i. Chain-Listing

For the listing of subsidiary/associated companies of a listed holding company, the threshold level of after-tax profits and/or net tangible assets contribution is now elevated from 35% to 50%.

ii. Profit Guarantee/Continuous Participation in Management

Parties giving profit guarantee in direct listing or reverse take-over/back-door listing cases would no longer be required to provide an undertaking that they will not effect a significant dilution of their shareholdings. The affected parties, however, would still have to give an undertaking that they will continue to participate in the management of the company for a period of three (3) years from the date of admission of the company to the Main Board or Second Board, or from the date of completion of the acquisition, as the case may be.

In addition, all Second Board applicant companies for direct listing would now be required to provide a profit guarantee in the form of bank guarantee instead of being given the option of either profit guarantee or moratorium on disposal of shares.

iii. Shareholding Spread

For the purpose of meeting the requirement on the 25% public shareholding spread for initial public offerings, the shareholdings held by associates of a substantial shareholder should be excluded. Such associates are those who fall under any one of the following categories:-

• A corporation which is a related corporation;
• A person who is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the substantial shareholder;
• A person in accordance with whose directions, instructions or wishes the substantial shareholder is accustomed or is under an obligation, whether formal or informal, to act;
• A body corporate which is, or the directors of which are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the substantial shareholder; or
• A body corporate in accordance with the directions, instructions or wishes of which, or of the directors of which, the substantial shareholder is accustomed or under an obligation, whether formal or informal, to act.

iv. Allocation of Securities to Foreign Employees

Foreign employees who are not based in their country of origin would be allowed to participate in "pink-form" share allocation schemes provided that such employees have served the company seeking listing, its operating subsidiary/subsidiaries or immediate holding company on a full-time basis and for a continuous period of at least two (2) years and are expected to continue serving for another period of at least one (1) year.

v. Transfer to Main Board

Flexibilities would now be given in regard to compliance with the profit uptrend requirement for Second Board companies seeking transfer to the Main Board, provided that the following conditions are met:-

• The company achieved its profit forecast in its first full year of listing and the profit level has at least been maintained at the same level in the subsequent years; and
• In the event there is a decline in actual profit in the subsequent year(s) following the forecast year,

- the decline should not be more than 10% of the profit forecast and, if the decline is more than 10%, the earnings performance of the company (measured in terms of return on shareholders' funds and other financial indicators) should be comparable to the industry's average;

- the decline occurred only in one (1) year of the track record years and has been reversed in the subsequent years with the actual profits achieved in the subsequent years being higher than the profit achieved prior to the year when the decline occurred; and

- the decline should not be due to inherent structural weaknesses in the company.

Second Board companies which were involved in reverse take-over/ back-door listing exercises would only be allowed transfer to the Main Board upon the new injected assets meeting the Main Board track-record requirements or upon the original core business of the Second Board companies meeting the normal requirements for transfer to the Main Board.

vi. Listing of Property-Development Companies

Direct listing of property-development companies can only be allowed on the Main Board. For reverse take-over and/or back-door listing of property-development companies/projects, such companies/projects to be injected into a listed company must meet the following conditions:-

• The property-development company/project to be injected into either a Main Board or Second Board company should have reasonable profits for the past three (3) years with a minimum aggregate after-tax profit of RM15 million;
• The prospective average after-tax earnings per share (over the forecast/projected period) of the listed company after the acquisition should not be less than 15% of par value on fully diluted basis; and
• The property-development company/project should have good prospects of future profits and should at the time of application possess sufficient land-bank at good locations or in growth areas to be able to sustain development and earnings at reasonable levels over a period exceeding five (5) years (where at least 30% of the land-bank should have been converted for development at the time of application).

vii. Private Placement of Securities

The issue price of private placement shares should now be based on the weighted average market price of the shares for the past five (5) days prior to placement, and not on the lower of the weighted average market price of the shares for the past five (5) days or the closing market price prior to placement. Where appropriate, a discount of up to 10% will be allowed.

To facilitate a listed company implementing a placement exercise expeditiously under a favourable market condition, a back-to-back private placement, involving an existing substantial shareholder placing out existing shares of the company to placees and the company subsequently issuing new shares to the said substantial shareholder, may be allowed to be undertaken by large Main Board companies, provided that certain conditions, such as the following, are met:-

• The company must justify the urgent need for funds;
• Proceeds to be derived by the existing substantial shareholder from the placement of shares are to be kept in an escrow account and all interests earned in the escrow account, if any, should accrue to the company; and
• The said existing substantial shareholder gives a declaration to the SC that he/she/it would not derive any benefits from the back-to-back private placement arrangement.

viii. Reverse Take-Over and/or Back-Door Listing of Financial Services Company

Financial services companies would not be allowed to be injected into Second Board companies under reverse take-over and/or back-door listing exercises. This is in line with SC's existing policy that financial services companies can only be listed on the Main Board.

ix. Related-Party Transactions

A related party would now include the following:-

• A director of an associated company of a listed public company; and
• An associated company of a body corporate substantial shareholder or an associated company of the parent company of the substantial shareholder.

Exemptions from complying with the requirements on related-party transactions under Chapter 20 of the Issues Guidelines are now being given to two (2) additional situations, as follows:-

• Where a related-party transaction is entered into in the ordinary course of business between a listed public company and its wholly-owned subsidiary/subsidiaries; and
• Where a listed public company has obtained a waiver from the stock exchange for the conduct of an Extraordinary General Meeting to seek approval of shareholders for a related-party transaction, subject to the condition that the listed public company is to disclose such transaction in its annual report.

x. Submission Requirements for Cash Acquisitions

Applications for cash acquisitions which are to be refinanced later through the issuance of securities are allowed to be made via abridged submissions containing information which is less detailed and onerous compared with the normal submissions for corporate proposals involving the issue/listing of securities. Such cash acquisitions, however, must not -

• be related-party transactions; or
• fall under reverse take-over and/or back-door listing schemes.