SC relaxes conditions for injection of foreign assets and multinational companies into Malaysian listed companies to further facilitate corporate restructuring
The Securities Commission (SC) today announced the relaxation of several conditions for the injection of foreign assets and multinational companies (MNCs) into Malaysian listed companies to further facilitate corporate restructuring. The latest relaxations provide listed companies, especially those which are distressed, with more options to acquire quality assets to diversify their income base. The relaxations are in line with the measures announced by the Prime Minister in his Budget Speech 2002, to facilitate the restructuring of companies.
Acquisition of Foreign Assets by Malaysian Listed Companies
The flexibilities in relation to the injection of foreign assets into Malaysian listed companies have been incorporated into the revised SC Guidelines on Acquisition of Foreign Assets, which replaces Chapter 19 of the SC’s Policies and Guidelines on Issue/Offer of Securities. The revised guidelines are available on the SC website by clicking here.
With effect from the date of this announcement (8 May 2002), companies listed on Kuala Lumpur Stock Exchange (KLSE) may acquire foreign assets that are either owned by Malaysians or foreigners through the issuance of securities, notwithstanding that the acquisition is above the 25% threshold based on the following ratios:
- The consideration for the foreign assets divided by the net tangible assets of the listed company;
- The consideration for the foreign assets divided by the aggregate market value of all the ordinary shares of the listed company prior to announcement of the acquisition; or
- The consideration shares to be issued divided by the equity share capital of the listed company.
The SC now allows the acquisition of such foreign assets to take place, provided that:
- The assets to be acquired are quality assets;
- The acquisition is financed entirely through the direct issuance of new securities to the vendors of the foreign assets;
- There will be no net outflow of funds from the country for a period of 3 years after completion of the acquisition; and
- The acquisition brings benefits to the listed company and the country.
With the relaxation, the restrictions imposed previously, i.e. inter alia the requirement for the foreign assets to be Malaysian-owned and the requirement to bring back research and development activities to Malaysia for acquisitions exceeding the 25% threshold, are no longer applicable.
Injection of Multinational Companies into Distressed Listed Companies
With effect from the date of this announcement (8 May 2002), unlisted multinational companies that have established their presence in Malaysia need not comply with the National Development Policy (NDP) requirement for 30% Bumiputera equity participation when seeking listing on KLSE via a reverse take-over of, or a back-door listing into, distressed listed companies.
This flexibility, however, only applies to foreign-owned companies incorporated in Malaysia or foreign-owned corporations registered in Malaysia that are already exempted by the Ministry of International Trade and Industry (MITI) from complying with the said NDP requirement.
To continue enjoying the exemption from the 30% Bumiputera equity participation requirement, these MNCs are expected to continue to meet the criteria set out by MITI in respect of the exemption.
(The term “distressed listed companies” is as defined in the SC’s guidelines entitled “Flexibilities for Distressed Listed Companies“, issued on 3 September 2001.)
8 May 2002