sum, indicative equity offered, and the number of shares per block)
  • Issue price per share
  • Usage of funds raised
  • Nominee structure (i.e. ordinarily, the crowdfunding shares will be held by a special purpose entity set up by the ECF operator to facilitate the investment)
  • Transfer of shares 
  • Additional benefits/Incentives for early investors (such as bonus shares or discount on products/services)

Although ECF platforms nowadays may usually share their own template version agreements and documents (such as term sheet, subscription agreement, and shareholders agreement) that you may use and adopt as the offer documents, you should consider spending time to go through all the terms and conditions inside the template documents carefully so that they are aligned with your circumstances.

The usual gaps that we came across inside the templates are clauses on addressing deadlock scenarios on board or shareholders meetings among major shareholders (i.e. founders) as there is usually no deadlock mechanism included and vesting provisions if the shares are subject to vesting. 

If you already have a shareholders’ agreement in place, you would likely to engage a startup lawyer to help you amend and prepare a supplemental shareholders agreement as there are new clauses that need to be inserted involving crowdfunding investors’ rights in the company.

Other documents that you will need are the board and shareholders resolutions for the  approval by the directors and shareholders for the company to undertake the ECF campaign. 

5. Pitching to Investors

The ECF platform that you choose to work with may have its own marketing or publicity strategy to tap on its investors base such as conducting weekly pitching sessions or organising ‘site visit’ to your factory or premise.

Once the campaign goes live, the campaign is usually set for 60 to 90 days or even shorter period depending on your funding target.

6. Campaign Closure

Once the fundraising period ends, note that there is a 6 days cooling off period by the SC guidelines which allows any investor to withdraw his or her investment. 

A list of the investors’ against the respective sums invested would be shared with your team. If you end up raising more than what you targeted, you may elect to accept the additional sum or reject the additional investment monies. 

The ECF platform will release the funds once all the paperwork is completed. The usual closing documents include signing the nominee agreement, subscription agreement, shareholders agreement  between the company and the new crowdfunding investors. In practice these documents are usually signed electronically/or by way of acceptance on the ECF platform to make the process more simplified.

The closing period usually may take between 2-3 weeks as the bulk of the paperwork would have been done in the initial assessment stage. The usual conditions precedent for disbursement are the board and shareholders approval for the allotment and issuance of the new shares to the crowdfunding investors.

7. Post ECF Campaign and Continuing Obligations

Although the current SC guidelines is silent on any annual or mandatory reporting expected by an issuer, the ECF operator that you engage or the shareholders may likely expect you to report on the business from time to time. 

A shareholders agreement will include an “information rights” clause. A legal counsel may advise you on what will be the industry practice when it comes to investor’s reporting that may be  incorporated inside the shareholders agreement. At a minimum you may be expected to share yearly audited accounts and write summary of the business progres to your investors.  

The SC guidelines also permits an ECF operator to run a secondary market feature i.e. the trading of the equity/shares raised on an ECF platform. Once this secondary market feature  in an ECF platform goes live, an existing crowdfunding investor in your company may liquidate his or her investment in a company by selling the stake to another investor on the ECF platform allowing for an exit option for the investor.


We hope that the steps described above serve as a useful reference on what to expect when starting an ECF journey. As your company grows, a legal counsel can provide ongoing legal guidance to ensure compliance with relevant regulations. We hope that by following these steps and engaging a crowdfunding lawyer to guide your campaign, you can launch a successful equity crowdfunding campaign and secure the necessary funding to grow your company.

Disclaimer: The content provided on this website does not constitute legal advice but are for general informational purposes only. It may not be the most up-to-date legal information after the published date. To seek professional legal advice, please book in a free initial 30 mins legal consult with us.

Picture of Izwan Zakaria

Izwan Zakaria

Izwan likes to write about startups. He enjoys working and mentoring entrepreneurs and founders. He is also a startup lawyer at Izwan & Partners.

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