Convertible loan stocks are securities, usually with fixed coupon rates, which can be exchanged for ordinary shares of the issuer during a pre-defined period. Although there are no specific prohibitions in the SC's "Policies and Guidelines on Issue/Offer of Securities" barring the issuance of convertible loan stocks at nominal values of less than RM1, the SC has, in practice, only approved the issuance of convertible loan stocks by listed companies based on nominal values of RM1.

After studying the practices of other jurisdictions and taking into account the fact that the issuance of convertible loan stocks with nominal values of less than RM1 would facilitate the raising of capital by listed companies in distress, the SC has decided, as a matter of policy, to allow the issuance of such convertible loan stocks under the following principles:

• The convertible loan stocks, whether redeemable or otherwise, are to be issued as part of a restructuring exercise formulated by the Corporate Debt Restructuring Committee or Danaharta Nasional Berhad or undertaken pursuant to section 176 of the Companies Act 1965;
• The convertible loan stocks are to be issued on a rights basis to all shareholders of the listed company. Such loan stocks are not allowed to be issued on a non-rights basis except to creditors under a debt-restructuring exercise, wherein, there should not be any arrangements in whatever form between the creditors and directors/promoters of the listed company to buy back the loan stocks;
• The directors and promoters of the listed company who are recipients of the convertible loan stocks under a rights-issue exercise are not allowed to sell their convertible loan stocks for a period of one year from the date of listing of the loan stocks. In this regard, the affected directors and promoters would be required to give the necessary undertakings to the SC;
• The listed company should strictly comply with the public shareholding spread requirements of KLSE for both the convertible loan stocks and the mother shares at the point of listing of the convertible loan stocks;
• The nominal value of the convertible loan stocks should be based on a denomination which would translate into a convenient and even conversion ratio;
• The convertible loan stocks are to be issued in board lots of 1,000 units;
• The convertible loan stocks are only exchangeable into ordinary shares of the listed issuer based on the par values of the mother shares;
• A security-exchange mechanism or "no-cash option" should be made available as a conversion mode for the convertible loan stocks in addition to, if applicable, other exchange options;
• Warrants are not to be attached to the convertible loan stocks; and
• Adequate disclosures, as required by the KLSE, are to be made by the listed company on the fact that the convertible loan stocks are issued at nominal values of less than RM1.