Guidelines on the Offering of Equity and Equity-Linked Securities and Guidelines on the Offering of Equity and Equity-Linked Securities for the MESDAQ Market (1 February 2008)

1. Are the Guidelines on the Offering of Equity and Equity-Linked Securities for the Main Market (Main Board and Second Board) and MESDAQ Market new guidelines?
Yes. The Guidelines on the Offering of Equity and Equity-Linked Securities replace the existing “Policies and Guidelines on Issue/Offer of Securities” and all related guidance notes while the Guidelines on the Offering of Equity and Equity-Linked Securities for the MESDAQ Market is SC’s inaugural, comprehensive set of guidelines on the offering of equity and equity-linked securities for the MESDAQ Market. The Guidelines on the Offering of Equity and Equity-Linked Securities for the MESDAQ Market replace the “Guidelines for Initial Public Offerings and Listings on the MESDAQ Market”, the relevant provisions of the Listing Requirements of Bursa Malaysia Securities Berhad for the MESDAQ Market adopted by SC on 1 January 2005 and any other relevant guidance notes issued by the SC.
2. What is the major thrust of the latest guidelines?
These latest guidelines are issued to further enhance the attractiveness and competitiveness of Malaysia as a fundraising and listing destination. While the main focus is the liberalisation and rationalisation of requirements, there are also several areas of enhancement.
3. Are there any changes in focus for the three boards i.e. Main Board, Second Board and MESDAQ Market?
No. The Main Board will remain the platform for the listing of large companies and specific companies (i.e. p roperty development, property investment, construction, financial services, trading/retailing, shipping/transportation and infrastructure project companies and companies with predominantly foreign-based operations), the Second Board for medium-sized companies and the MESDAQ Market for high-growth and technology-based companies.
4. What aspects of the guidelines were liberalised?
There are many changes in the new Equity Guidelines. Amongst the more notable ones are as follows:

  • Companies with foreign-based assets/operations are now subject to the same listing criteria applicable to companies with domestic operations.
  • Property development companies seeking listing are no longer required to have a minimum land bank of 500 acres.
  • Property development and construction companies are now allowed to seek listing via market capitalisation route.
  • Acquisitions of significant assets that are used for the existing core business of the company are no longer subject to the SC’s approval unless such acquisitions are satisfied by an issue of securities.
  • MESDAQ-listed companies are now permitted to undertake acquisitions resulting in significant changes in their business direction.
  • Removal of the mandatory requirements for submissions of financial forecasts, except for distressed listed companies.
5. With more liberal requirements, would there be ‘lesser’ quality corporations being listed on Bursa?
The liberalisations were made after benchmarking against international practices, taking into consideration the peculiarities of our market and after ensuring sufficient safeguards for investor protection.

In addition, a greater role and higher levels of accountability are expected of principal advisers, directors and promoters of corporations. Greater onus is placed on issuers and principal advisers to justify the appropriateness of corporate proposals and the benefits to the corporation and shareholders.

6. What type of acquisition does not require the approval of the SC under the latest guidelines?
Acquisitions of current assets or assets such as property, plant, machinery and equipment, that are used for the existing core business of the listed corporation, regardless of size, does not require SC’s approval unless such acquisitions are satisfied by an issue of securities.
7. What would the SC deem a suitable company for listing?
The SC would like to stress that the guidelines lay out the minimum standards to be met by an applicant. Although adherence to quantitative and qualitative requirements forms the core focus of assessment, the review of an application covers a wider breadth of issues, such as the company’s corporate governance standards.

It is also important to note that viable businesses in itself do not necessarily translate into suitability for listing. The latest guidelines address this concern by providing a list of suitability criteria and clarifying the qualitative attributes expected of applicants.

There are no particular industries that the SC favours or otherwise, and similarly there are no particular restrictions on the type of companies to be listed on Bursa Securities.

8. What would the SC require to be submitted in the applications on proposals relating to the latest guidelines?
The requirement on content of applications is prescribed in the appendices to the guidelines.
9. My application documents have been prepared based on the old guidelines and I am ready to submit my application any day. Now that there are new guidelines, must I revamp my application documents?
The effective date of the guidelines is 1 February 2008. However, applicants are given the choice to submit their applications based on the old guidelines until 30 April 2008. Thereafter, all applications are required to conform to the latest guidelines.
10. A financial forecast has already been prepared and reviewed by the Reporting Accountants. Should this still be submitted as part of the application?
If the proposal involves a distressed listed company, the financial forecast has to be furnished as part of the submission, in addition to the submission of the management’s thorough discussion and analysis of business, financial conditions and prospects of the listed group.

For initial public offerings and acquisitions resulting in a significant change in the business direction or policy of a listed company, applicants may still submit the financial forecast if they wish to do so. However, the management’s discussion and analysis of business, financial conditions and prospects of the listed group has to be included as part of the submission.

11. What are the SC’s timelines for evaluation of corporate proposals under the new guidelines?
The consideration timeframes adopted by the SC for corporate proposals involving equity and equity-linked securities are summarised as follows:

No. Type of Corporate Proposal for Equity and Equity-Linked Securities

Time Charter 1 (working days)

1. Public Offerings and Listings

  (a) Public offerings and primary listings of companies (including foreign corporations) on Bursa Securities

    (i) Companies with market capitalisation of at least RM500 million upon listing on Bursa Securities

21 days

    (ii) Companies with market capitalisation of less than RM500 million upon listing on Bursa Securities

60 days

  (b) Secondary listings of foreign corporations on Bursa Securities

21 days

  (c) Cross listings of Malaysian-incorporated listed companies on foreign stock exchanges

60 days

No. Type of Corporate Proposal for Equity and Equity-Linked Securities

Time Charter 1
(working days)

2. Issue of Securities by Listed Companies

  (a) Issues of securities under general mandate 2

1 day

  (b) Stand-alone rights issues of securities 3

5 days

  (c) Other issues of securities

21 days

3. Structured Warrants

  (a) Master proposals (base prospectus)

21 days

  (b) Specific launch proposals (term sheet)

4 days

4. Acquisitions and Disposals of Assets

  (a) Acquisitions of assets financed by issuance of equity/ equity-linked securities

21 days

  (b) Acquisitions or disposals of assets resulting in a significant change in the business direction or policy of a listed company

60 days

5. Proposals by Distressed Listed Companies

60 days

6. Transfer of Listing

21 days

7. Other Corporate Proposals

21 days

Notes:
1 On the basis of complete submission of the application documents and no major corporate governance concerns.
2 Issuance of new shares of up to 10% of the listed company’s issued and paid up capital and on the basis of full compliance with the Guidelines on the Offering of Equity and Equity-Linked Securities or Guidelines on the Offering of Equity and Equity-Linked Securities for the MESDAQ Market.
3 On the basis of full compliance with the Guidelines on the Offering of Equity and Equity-Linked Securities or Guidelines on the Offering of Equity and Equity-Linked Securities for the MESDAQ Market.
12. Are structured products, particularly equity-linked notes, covered under the Guidelines on the Offering of Equity and Equity-linked Securities (Equity Guidelines)?
No, the Equity Guidelines are not applicable to structured products (including equity-linked notes). However, a separate guideline – Guidelines on the Offering of Structured Products, addresses equity-linked notes.