Corporate and Commercial

Zaid Ibrahim & Co contributed to the Lexology Panoramic: Private Equity 2026 (Fund Formation)Malaysia.

Authored by Chief Operating Officer, Chua Wei Min, Partner, Geraldine Oh and Partner (Tax) Kellie Allison Yap, the article offers a detailed overview of essential information regarding Malaysia’s private equity fund formation regime whether through the use of Malaysia vehicles of a Sdn Bhd, LLP or Labuan entities of an LP, LLP. Each with its own pros and cons.

The guide explores, among other, formation, regulation, licensing and registration requirements (CMSL/PEMC), taxation, selling restrictions and investors generally and finally, updates and trends in the vibrant VC/PE space in the last year with a continued forward momentum in 2026.

Read the full article here.

Zaid Ibrahim & Co contributed to the Lexology Panoramic: Private Equity 2026 (Transactions) Malaysia.

Authored by  Chief Operating Officer, Chua Wei Min, Partner, Muhammad Zukhairi Muhammed Salehudin and Associate, Teng Yee Von, the article offers a detailed overview of things to know regarding Malaysia’s private equity transactions.

The guide explores, among other, transactions formalities, rules and practical considerations, debt financing, shareholders' agreement and more.

Read the full article here.

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Introduction

Malaysia has enacted the Cross-Border Insolvency Act 2026 (Act 877) (“Act”), which received Royal Assent on 20 January 2026 and was published in the Gazette on 30 January 2026. The Act will come into operation on a date to be appointed by the Minister charged with responsibility for law by notification in the Gazette.

The Act adopts the principles of the UNCITRAL Model Law on Cross-Border Insolvency dated 30 May1997, representing a significant modernisation of Malaysia's insolvency regime.

Key Objectives

The Act's objectives include fostering cooperation between Malaysian and foreign courts, providing legal certainty for trade and investment, ensuring fair administration of cross-border insolvencies, maximising debtor property value, and facilitating the rescue of financially troubled businesses.

Scope of Application

The Act applies to corporations as defined in the Companies Act 2016 and the Labuan Companies Act 1990, but expressly excludes individuals under the Insolvency Act1967, limited liability partnerships, and registered businesses under various state and federal business licensing statutes.

Notably, the Act contains significant carve-outs for regulated financial institutions. It does not apply to licensed financial institutions, Islamic financial institutions, development financial institutions, member institutions under the Malaysia Deposit Insurance Corporation Act 2011, stock exchanges, derivatives exchanges, clearing houses, central depositories, and various Labuan-licensed entities including Labuan banks, investment banks, insurers, reinsurers, takaful operators, trust companies, and foundations.

Recognition of Foreign Proceedings

The Act defines "foreign proceedings" as collective judicial or administrative proceedings in a foreign State, including interim proceedings, under the law relating to insolvency in which the property and affairs of the debtor are subject to control or supervision by a foreign court, for the purposes of reorganisation or liquidation. This broad definition encompasses a wide range of insolvency-related processes, whether formal court-supervised proceedings or administrative procedures, provided they involve collective creditor participation and supervisory oversight over the debtor's property and affairs. Importantly, interim or provisional proceedings also fall within the definition, enabling foreign representatives to seek recognition even while foreign insolvency proceedings are at an early stage.

A foreign representative may apply directly to the High Court in Malaya or the High Courtin Sabah and Sarawak for recognition of foreign proceedings. Applications for recognition must be accompanied by a certified copy of the decision commencing the foreign proceedings and appointing the foreign representative, or a certificate from the foreign court affirming the existence of the foreign proceedings and the appointment. The High Court is required to determine applications for recognition at the earliest possible time.

Effects of Recognition and Relief

Upon recognition, individual actions concerning the property, rights obligations or liabilities of the debtor is stayed, execution against debtor property is stayed, and the right to dispose of debtor property is suspended. These have the same effect as a winding-up order under Malaysian law.

The Court may also grant discretionary relief upon recognition of any foreign proceedings, including orders staying actions, suspending property disposal rights, directing examination of witnesses, and entrusting property administration to the foreign representative or a Malaysian insolvency office-holder.

Access Rights

Foreign representatives have direct access to Malaysian courts and may appear in person or through an advocate. Foreign creditors have the same rights as Malaysian creditors and cannot be ranked lower than general unsecured creditors solely due to their foreign status, though foreign tax, social security, and superannuation claims may be excluded.

Cooperation with Foreign Courts and Representatives

The Act mandates cooperation between Malaysian courts and insolvency office-holders with their foreign counterparts to the maximum extent possible, including direct communication and information sharing. Cooperation may include coordinating administration of debtor property, implementing agreements on coordination of proceedings, and managing concurrent proceedings.

Concurrent Proceedings

After recognition of foreign main proceedings, Malaysian insolvency proceedings are generally limited to property located in Malaysia. Where concurrent proceedings exist, the Court must ensure consistency between relief granted and Malaysian proceedings and that automatic stays do not apply if foreign main proceedings are recognised after Malaysian proceedings have commenced.

Protection of Creditors and Interested Persons

In granting relief, the Court must ensure adequate protection for creditors (including Malaysian creditors, secured creditors, and hire-purchase parties) and may impose conditions such as requiring security. Transferring property outside Malaysia requires court leave and certification that Malaysian creditors' claims below a prescribed threshold have been satisfied.

Public Policy Exception

The Court retains discretion to refuse any action or relief that would be contrary to the public policy of Malaysia.

Avoidance Actions

Upon recognition of foreign proceedings, a foreign representative has standing to apply to the Court for avoidance actions under relevant provisions of the Companies Act 2016 and the Labuan Companies Act 1990. These include actions relating to preferences, floating charges, and other transactions that may be detrimental to creditors. However, this power does not apply retrospectively to transactions entered into before the Act comes into operation.

Regulatory Restrictions

The Act contains important restrictions where regulatory authorities are involved. Recognition, relief, and cooperation under the Act are not permitted if theywould be prohibited by certain provisions of the Financial Services Act 2013, Islamic Financial Services Act 2013, Malaysia Deposit Insurance Corporation Act 2011, or Capital Markets and Services Act 2007.

The Act also protects the finality of payment and netting arrangements under financial services legislation and the enforceability of netting provisions in qualified financial agreements. Additionally, where regulatory authorities such as Bank Negara Malaysia, the Securities Commission Malaysia, or the Labuan Financial Services Authority have issued specific directions or orders in respect of a person for purposes of financial stability or systemic risk management, recognition and relief under the Act require the prior written approval of the relevant authority.

What This Means for Local Players

Malaysian corporations and insolvency practitioners now have a structured framework for dealing with cross-border insolvencies involving foreign counter parties. Local creditors benefit from explicit statutory protections as the Act mandates that Malaysian courts must ensure their interests are adequately protected before granting relief to foreign representatives, and any transfer of debtor property outside Malaysia requires prior court leave and certification that Malaysian creditors below a prescribed threshold have been satisfied. This offers meaningful safeguards against value leakage in cross-border restructurings.

Malaysian insolvency office-holders are expressly authorised to cooperate and communicate directly with foreign courts and representatives. This legitimises cross-border coordination efforts and should reduce uncertainty when Malaysian proceedings run concurrently with foreign proceedings. However, where concurrent proceedings exist, Malaysian proceedings will generally be limited to assets located in Malaysia, which may constrain the reach of local office-holders in complex group restructurings.

For local financial institutions, the broad carve-outs in the Schedule are significant. Licensed banks, insurers, securities market operators, and other regulated entities remain subject to their sector-specific resolution regimes under the Financial Services Act 2013, Islamic Financial Services Act 2013, and the Malaysia Deposit Insurance Corporation Act 2011, rather than this Act. This preserves regulatory control over systemically important institutions and ensures continuity in how their distress situations are managed.

What This Means for Foreign Investors

Foreign investors and multinational groups with Malaysian subsidiaries or assets now have a clear pathway to seek recognition of foreign insolvency proceedings in Malaysia. The Act grants foreign representatives direct access to the Malaysian High Courts without requiring submission to full local jurisdiction, removing a significant procedural barrier. Applications for recognition must be determined at the earliest possible time.

Once foreign main proceedings are recognised, the Act provides automatic stays on individual creditor actions and executions against the debtor's Malaysian assets, mirroring the effect of a local winding-up order. This is a substantial benefit for foreign insolvency practitioners seeking to preserve asset value and prevent a race to enforcement by local creditors. Foreign representatives may also apply for discretionary relief, including orders entrusting the administration of Malaysian assets to them or examining witnesses and gathering evidence.

Foreign creditors are afforded equal treatment with Malaysian creditors in terms of participation rights and cannot be ranked lower than general unsecured creditors solely by reason of being foreign. However, foreign tax claims, social security claims, and superannuation claims may be excluded from Malaysian proceedings, which investors should factor into recovery expectations.

Critically, cooperation and recognition under the Act may be refused or subject to prior regulatory approval where financial stability concerns are engaged. Foreign investors dealing with Malaysian financial institution counterparties should be aware that the Act's benefits may not extend to situations involving regulated entities or where Bank Negara Malaysia, the Securities Commission, or the Labuan Financial Services Authority has issued specific directions.

Conclusion

The Cross-Border Insolvency Act 2026 aligns Malaysia with international best practices under the UNCITRAL Model Law. Stakeholders should familiarise themselves with the Act and monitor for its commencement date.

Please contact us if you have any questions regarding the Act's implications for your business.

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On 3 October 2025, with robust governmental support and momentum, the Ministry of Finance has successfully gazetted the order and the rules in relation to Pulau 1 of Forest City Special Financial Zone (“Single Family Office Order and Rules”).

While wealthy families have historically chosen specific established tax exempted jurisdictions to establish their generational wealth management family office structures, Malaysia is now well-positioned to compete with these jurisdictions in attracting family office establishments by having specific tax incentives and stamp duty exemptions to attract both Malaysian and foreign families to establish their family offices within the Forest City Special Financial Zone.

To date, 6 families have received conditional approval from the Securities Commission (“SC”), with indicative assets under management (“AUM”) of close to RM400 million.

Single Family Office Incentive Scheme (“Scheme”)

Families intending to set up their family office under this Scheme must establish 2 Malaysian incorporated companies - the Single Family Office Vehicle (“SFOV”) and the Single Family Office Management Company(“SFO MC”).  Both the SFOV and the SFO MC must be wholly owned, directly or indirectly, by one or more individuals, all of whom should be members of a single family. “Single Family” means a family whose members are individuals who are lineal descendants of a single ancestor and includes:

(a)           the spouse;

(b)           the biological child;

(c)           the stepchild; and

(d)           the child adopted in accordance with any written law.

The SFOV is solely for the purpose of holding the assets and investments of the single family, while the SFO MC is for the purpose of managing such assets and investments. The SFO MC is not required to be operating in Pulau 1.

SFOV

A qualifying company may apply for the Scheme to the Minister through the SC from 1 September 2024 to 31 December 2034.

A “qualifying company” is a single family fund company which [1]:

(a)           is incorporated under the Companies Act 2016 and resident in Malaysia;

(b)           is wholly owned, directly or indirectly, by a member of a single family;

(c)           operates in Pulau 1 of Forest City Special Financial Zone; and

(d)           is established solely for the purpose of holding the asset and investment activity for the interest of

                members of a single family.

A “qualifying company” will not be regarded as a qualifying company for the purposes of the Scheme if, it has claimed or been granted other tax incentives under Malaysian law. Specifically, the company will be disqualified if [2]:

(a)           a claim has been made for investment allowance for the service sector under Schedule 7B to the Income

               Tax Act 1967;

(b)           any incentive has been granted under the Promotion of Investments Act 1986;

(c)           an exemption has been granted under paragraph 127(3)(b) or subsection 127(3A) of the Income Tax Act

               1967;

(d)           an incentive scheme has been approved by the Minister under any rules made pursuant to section 154 of

                the Income Tax Act 1967;or

(e)           a claim has been made for deduction under any rules made under section 154 of the Income Tax Act 1967,

                except for:

               (i)           allowances under Schedule 3 to the Income Tax Act 1967;

               (ii)          deductions under the Income Tax (Deduction for Audit Expenditure) Rules 2006; or

               (iii)         deductions under the Income Tax (Deduction for Expenses in relation to Secretarial Fee and Tax

                             Filing Fee) Rules 2020.

Upon obtaining SC’s approval for the tax incentives granted pursuant to the Scheme, an approved company shall comply with the conditions imposed by the Minister which shall include the following conditions [3]:

(a)           for each year for the first period of 10 years of assessment, the approved company shall obtain a

                certification from SC that the approved company:

                (i)            has employed at least 2 full-time employees whom one of the employees is a professional

                                investor with a minimum salary of RM10,000;

                (ii)           has not utilised bank deposits for local investment;

                (iii)           at the end of the year of assessment—

                                (A)      has incurred an annual local operating expenditure of not less than RM500,000;

                                (B)      has assets under its management of not less than RM30 million; and

                                (C)      in relation to a local investment, has made an investment of not less than RM10 million or

                                           10% of the assets under its management referred to in subparagraph(a)(iii)(B), whichever is

                                           the lower; and

                (iv)          has not carried on any other business in Malaysia;

(b)           for each year for the following period of 10years of assessment, the approved company shall obtain a

                certification from the SC that the approved company at the end of the year of assessment:

                (i)             has assets under its management of not less than RM50 million;

                (ii)            in relation to a local investment, has made an investment of not less than RM10 million or

                                10% of the assets under its management referred to in subparagraph (b)(i), whichever is greater;

                (iii)           has employed at least 4 full-time employees; and

                (iv)          has incurred an annual local operating expenditure of not less than RM650,000.

(c)            the approved company shall comply with the conditions provided for under section 65B of the Income

                 Tax Act 1967; and

(d)            the approved company shall comply with any guidelines issued by the SC.

Tax incentives under the Forest City Special Financial Zone framework

Pulau 1 was designated as a duty-free island and officially recognised as a “Designated Area” under Malaysia’s Sales Tax and Services Tax regimes, with similar duty-free status as Langkawi, Labuan, and Pangkor.

Effective 1 September 2024, the tax incentives for the SFOV include:

(a)           0% income tax rate for the first period of 10 years of assessment and 0% income tax rate the following

                period of 10 years of assessment by the approved company.[4]

(b)           Full exemption on gains from share disposal from 1 September 2024 to 31 December 2034, subject to

                further conditions.[5]

(c)           Full exemption on income received from any qualifying persons for income received on or before 31

                August 2034, subject to conditions.[6]

(d)           10% of industrial building allowance on the capital expenditure for the construction or purchase of an

                industrial building for Year of Assessment 2024 onwards until 31 December 2034, subject to conditions.[7]

(e)           Deduction up to RM500,000 maximum for certified relocation costs, subject to conditions.[8]

Stamp Duty exemptions under the Forest City Special Financial Zone framework

Apart from tax incentives, transactions and transfers of a qualifying asset executed from 1 September 2024 to 31 December 2034 may qualify for a range of stamp duty exemptions introduced by the Government to encourage investment and the establishment of family offices in the area.

The key stamp duty exemptions are:

(a)           Exemption of stamp duty for transfers of qualifying assets between single family fund companies and

                their related family entities.[9]

(b)           50% remission on loan or financing agreements for eligible individuals[10] and qualifying investors[11]

                purchasing completed residential or commercial units in Pulau 1.

(c)           50% remission on property transfer instruments for eligible individuals[12] and qualifying investors[13]

                purchasing completed residential or commercial units in Pulau 1.

Real Property Gains Tax (“RPGT”) exemptions under the Forest City Special Financial Zone framework

RPGT, a tax imposed on profits arising from the disposal of real property in Malaysia, now offers progressive exemptions for non-citizen and non-permanent resident individuals disposing of property within Pulau 1 of Forest City Special Financial Zone. Effective from 1 September 2024 to 31 July 2034, the Scheme provides for progressive reductions in RPGT rates during the initial years of ownership, culminating in a full exemption after the sixth year, to promote long-term property investment in Pulau 1.[14]

The introduction of the newly implemented Single Family Office Order and Rules marks a significant milestone in Malaysia’s efforts to position itself as a regional hub for wealth management and family office activities. The comprehensive incentives framework under the Forest City Special Financial Zone reflects the Government’s continued commitment to ensuring the success of the Scheme, as evidenced by the growing number of family office applications currently being reviewed by the SC.

Please feel free to reach out to the contributing partners and associates to this alert – Chua Wei Min, Lee Lily @ Lee Eng Cher, Sarah Menon and Coe Tay for further information.

[1] Income Tax (Single Family Office Incentive Scheme) (Pulau 1 of Forest City Special Financial Zone)Rules 2025

[2] Income Tax (Single Family Office Incentive Scheme) (Pulau 1 of Forest City Special Financial Zone)Rules 2025

[3] Income Tax (SingleFamily Office Incentive Scheme) (Pulau 1 of Forest City Special Financial Zone)Rules 2025

[4] Income Tax (Single Family Office Incentive Scheme) (Pulau 1 of Forest City Special Financial Zone)Rules 2025

[5] Income Tax (Single Family Office Incentive Scheme) (Pulau 1 of Forest City Special Financial Zone) (Exemption) Order 2025

[6] Income Tax (Income of Non-Resident Person) (Pulau 1 of Forest City Special Financial Zone)(Exemption) Order 2025

[7] Income Tax (Industrial Building Allowance) (Pulau 1 of Forest City Special Financial Zone) Rules 2025

[8] Income Tax (Deduction of Cost for Relocation of Business) (Pulau 1 of Forest City Special Financial Zone) Rules 2025

[9] Stamp Duty (Single Family Fund Company) (Pulau 1 of Forest City Special Financial Zone)(Exemption) Order 2025

[10] Stamp Duty (Instrument of Loan or Financing Agreement in relation to Individual) (Pulau 1 of Forest City Special Financial Zone) (Remission) Order 2025

[11] Stamp Duty (Instrument of Loan or Financing in relation to Qualifying Person) (Pulau 1 of Forest City Special Financial Zone) (Remission) Order 2025

[12] Stamp Duty (Instrument of Transfer in relation to Individual) (Pulau 1 of Forest City Special Financial Zone)(Remission) Order 2025

[13] Stamp Duty (Instrument of Transfer in relation to Qualifying Person) (Pulau 1 of Forest City Special Financial Zone)(Remission) Order 2025

[14] Real Property Gains Tax (Pulau 1 of Forest City Special Financial Zone) (Exemption) Order 2025

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On 1 April 2024, we welcomed the introduction of amendments to the Companies Act2016 (“CA 2016”) on beneficial owners (i.e its definition, duty to disclose, annual return requirements, etc.). Subsequently, in a bid to improve transparency and accountability within limited liability partnerships (“LLP”), the Limited Liability Partnership (Amendment) Act 2024 (“LLPAA 2024”) was gazetted on 17 October 2024, though it has yet to come into force.

The LLPAA 2024 introduces several amendments to the Limited Liability Partnership Act 2012 (“LLPA 2012”) including time for compliance with the requirements under the LLPA 2012 (new section 70A), substitution of section 76 of the LLPA 2012 to include electronic means as way of service of documents, and a new section 76A on publication or advertisement on the website of the Companies Commission of Malaysia (“CCM”).

This article will be focusing on two pertinent amendments to the LLPA 2012 — ­­­­­the introduction to the beneficial ownership reporting and disclosure framework (introduced as a new Part IIIA) and the concept of corporate voluntary arrangement and judicial management of LLPs (new sections 49A and 49B).

Introduction to Beneficial Ownership Reporting and Disclosure

The LLPAA 2024 has introduced a new Part IIIA to govern beneficial ownership reporting and disclosure framework of LLPs.

It sets out the definition of beneficial owner and grants the registrar of the CCM (“Registrar”) the power to issue guidelines on identifying beneficial owner of LLPs. In line with this, CCM has issued a consultation on the proposed guideline for the reporting framework for beneficial ownership of LLPs. This consultation, together with case studies and illustrations, relatively similar to the approach taken for the beneficial ownership reporting under the CA 2016, contains step by step approach for the application of the new Part IIIA. It covers proposed scopes of reporting, entry points of the beneficial ownership information and criteria to determine beneficial owners. However, do note that this is still a consultation document and has yet to be enforced or finalised by CCM.

Further, Part IIIA provides a list of details that must be included in the register of beneficial owners. These can be found in section 20B(1) which states:

LLPs are obligated to require any partners to disclose if they are the beneficial owner. If they are not, then to indicate persons (whether by name or other particulars to make identification easy) who are beneficial owners. LLP has 14 days from the date the information is received to record the information in the register of beneficial owners (section 20C(4) of the LLPA 2012).

Additionally, a beneficial owner is to notify the LLP if there are any changes to their particulars, including when they cease to be a beneficial owner. The date and particulars of the cessation must be notified as soon as practicable (section 20D(3) of the LLPA 2012).

LLPs that are already subjected to similar reporting obligations may be exempted from their obligations under Part IIIA by the domestic trade minister. The exemption maybe subjected to such terms imposed by the Minister. Failure to abide by the requirements in Part IIA, LLPs and every partner and compliance officer can be liable for the following:

• Section 20B: Fine not exceeding RM 20,000. If the offence continues, a further fine not exceeding RM 500 for each day.
• Section 20C (1)-(6): Commits an offence.
• Section 20D: Any person who contravenes this section commits an offence.

Corporate voluntary arrangement and judicial management

In addition to the introduction of the beneficial ownership framework, the LLPAA 2024 introduces the concept of corporate voluntary arrangement and judicial management. Section 49A of the LLPA 2012 provides that Division 8 of Part III (in so far as they relate to a company limited by shares and except for sections 395 and 403 and paragraph 1 of the Eight Schedule) of the CA 2016 and the Companies (Corporate Rescue Mechanism) Rules 2018 shall apply to the voluntary arrangement and judicial management of an LLP. Nonetheless, this is subject to such modifications and adaptations as may be necessary.

Moreover, Section 49B imposes that an insolvency related clause in any contract for the supply of essential goods and services shall not be exercised against LLPs. However, it is pertinent to note that section 49B(2) provides an avenue to a supplier who wishes to exercise his rights pursuant to an insolvency related clause in a contract. They must inform the LLP of their intention in writing at least 30days before exercising their rights and taking any action.  

Section 49B shall not prevent a supplier from exercising his other rights, including right to payment for essential goods and services provided to an LLP, under a contract for supply of essential goods and services. The newly inserted Fourth Schedule provides a list of the essential goods and services that is covered.

In conclusion, the recent amendments introduced in the LLPAA 2024 marks a promising shift towards improved governance and accountability in LLPs. With these new frameworks and future guidelines, stakeholders have the opportunity to enhance cooperate governance and embed greater transparency in their reporting practices.

If you have any questions or require any additional information, please contact Chan Xian Ai, or the Zaid Ibrahim & Co partner you usually deal with. This article was prepared with the assistance of Ellesya Myra Faredz, Associate at Zaid Ibrahim & Co.

This article highlights predictions from Corporate and M&A professionals from the KPMG global Legal Operations Transformation Services practice concerning the expected changes in mergers and acquisitions (M&A) markets. We focus on how these changes are expected to affect future legal functions and legal practice. As predictions, they are not intended to guarantee any specific outcomes.

After a strong rally post-pandemic, the world’s M&A markets have been quiet in recent months as ongoing high interest rates, inflation and global political uncertainty continue to create financing challenges and dampen appetites for new transactions.

While deal volumes may be muted, digitalization continues its rapid advance, with innovations such as Generative AI (Gen AI) being embraced by businesses and their legal teams with increasing enthusiasm. When M&A markets ultimately rebound — as is widely expected before the end of 2024 — the pressure and pace of the deal making process will likely create significant challenges for legal professionals.

How will rapidly changing approaches to M&A transform the legal functions of the future?

Here are our top predictions:

1. Legal professionals who use technology effectively in the deal-making process can gain a competitive advantage by boosting the speed and efficiency of M&A transactions.

Around the world, M&A deal-making will continue at a more rapid rate and complexity as advancing technology and more available data drive new efficiencies and transparency across the deal cycle. From matching buyers and sellers to post-integration planning, the role of M&A lawyers will likely evolve as routine tasks are standardized and automated.

With the huge volumes of data that are typically relevant in international reorganizations, legal professionals will increasingly assign technology to do more basic work. This includes scanning and producing documents, summarizing information, preparing reports and tracking time and expenses.

Approaches to due diligence will also change. Technology tools, especially Gen AI will streamline the scope of the legal review by delivering reliable information summaries quickly on matters such as standardized contracts, litigation, market terms and insurance policies. With Gen AI facilitating first drafts and research, the lawyer’s legal knowledge and review capabilities will need to be updated to ensure quality and accurate deliverables.

In fact, the opportunities that technology can bring to M&A transactions are so vast that they can seem overwhelming. As deals continue to pick up pace and workflows are adapted, it will be important for lawyers to understand that their role in the process remains fundamentally the same: to negotiate sound terms, execute and optimize buy-sell agreements, apply prior deal knowledge and create strategic business solutions for their clients.

Technology is designed to make the journey faster and smoother, but the destination is unchanged. The most successful legal teams will likely be those who use technology appropriately and efficiently to bring more added value services to their clients in a collaborative format.

2. Rapid technological adoption can help level the playing field for players in developing countries.

The digital divide between developed and developing countries will continue to narrow as businesses in countries such as Indonesia and Vietnam skip over previous technologies, and create the new infrastructure to support Gen AI, mobile, 5G and other contemporary advances. The latest wave of technology offers another opportunity for developing countries to “leapfrog” in areas such as developing precedents and running major due diligence exercises.

This may level the playing field by allowing new M&A players in developing markets to ramp up their capabilities quickly and compete on more equal footing with established investors and strategic buyers in developed jurisdictions. This speed of development will require extra effort and vigilance in areas such as training, the ethical use of AI and cybersecurity.

3. Proliferating environmental, social and governance (ESG) rules will require more detailed due diligence and access to significant volumes of previously unreported data.

New ESG reporting regulations are set to take effect in Europe, and similar rules are likely to be adopted in the Asia-Pacific and other regions. This aims to greatly expand the level of due diligence and data that potential buyers will need to manage to meet new compliance, reporting and other requirements.

While these rules are scheduled to come into effect over a period of years, companies should currently be developing systems to track the relevant information needed for future deal-making. This will be no small task since companies will have to provide detailed information and potentially obtain external assurance about topics that they may never have reported on before. Complying with the rules and opening new windows of transparency into the acquired company may also prompt changes to a target’s operations, structure and supply chain.

Similarly, deal lawyers will need to consider what diligence needs to be conducted to assess the maturity of target businesses to comply with these obligations and the associated representations, warranties and covenants that provide the contractual protections that underpin the diligence.

4. Evolving international tax rules will complicate international structures, planning and due diligence.

Following the pandemic, escalating trade tensions between the US and China and more recent geopolitical conflict in Europe, the Middle East and other areas, have caused many international companies to reconsider the locations of their operations and supply chains.

At the same time, the sweeping international tax rules developed by member countries of the OECD’s Inclusive Framework are being implemented by many global jurisdictions. Commonly referred to as BEPS 2.0, the two-pillar framework of the rules will reallocate a portion of corporate profits to market jurisdictions (Pillar One) and impose a minimum tax to ensure corporate profits are taxed at a 15 percent minimum.

In view of these new rules, many international companies and investors are streamlining their subsidiaries and holdings to minimize complexity and tax exposure. More attention is being paid to the location of their business’ value drivers. Increasing tax transparency under BEPS 2.0’s reporting rules is also influencing the structure of M&A transactions, with some buyers seeking to carve out activities, entities or geographies from agreements to insulate the core business or obtain watertight indemnities around potential liabilities that may come with the target business.

Legal teams will have their hands full dealing with the impacts of these new rules as jurisdictions set different effective dates and impose their own variations of safe harbors and other aspects of the BEPS 2.0 package. During this implementation period, it will be particularly important for due diligence teams to include a full complement of tax professionals to identify and advise on specialty areas such as international corporate tax, transfer pricing and indirect tax.

5. As the balance of deal-making shifts to Asia and developing countries, legal teams will require more linguistic and cultural diversity to prosper in all M&A markets.

Legal practice will continue to become more universal. Due to the historical and increasing dominance of US legal firms in global markets, English will likely continue to be the common legal language and concepts rooted in common law will continue to dominate training, deal negotiations and transaction arrangements. But legal teams of the future will need to include legal professionals with skills and experience to understand and manage the differences between US law and other common-law jurisdictions such as the UK, Malaysia and other Commonwealth countries.

In addition, capital flows from outside the historical largest players tend to be much more complex and harder to tap into than was once the case since there are now major companies, banks and funds doing deals from a greater array of countries. For example, big Indian corporates are making acquisitions in countries such as Brazil and Indonesia; Malaysian companies are making acquisitions in Türkiye and other parts of the world. This is not new, but as the number of economies providing outbound capital, or local banks become able to fund larger deals (and not rely on US/European/Japanese or Chinese banks), the need for a different footprint becomes more acute. To capture global M&A deal flows, there is an ever-increasing requirement to have relationships in a broader array of business centres and have senior lawyers in country who can build those relationships and execute those deals.

This will be particularly important in the Association of Southeast Asian Nations (ASEAN) region. With the region’s broad diversity of cultures and legal foundations, legal teams there may need to comprise lawyers who can deliver advice, review documents, negotiate terms and navigate cultural differences to deal with outbound, and especially inbound, transactions involving such disparate jurisdictions as China, Japan, Taiwan and India.

6. As deal cycles tighten, legal teams will need strong information management skills to get deals done quickly while mitigating risk.

Speed is vital for competitive due diligence work, but as the pace of deal making increases, risk management and controls will become even more important. For example, when one or both parties are involved are public companies or in a regulated industry, the due diligence process can involve 100 or more people. Beyond legal professionals, the proposed transaction may also need review by and input from banking, finance, tax, ESG, IT consultants and other specialists.

Each individual should be assigned the right level of access to different layers of information, much of it proprietary or confidential. The security of data rooms is a huge concern since inadvertent leaks could create problems preserving privilege, expose sensitive information and impair negotiations.

Further, as technology automates many common, lower-level due diligence tasks, junior-level stakeholders at investment banks and insurers, may lack the experience or training they need to properly recognize and manage sensitive information.

Due diligence in the future will therefore require robust information management, and legal teams will increasingly lead the process. This will likely include:

• deciding who needs access to what information
  
• coordinating the work of specialists
• sensitizing participants to matters of confidentiality, legal privilege and cybersecurity
• synthesizing key information for decision-makers
• maintaining high standards of risk management.

Skills in information management can enable legal teams to take charge of maintaining the fast flow of documents while mitigating confidentiality, regulatory and other risks. Communication and stakeholder relations skills will also be key.

Conclusion

As the world of M&A evolves, the legal profession is being given a tremendous opportunity to utilize new technologies and approaches to enhance deal flow and improve client results. However, lawyers should also be aware that these new technologies and approaches also require a new skill set. Lawyers who are able to respond quickly to shifting global attitudes, an increased use of AI and new regulations will likely be able to gain a substantial advantage both for their own teams and their clients.

This article is prepared by Hanim Hamzah, Head of Asia Pacific, KPMG Law; Gilbert Gan, Managing Partner, Zaid Ibrahim & Co.;  Stuart Bedford, Head of KPMG Law UK, KPMG in the UK; Franck Bernauer, Partner, Head of Legal, Avocat; Jeffrey Issacs, Head of GLS Strategy Implementation, KPMG in the US and Director, Global Legal Managed Services, KPMG International; and Lucia Lorenti, Partner, Ferraz de Camargo e Matsunaga Advogados Associados.