SC Introduces Flexibilities to Facilitate the Issue, Offer and Listing of Securities

Kuala Lumpur, 10 May 2001

The Securities Commission (SC) is pleased to announce the introduction of several flexibilities to facilitate the issue, offer and listing of securities by Malaysian companies. The flexibilities are effected through changes and amendments made to certain existing requirements in the SC's "Policies and Guidelines on Issue/Offer of Securities". The flexibilities are introduced in part to support the gradual liberalisation of the Malaysian capital market regulatory framework, as the SC moves towards the implementation of full disclosure-based regulation (DBR). These changes are part of the overall objectives and recommendations in the Capital Market Masterplan of making the Malaysian capital market the preferred fund-raising centre for Malaysian companies and to enhance the efficiency of the overall fund raising process.

In liberalising the regulatory criteria in these areas of issue, offer and listing of securities, the SC has taken note of the less restrictive regulatory framework in other benchmarked jurisdictions, namely, the United States of America, United Kingdom, Australia, Hong Kong and Singapore. The SC is also cognizant of the current weak market conditions which may hinder the process of fund-raising by viable and healthy companies and, to this end, the flexibilities introduced are designed to alleviate some of the problems faced by such companies in raising funds from the capital market.

The flexibilities introduced are summarised below:-

A. Revision to the Historical Profit-Performance Requirement for Initial Public Offerings and Reverse Take-Overs/Back-Door Listings on KLSE
Currently, a company seeking listing on Kuala Lumpur Stock Exchange (KLSE) is required to fulfil the following historical profit-performance requirement:-
(i) An uninterrupted record of after-tax profit for each of the past 3 or 5 full financial years;
(ii) An aggregate after-tax profit of a minimum amount (Main Board: RM30 million/Second Board: RM12 million) for the past 3 or 5 full financial years; and
(iii) A minimum after-tax profit of a requisite amount (Main Board: RM8 million/Second Board: RM4 million) for the most recent financial year.
Thus, the fulfilment of the historical profit-performance requirement is based on either a 3-year or 5-year track record.
Changes have now been made to allow companies seeking listing on KLSE to fulfil the historical profit-performance requirement on the basis of a 4-year track record, in addition to the 3-year or 5-year track record.
Flexibilities are also given to Government-owned companies to seek listing on KLSE without fulfilling the uninterrupted profit record test of the historical profit-performance requirement. Such companies, however, are still required to fulfil the other 2 tests of having the necessary aggregate after-tax profit and the minimum after-tax profit for the latest financial year. A "Government-owned company", for purposes of the flexibilities, is defined as a company in which the Minister of Finance, by virtue of the Minister of Finance (Incorporation) Act 1957, holds a "Golden Share", at the point of listing, and has equity ownership of more than 50% held either directly or indirectly.
With the changes in the historical-profit performance requirement for companies seeking listing on KLSE, consequential changes have also been made to the track-record requirement governing reverse take-overs and back-door listings on KLSE, to allow for the fulfilment of such requirement on a 4-year basis as well, in addition to the present 3-year or 5-year basis.
B. Allowing the Issuance and Listing of Irredeemable Convertible Unsecured Loan Stock (ICULS) as Part of a Flotation Scheme on KLSE
The issuance and listing of ICULS by companies as part of their flotation scheme on KLSE has generally not been allowed by the SC in the past. Companies seeking listing are now given the flexibility to issue and list ICULS, provided that the newly-introduced requirements pertaining to disclosure, promoter shareholdings, public shareholding spread and conversion price of the ICULS are complied with.
C. Abolishing the Preferential Allocation Limit of 10 Lots Per Person for Directors, Employees and/or Other Persons in Relation to a Flotation Scheme on KLSE
Currently, the SC allows a company seeking listing on KLSE to allocate up to 5% of the company's issued and paid-up capital, under a preferential allocation scheme, to the following:-
(i) The directors and employees of the company seeking listing as well as directors and employees of its subsidiary/subsidiaries and parent company; and
(ii) Other persons who have contributed to its success (such as suppliers, distributors, dealers and customers), provided that the shares are allocated to business entities, and not to their officers or employees except where the business entities are sole proprietorships or partnerships.
The preferential allocation, which is also commonly known as "Pink-Form share allocation", was previously limited to 10,000 shares per person.
While the 5% overall limit of the preferential allocation scheme is retained, the limit of 10,000 shares per person has now been removed. Greater disclosure in regard to the allocation would, however, be required to be made in the prospectus issued in conjunction with the listing of the company.
D. Removal of the Merit-Based Criteria for Bonus Issues Arising from Capitalisation of Share Premium and Other Reserves
A company listed on KLSE is now allowed to undertake bonus issues of securities through the capitalisation of share premium as long as the availability of the share premium is verified and confirmed by the external auditors/reporting accountant to the company. The company is no longer required to fulfil the following merit-based criteria stipulated by the SC previously:-
(i) That the company must be profitable, with an uptrend in profits over the past 3 years and future profits which are able to support the additional shares arising from the bonus issue;
(ii) That the company must be capable of at least maintaining the absolute quantum of dividend declared and paid in the previous financial year;
(iii) That the proposal for the bonus issue must be based on annual audited accounts for a full financial year;
(iv)That, if the share premium arose from a rights issue and/or a public issue, capitalisation can only be done after a lapse of at least one year from the date of such issue; and
(v) That the resultant enlarged share capital should be fully backed by net tangible assets, exclusive of goodwill.
Listed companies wishing to undertake bonus issues through the capitalisation of revaluation reserves are now also allowed to carry out such exercises under liberal circumstances without the need to fulfil the previously-stipulated merit-based criteria. However, certain requirements on valuation of assets and retention of reserves would have to be complied with.
The flexibilities on the undertaking of bonus issues by listed companies are also accorded to companies seeking listing on KLSE.
E. Revision to the Guidelines on Employee Share Option Schemes
The SC's Guidelines on Employee Share Option Schemes (ESOS) have been fully revised to cater for the establishment of a more market-based and performance-based ESOS by companies. The major revisions include the following:-
(i)Removal of the 500,000-share limit per person that can be allocated to directors and employees. Companies would now be allowed to allocate any amount of shares under ESOS, at the discretion of their directors, to individual directors and employees, provided that -
the total number of shares to be offered under the scheme does not exceed 10% of the issued capital of the company at any one time;umber of shares to be offered under the scheme does not exceed 10% of the issued capital of the company at any one time;
not more than 50% of the shares available under the scheme should be allocated, in aggregate, to directors and senior management of the company; and
not more than 10% of the shares available under the scheme should be allocated to any individual director or employee who, singly or collectively through his/her associates, holds 20% or more of the issued and paid-up capital of the company.
(ii) Allowance for the ESOS to be operational for a maximum period of 10 years, instead of 5 years now; and
(iii) Allowance for the ESOS to be terminated in mid-stream, provided that the By-laws of the ESOS contain a termination clause that empowers the company to terminate, and subject to compliance with certain requirements prescribed by the SC, such as the need to obtain the written consent of all option-holders who have yet to exercise their options.
All the flexibilities introduced are effective with immediate effect and are applicable to new applications to be submitted to the SC and, if so requested and upon re-submission of consequential changes being made to the SC, to applications outstanding with the SC and those applications which have already been approved but pending implementation.

The relevant Guidelines incorporating the flexibilities are available here.


about the SC
The Securities Commission Malaysia (SC) was established on 1 March 1993 under the Securities Commission Act 1993 (SCA). We are a self-funded statutory body entrusted with the responsibility to regulate and develop the Malaysian capital market.

General Line: +603-6204 8000
General Email: [email protected]
© Copyright Securities Commission Malaysia.  Contact Us   |    Disclaimer   |   The site is best viewed using Microsoft Edge and Google Chrome with minimum resolution of 1280x1024
Generic Popup