Malaysia-to-Indonesia SME Acquisition: Buyer Diligence and Handoff Map

As of August 2026, a Malaysian company buying an Indonesian SME runs two sets of workstreams at once. In Malaysia: board and shareholder approval under section 223 of the Companies Act 2016, or Chapter 10 of Bursa's Listing Requirements if the buyer is listed; Bank Negara Malaysia's rules on investing abroad; financing; and tax on future dividends. In Indonesia: PT PMA conversion, licensing, tax, land, employment and the Company Law announcement.

This is for the CFO or corporate development head of a Malaysian group, listed on Bursa Malaysia or privately held, that is buying a controlling stake in an Indonesian PT. Most of the diligence effort goes into Indonesia, where the licences, land and employees are. The critical path, though, can run through Kuala Lumpur: a transaction that crosses a 25% percentage ratio needs a circular and a shareholder vote, and a group with ringgit borrowings can only convert RM50 million a year for investment abroad without Bank Negara's approval. Both are known on the day the price is agreed, and in some engagements both are found weeks later.

What runs on each side of the border, and where do the two meet?

The Indonesian column is the same work any foreign buyer does, set out row by row in workstreams a foreign buyer should map before signing for an Indonesian SME. The last column is where a Malaysian deal slips if nobody owns it.

Which Malaysian approvals does the buyer need?

For an unlisted buyer, section 223 of the Companies Act 2016 bars directors from acquiring an undertaking or property of substantial value without a members' resolution. Substantial means more than 25% of the company's total assets, net profits or issued share capital. Thomas Philip's note on the section adds that where the acquiring subsidiary's parent is listed, approval is needed at both levels, and that breach exposes directors to up to five years' imprisonment or a fine of up to RM3 million.

For a listed buyer, Chapter 10 of the Main Market Listing Requirements sets the thresholds by percentage ratio. The ratios compare the deal with the issuer on several bases, among them consideration against net assets, the target's net profits against the issuer's, and consideration against market value. On the Chapter 10 text we read (the consolidated version as at 26 May 2023; Bursa's current version is dated 3 June 2026 and your company secretary should check it):

• Any ratio of 5% or more: announce to Bursa as soon as possible after terms are agreed (paragraph 10.06), unless the consideration is below RM500,000.
• Any ratio of 25% or more: issue a circular and seek shareholder approval in a general meeting (paragraph 10.07).
• Any ratio of 100% or more: a very substantial transaction, with additional disclosure (paragraph 10.10). A deal that changes the issuer's business direction needs Securities Commission approval under paragraph 10.11.
• A valuation is required where the target owns real estate and a ratio reaches 25%, but for a company that is not a property company only if a revalued amount is used to set the price (paragraph 10.04).

Related-party deals run on lower thresholds: announcement from 0.25% and a circular from 5%. ACE Market issuers have their own Chapter 10. Where a Bursa or Securities Commission purpose needs a valuation by an independent registered valuer, that is a separate engagement with a licensed firm, not something Nobridge issues.

Can the money leave Malaysia, and come back?

Bank Negara Malaysia's foreign exchange policy splits resident companies in two. A resident with no domestic ringgit borrowing is free to invest any amount abroad. A resident with domestic ringgit borrowing may invest up to RM50 million equivalent per calendar year, in aggregate on a corporate group basis (so every investment abroad the group makes that year counts), where the money comes from converting ringgit or from a trade foreign currency account; above that, it applies through Bank Negara's FEP submission portal first. A ringgit acquisition loan from a Malaysian bank puts most buyers in the second group, so confirm the group's status with your bank before you agree a payment schedule.

On the Indonesian side, Bank Indonesia Regulation 17/3/PBI/2015 requires rupiah for payments and obligations settled in Indonesia, with exemptions that include international financing where one party is domiciled abroad. Whether the price paid by a Malaysian buyer to Indonesian sellers, or a shareholder loan to the PT, can be in ringgit or US dollars is a question for Indonesian counsel, and the answer changes the hedging. Two further limits sit on the cash once it arrives: PT PMA paid-up capital is locked up for 12 months under BKPM Regulation 5/2025 unless it goes into assets, construction or operations, and dividends leaving Indonesia carry withholding, 20% under domestic law or 10% under the treaty if the paperwork is in order.

How are dividends and a later exit taxed?

In Malaysia, dividends a resident company receives from abroad have been exempt since 1 January 2022 under P.U.(A) 235/2022, on the conditions EY Malaysia records: the dividend was subject to tax of a similar character in the source country, and that country's highest rate was not less than 15%. Indonesia's corporate rate is 22%. EY also noted that further conditions would come through Inland Revenue Board guidelines, and banking, insurance and sea or air transport businesses are excluded. The exemption was due to end on 31 December 2026; KPMG's summary of Budget 2026 records the extension to 31 December 2030 for dividends and for foreign capital gains. Check that the extending order has been gazetted before you model a 2027 dividend as tax-free.

A later sale of the PT is a disposal of a foreign capital asset: PwC's Malaysia summary records that such gains are taxable when remitted from 1 January 2024, exempt to 31 December 2026 for resident companies meeting economic substance requirements, with the same proposed extension.

The Indonesia-Malaysia tax treaty was signed on 12 September 1991 and amended by a protocol signed in Bukittinggi on 12 January 2006, which cut the dividend rate to 10% of the gross amount for a beneficial owner. On share gains, Article 13(3) lets Indonesia tax the sale of shares in a company whose property consists principally of Indonesian immovable property. Ortax's commentary reads it as leaving Indonesia no taxing right where that test is not met, which would displace the 5% effective withholding a non-resident seller otherwise pays. We have not seen Directorate General of Taxes guidance on how withholding is handled at payment in that case. Treat the exit position as unconfirmed until an Indonesian tax adviser has looked at your holding chain.

What should you ask counsel in each country?

Malaysian counsel, company secretary and tax adviser:

1. Which percentage ratios does this deal reach, on which accounts, and does paragraph 10.11 apply?
2. Does section 223 bite at the acquiring subsidiary, the parent, or both?
3. Does the group have domestic ringgit borrowing, and which of our funding sources count towards the RM50 million limit?
4. Will dividends from the PT meet the exemption conditions, and has the 2030 extension been gazetted?
5. Does the economic substance test for the capital gains exemption hold for the entity that will own the PT?

Indonesian counsel and tax adviser:

1. Is every KBLI code open to a Malaysian shareholder at the stake we plan, and what investment plan follows?
2. Can the Company Law announcement go out before signing?
3. Must the price or any shareholder loan be in rupiah, or does an exemption apply?
4. What documents must be in place before payment for the treaty rate on dividends, and what is your view of Article 13(3) for this target?
5. Do the Malaysian group's Indonesian assets or turnover trigger a KPPU notification?

How might the sequencing work in practice?

The figures below are hypothetical and illustrate the mechanics only. Assumptions: a Main Market-listed Malaysian manufacturer with audited net assets of RM400 million, net profit of RM36 million and a market value of RM520 million, carrying a RM60 million ringgit term loan, buys 70% of an Indonesian plastic components PT for RM110 million in cash; the target earns RM14 million after tax and its factory sits on Hak Guna Bangunan; the price is set on earnings, not on a property revaluation.

• Consideration against net assets is 27.5%, the target's attributable profit (RM9.8 million) against the buyer's is 27.2%, and consideration against market value is 21.2%. Two ratios pass 25%, so the buyer needs a circular and a shareholder vote. No property valuation is triggered, because no revalued amount sets the price.
• The group has domestic ringgit borrowing, so converting RM110 million in one calendar year exceeds the RM50 million limit. The CFO files with Bank Negara in the diligence window rather than after signing.
• The Indonesian side can close about 45 days after its announcement. The Malaysian side cannot close until Bursa has cleared the circular and shareholders have voted, and we are not aware of a published review period for Bursa's comments on a circular, so the long-stop date is set well beyond the Indonesian minimum.

In this example the Malaysian vote, not the Indonesian notary, decides the closing date. Price movements across that longer gap are covered in what changes price between signing and closing of an SME acquisition.

What does this map leave to counsel?

It does not decide whether your deal needs a given approval, which entity should own the PT, or whether the treaty applies to your holding chain. Malaysian counsel and your company secretary decide the Bursa and section 223 questions, Bank Negara decides an FEP application, and tax advisers in both countries decide the dividend and exit positions. It leaves out acquisitions through a Singapore or Labuan intermediate company, listed Indonesian targets and regulated financial institutions. The Indonesian ownership rules are in foreign ownership rules for buying an Indonesian business, and the full list is in the due diligence checklist for cross-border Asia acquisitions. Two of the rules above moved within the past year: the PT PMA capital floor fell on 2 October 2025, and the Malaysian foreign dividend exemption, due to lapse on 31 December 2026, was extended to 2030 in the Budget 2026 proposals of October 2025.

If you are still at the indicative-price stage, run the percentage ratios and the FEP question this week; both use numbers you already have. If you have signed, check that Malaysian shareholder and Bank Negara approvals are conditions precedent in the Indonesian agreement. The wider eight-stage map is in our guide to cross-border M&A process support in Southeast Asia, and if you want both columns laid over your own deal, map your transaction with us and we will name the owner of each handoff, working from our Jakarta office.

Sources and review note

• Bursa Malaysia, Main Market Listing Requirements, Chapter 10, consolidated text as at 26 May 2023.
• Bank Negara Malaysia, Foreign exchange policy: residents investing in foreign currency assets.
• Thomas Philip, Section 223, Companies Act 2016.
• EY Malaysia, Foreign-sourced income exemption orders gazetted, 2022.
• KPMG, Malaysia: 2026 budget tax proposals, October 2025; PwC Worldwide Tax Summaries, Malaysia income determination, 2026.
• Ortax, Indonesia-Malaysia tax treaty text, with Ortax's commentary on Article 13; PwC Worldwide Tax Summaries, Indonesia withholding taxes, 2026.
• Makarim & Taira S., The obligation to use rupiah in Indonesian territory.
• ATD Law with Mori Hamada, BKPM Regulation 5/2025, 2025.

Last reviewed 21 August 2026. This guide is educational: legal, tax and regulatory points should be confirmed by qualified local counsel in Malaysia and Indonesia before you rely on them, and Nobridge does not provide legal or tax advice.

Frequently Asked Questions

Does a Bursa-listed company need shareholder approval to buy an Indonesian company?

Only if any Chapter 10 percentage ratio reaches 25%, such as the consideration against the issuer's net assets or the target's profit against the issuer's. At 5% the deal must be announced once terms are agreed, unless the consideration is below RM500,000. Related-party deals use lower thresholds.

How much can a Malaysian company invest in Indonesia without Bank Negara approval?

Any amount if the group has no domestic ringgit borrowing. With domestic ringgit borrowing, up to RM50 million equivalent per calendar year on a corporate group basis from converted ringgit and trade foreign currency accounts. Above that, the company applies through Bank Negara's FEP portal before paying.

Are dividends from an Indonesian subsidiary taxed in Malaysia?

Not if they meet the exemption for resident companies: the income was taxed in Indonesia, whose highest corporate rate is above the 15% floor, and the Inland Revenue Board's conditions are met. It runs to 31 December 2026, with Budget 2026 extending it to 2030. Indonesia withholds 10% under the treaty, or 20% without a valid certificate of domicile.