Further measures to enhance premier status of capital market introduced; flexibilities for distressed listed companies no longer accorded

The Securities Commission (SC) today announced several streamlining measures in relation to its Policies and Guidelines on the Issue/Offer of Securities (Issues Guidelines). These measures are to take effect from 1 January 2005, and form part of a continuous effort to improve the quality of assets and companies listed on Bursa Malaysia Securities Berhad (Bursa Malaysia).

As part of this streamlining exercise, the requirements for injection of assets into listed companies will equally apply for the injection of assets into distressed listed companies (DLCs). Earlier accorded flexibilities, which have largely served their purpose in assisting in the regularisation of these DLCs, will no longer apply.

The admission requirements of financial services companies, shipping/transportation, trading/retailing, property investment holding and infrastructure project companies, whether via a direct listing or back-door listing/reverse take-over (RTO), will be of the same standard.

In addition, the SC has also liberalised its requirements in relation to acquisitions of foreign assets by Malaysian companies.

Flexibilities accorded to DLCs have succeeded in facilitating regularisation

In September 2001, a number of flexibilities for DLCs to aid in the resuscitation of such companies had been introduced by the SC. As such flexibilities have largely served their purpose in assisting in the regularisation of such companies, it is now timely that they be lifted to enable parity of requirements for the injection of assets into listed companies.

The market has seen significant improvement in the conditions of DLCs, particularly with regard to companies with an unsatisfactory level of financial condition, classified under Practice Note 4 (PN4) of the Listing Requirements of Bursa Malaysia. Since PN4 was introduced in January 2001, 128 companies have been classified under the practice note as at 16 December 2004, out of which 73 have regularized their financial condition and 28 have either announced their restructuring plans, submitted them for the authorities’ approval or are in the process of implementing them.

Therefore, for the injection of assets as part of a restructuring scheme, DLCs will no longer be able to rely on a less stringent profit track requirement for such assets. The normal historical profit track record requirements applicable to “healthy” PLCs, as contained in Chapter 12 of the Issues Guidelines, will now apply. Injected assets that meet this higher profit track record requirement will be able to further enhance the financial position of the company.

In addition, the requirement for an investigative audit for re-listing cases will be removed. SC’s enforcement and surveillance efforts will continue, to determine whether the actions of the company’s directors or management leading to corporate failures disclose transgressions of securities laws or compromise the interests of shareholders and the investing public.

Listing requirements for specific companies streamlined

The requirements for the back-door listing/RTO of financial services companies, shipping/transportation, trading/retailing and infrastructure project companies into listed companies are amended to ensure that such companies meet the profit track record requirement for the Main Board, similar to the existing requirements for the direct listing of such companies.

Requirements for the direct listing of property-investment companies are introduced, and the current rules for injection of property-investment assets into listed companies (resulting in a significant change in business direction) will be streamlined with the more stringent requirements applicable to the direct listing of such assets.

The requirements for the listing of such companies will therefore be made consistent, whether the listing is undertaken directly or through a back-door listing/RTO.

Acquisition of foreign assets facilitated further

To facilitate companies to expand their operations abroad, public companies wishing to acquire substantial foreign assets (other than by way of cash) will no longer be required to finance the entire acquisition by way of issuance of securities.

Such companies must demonstrate that they would be acquiring quality foreign assets that bring benefits to them as well as to Malaysia, and that they have obtained the prior approval of Bank Negara Malaysia.

Substantial acquisitions of foreign assets by listed companies resulting in a significant change in business direction will be governed by the existing requirements for back-door listing/RTO under Chapter 12 of the Issues Guidelines. For injections of all foreign-based assets that result in a change of dominant shareholder, the new dominant shareholder must be Malaysian.

Guidance Notes

A set of Guidance Notes to the Issues Guidelines have been issued to implement the above measures. Guidance Notes 2, 6C, 7C, 11, 12B, 13A and 15A will come into effect on 1 January 2005, and can be found at the SC website here. The new requirements will not be applicable to proposals already submitted to SC or announced to Bursa Malaysia prior to this date.

27 December 2004