Bumiputera Equity Requirements For Public Listed Companies

Measures announced by the Prime Minister of Malaysia, YAB Dato’ Sri Mohd Najib bin Tun Abdul Razak at Invest Malaysia, 30 June 2009

General

What proposals would be considered by the SC under the Bumiputera equity requirement?
The proposals that will be considered by the SC under the Bumiputera equity requirement are those proposals involving listing of corporations, reverse take-over (RTO) and transfer of listing.
Updated: 1 November 2012

Listings of real estate investment trusts or business trusts on Bursa Malaysia Securities Berhad (Bursa Securities) are required to be submitted under the Bumiputera equity requirement.
Equity conditions would not be imposed for: a. Listing of a corporation which does not involve an offer of securities to the general public through a balloting process whereby a listed corporation intends to undertake a restricted offer for sale to its shareholders or distribution in specie of the securities of the corporation for which listing is sought; b. Listing or acquisitions/mergers of a corporation which has Bumiputera shareholding of more than 50% equity interest before and after the proposal; c. Acquisitions/mergers of listed corporations where the relevant listed corporations have previously complied with the Bumiputera equity condition imposed pursuant to the listing; and d. Acquisitions/mergers which do not result in a change in the ultimate shareholders and their interests in the relevant listed corporations.
When will the policy take effect?

The policy will take effect immediately.
Do corporations need to comply with any Bumiputera equity requirement imposed by the relevant Ministries as part of their licensing conditions?

Yes, where relevant, corporations must obtain sector regulator’s approval prior to submitting any proposals to the SC.

IPO

What is the Bumiputera equity requirement for corporations seeking listing on the Main Market?
Corporations seeking listing on the Main Market must allocate at least 12.5% of their enlarged issued and paid-up share capital to Bumiputera investors.

Currently, all corporations seeking listing must meet the 25% public spread requirement under the Bursa Malaysia Listing Rules.

Corporations with Malaysian-based operations seeking listing on the Main Market are required to allocate 50% of the public spread requirement to Bumiputera investors at the point of listing. This includes the portion made available for subscription via balloting, 50% of which are to be made available to retail Bumiputera investors. Hence, the Bumiputera equity requirements will be subsumed under the public spread requirements

Corporations with Malaysian-based operations are defined as companies deriving more than 50% of their profits after tax from operations based in Malaysia.

Updated: 1 November 2012
A Special Purpose Acquisition Company or “SPAC” is required to allocate at least 12.5% of its enlarged issued and paid-up share capital to Bumiputera investors to be recognised by Ministry of International Trade and Industry (MITI) or Ministry of Finance (MoF) (if a licensed financial institution) within one year after completion of the qualifying acquisition.
Completion of the qualifying acquisition means the point of time whereupon all conditions precedent set out in the sale and purchase agreement governing the qualifying acquisition have been fulfilled.
How do corporations comply with the Bumiputera equity requirement?
The 25% public spread requirement is generally fulfilled by corporations in the following manner:-
Corporations are expected to make available up to 5% for subscription by the general public via the balloting process; and
The balance of up to 20% can be placed out to non-substantial shareholders i.e. those owning less than 5% each.

Under the policy, corporations must apply to MITI, or to MOF (if licensed financial institutions) for the allocation of up to the 50% of the public spread requirement shares to MITI or MOF recognised Bumiputera investors.

When the corporation offers up to 5% of its issued capital for subscription via the balloting process, 50% of these shares must be offered to Bumiputera public.
What if the Bumiputera allocation is not fully subscribed?
In the event that MITI or MOF approved Bumiputera investors take up less than the 10% of the shares offered to them, the balance of the shares that are unallocated will be made available for subscription by the Bumiputera general public in addition to the mandatory requirement under the IPO balloting process. Say only 8% of the shares offered are taken up by MITI and MOF approved Bumiputera investors, the remaining 2% of the shares will be added to the balloting portion, thus making the total available for subscription by the Bumiputera public to be 4.5%.

The corporation will be deemed to have complied with the Bumiputera equity requirement once it has completed this process.

Updated: 1 November 2012
The corporation may reallocate any unsubscribed MITI or MoF shares to institutional investors before making the shares available to the Bumiputera general public.
If a corporation has existing Bumiputera shareholders, can the Bumiputera shareholders be recognised to fulfill the Bumiputera equity requirement?

Yes, subject to recognition by MITI /MOF and only if the Bumiputera shareholder is not a substantial shareholder i.e. holds less than 5% of the issued and paid-up share capital.

Example:
Existing Bumiputera shareholders: 8%, each holding less than 5%
Bumiputera equity requirement to be fulfilled: 12.5% – 8% = 4.5%
What if the corporations have met with the 12.5% Bumiputera equity requirement, do they still need to offer 50% of the shares under the balloted public offer portion to Bumiputera investors?

Whenever a corporation undertakes a public balloting exercise, it must make available up to 50% for subscription by Bumiputera public.
Under the Bumiputera equity requirement, does that mean the Bumiputera shareholding in a corporation is restricted to 12.5%?

The 12.5% is the prescribed minimum limit. Of course the Bumiputera shareholding can be higher. For example, in the situation where 20% of the shares are held by existing Bumiputera investors, with the 12.5% Bumiputera public spread requirement, this will potentially bring the total Bumiputera shareholding to 32.5%.
What is the Bumiputera equity requirement for corporations seeking listing on the ACE Market?

For listing on the ACE Market, companies are required to allocate 12.5% of their enlarged issued and paid-up share capital to MITI-recognised Bumiputera investors within 1 year after achieving the profit record required for a listing on the Main Market, or 5 years after being listed on ACE Market, whichever is the earlier.
What should a corporation listed on the ACE Market do to comply with the Bumiputera equity condition after achieving the profit track record or after being listed for 5 years?

For the purpose of complying with the equity condition imposed, the corporation needs to submit to the SC on its proposal to comply with the Bumiputera equity condition within six (6) months from the trigger date.
Does the Bumiputera equity requirement apply to all corporations seeking listing?
The equity requirement only applies to corporations with Malaysian-based operations seeking listing. Corporations with MSC-status, BioNexus-status and corporations with predominantly foreign-based operations are exempted from the Bumiputera equity requirement.

Although the Bumiputera equity requirement does not apply to these corporations, they are, however, required to notify the SC.

Updated: 1 November 2012
The following proposals are exempted from the Bumiputera equity requirement:
Any listing of an MSC-status/BioNexus-status corporation or a corporation with a subsidiary carrying MSC/BioNexus-status which is a major contributor (more than 50%) to the group’s profitability, business or operations for the most recent financial year;
Any acquisition of an MSC/BioNexus-status corporation which results in a significant change in the business direction or policy of a listed corporation;
Any listing of a corporation with predominantly foreign-based operations. The determination for a corporation with predominantly foreign-based operations is based on the profit contribution from domestic and foreign operations of the group for the past year, in which the profits after tax derived from the foreign-based operations are higher than the Malaysian-based operations i.e. more than 50%;
Any acquisition of a corporation with predominantly foreign-based operations which results in a significant change in the business direction or policy of a listed corporation; and
Any listing of an exchange-traded fund or a closed-end fund.

Should these corporations undertake subsequent proposals involving transfer of listing status from the ACE Market to the Main Market or acquisition which results in a significant change in the business direction or policy of the listed corporation, the corporations must submit such applications to the SC and the SC will reassess to determine if such proposals are still exempted.

Subsequent Fund Raising/Corporate Exercise

Are public listed corporations (PLCs) required to make a submission to the SC for subsequent fund raising exercises involving placement of shares?

No. However, where a proposed placement results in the entry of one or more new controlling shareholders of the corporation, a submission must be made to the SC. For issuance of shares which results in the entry of new controlling shareholders, the revised Bumiputera equity condition will be imposed. This is because the entry of new controlling shareholders through a reverse take-over or backdoor listing of assets is treated like an IPO and requires the corporation to meet the IPO guidelines including the Bumiputera equity condition.
What are the Bumiputera equity conditions to be imposed on PLCs in the case of RTO/ acquisitions which results in a significant change in the business direction or policy?

Updated: 1 November 2012

The corporation is required to allocate 12.5% of its enlarged issued and paid-up share capital to Bumiputera investors to be recognised by MITI or MoF (if a licensed financial institution) within one year after registering a profit or three years after the implementation of the proposal, whichever is the earlier.
What are the Bumiputera equity conditions to be imposed on PLCs in the case of transfer of listing?

In the case of a transfer of listing, the PLC is required to comply with the 12.5% Bumiputera equity requirement at the point of transfer.