Frequently-Asked Questions

The Malaysian Code on Take-Overs and Mergers 2010 (2010 Code) and Practice Note (PN) 2010

(Effective from 15 Dec 2010)


When would the 2010 Code be applicable?

The 2010 Code applies to different types of proposals as follows:

Type of proposal

The Code applies when

Take-over offer

  • take-over notices are issued on or after the effective date of the 2010 Code; or

  • offer documents are submitted to the SC for clearance on or after the effective date of the 2010 Code

Selective capital repayment or scheme of arrangement

  • circulars are dispatched on or after the effective date of the 2010 Code

Exemptions under PN 16 & PN 24 (previously known as PN 2.9.1 and PN 2.9.10) in relation to the issuance of new securities and an offeree purchasing its own voting shares or voting rights respectively

  • independent advice circulars are issued on or after the effective date of the 2010 Code

Other exemptions/rulings

  • applications are made to the SC on or after the effective date of the 2010 Code


What are the major amendments introduced in the 2010 Code?

The major amendments are:-


All companies (including foreign incorporated companies) and real estate investment trusts (REITs) listed on Bursa Malaysia are subject to the 2010 Code;


The 2010 Code applies to schemes of arrangement, compromise, amalgamation and selective capital reductions; 


Presumption that the directors of a company and shareholders of the company as persons acting in concert if there is an arrangement between them which restricts the director or the shareholder from making or accepting a take-over offer, or changing his shareholdings in the company. Partners of a partnership are also presumed to be persons acting in concert. In addition, the 2010 Code provides guidance on situations where the concert party relationship can be rebutted;


The 2010 Code provides guiding principles on the conduct expected of parties involved in take-over offers, which include observing good standards of commercial behavior, providing information to shareholders to enable them to make informed decisions, applying a high standard of care to documents and information provided to shareholders, prohibiting activities that distort transparency and orderliness in the market, ensuring take-over offers are undertaken in accordance with timelines and prohibiting actions that could frustrate an offer. The guiding principles apply to offerors, advisers and boards of offerees;


Specifically allowing a higher acceptance threshold in voluntary offers as a condition of the offer;


The 2010 Code has reduced the settlement period from twenty-one (21) days to ten (10) days for settlements via cash consideration and fourteen (14) days for settlements using share consideration. This will enable accepting shareholders to be paid faster;


The 2010 Code requires a potential offeror or a potential offeree to make an announcement on possible offers where there are unusual changes in the price of the potential offeree’s shares. A potential offeror is required to announce its intention to make a take-over offer or otherwise. If a potential offeror denies that he is making an offer for the offeree, he is prohibited from making a take-over offer within a period of 6 months for the offeree;


Requirement to inform the SC in situations where any documents or information provided to shareholders turn out to contain false or misleading information or material omissions, or where material changes in circumstances occur subsequent to the dispatch of documents or the dissemination of information;


Applications for exemptions from mandatory offer obligations arising from the issuance of new securities or share buy-back schemes will only be made in one stage instead of two stages; 


Under the 2010 Code, an independent adviser who has been appointed by the board of an offeree will need to declare its independence from any conflict of interest or potential conflict of interest to the SC within three (3) days of its appointment. No approval from the SC will be required for the appointment itself;


The 2010 Code prescribes three (3) additional actions which would frustrate a take-over offer:


the disposal of assets or liabilities that are a condition to the take-over offer;


the selling of treasury shares of the offeree; or


any action that causes the offeree or subsidiary/associate company of the offeree to purchase, redeem or provide financial assistance to purchase or redeem, shares in the offeree.


Who is eligible to act as an adviser in making applications on take-over matters to the SC?

The following categories of persons may act as an adviser in a take-over offer and compulsory acquisition –

  • An investment bank;

  • A universal broker;  

  • A 1+1 broker who is a holder of a Capital Markets Services License carrying on the regulated activity of advising on corporate finance; or

  • An Islamic bank (with regard to shariah-compliant take-over offer and compulsory acquisition application).

However, the SC may, on case to case basis, approve any person who has necessary expertise and experience in corporate finance matters to submit any application on take-over offers, merger and compulsory acquisition to the SC. Such person must consult the SC at the earliest opportunity before making any application on take-over offer, merger and compulsory acquisition to the SC.


Is an independent adviser appointed in relation to a takeover required to disclose its dealings in the shares of the offeree pursuant to section 33 of the 2010 Code?

Yes, an appointed independent adviser for a takeover offer is deemed as a connected person for the purposes of section 33. The requirement to disclose dealings under section 33 will also apply to other members in the independent adviser’s group. Disclosures to the SC must include detailed information such as the identity of the persons who deal in the shares of the offeree, transaction prices and quantum, etc.


What are the timelines for the dispatch of offer documents and independent advice circulars under the 2010 Code?

The existing timelines currently being practiced shall apply under the 2010 Code. An offer document is to be dispatched within twenty one (21) days from a written notice, i.e. T1+ 21, where T1 is the date of the sending of the written notice. An independent advice circular would need to be dispatched by T2+10, where T2 is the dispatch date of the offer document. However, if the dispatch date of an offer document or an independent advice circular falls on a day which is not a market day, the dispatch may be made on the following market day.


Can an offeror lower the original acceptance condition of a take-over offer during the offer period?

Yes, but this is allowed for only voluntary take-over offers. To be entitled to do this, the offeror must state in the offer document that he reserves the right to lower the acceptance condition and the revised acceptance level must at least be more than 50% of the voting shares or voting rights of the offeree.


How do you compute the acceptance level in a voluntary take-over offer?

The holdings of the persons acting in concert with the offeror would not be aggregated in the computation of the acceptance level unless the persons acting in concert are joint offerors with the offeror in the take-over offer.


When would cash consideration be necessary in a voluntary take-over offer?

Cash consideration is necessary if the offeror or his persons acting in concert has acquired:


at least 10% offeree shares by cash within six (6) months before the start of the offer period; and


any offeree shares by cash during the offer period.

In addition, the SC may also determine that it is necessary to provide cash consideration in certain cases to ensure fair and equal treatment to all shareholders.


How would offeree shareholders be informed of any extensions to the close of a take-over offer?

Under subsection 25(5), the offeror shall give at least fourteen (14) days notice in writing to the offeree shareholders before closing the take-over offer. The notice for the extension would be made via –


an announcement to the public in a press notice;


an announcement to the relevant stock exchange in Malaysia if the voting shares or voting rights of the offeree or offeror are listed on the relevant stock exchange in Malaysia; and


written notice to the offeree shareholders.

PN 25 of the Code 2010 further provides that announcements on new closing dates of an offer shall be made at least two (2) days before the original closing date.

An extension of time to close an offer must be at least fourteen (14) days from the first closing date unless the take-over offer has become unconditional prior to that. A written notice of not less than fourteen (14) days is to be sent for any subsequent extension of the closing date.

Even though the written notice of the new closing date of the take-over offer is provided to the offeree shareholders, the offeree shareholders are encouraged to keep themselves updated on the latest developments on the offer through press releases and Bursa Securities Malaysia Berhad website.


How would offeree shareholders know that the offeror has reached the threshold for invoking compulsory acquisition?

Under section 32 of the 2010 Code, the offeror would need to –


inform the SC in writing;


announce to the public in a press notice; and


announce to the relevant stock exchange in Malaysia, if the offeror or the offeree are listed on a relevant stock exchange in Malaysia,

before 9 a.m. on the next market day, after reaching the threshold.


Can an offeror acquire further voting shares in the offeree subsequent to an offer succeeding and closing?

Yes. However, he is not allowed to acquire voting shares in the offeree on more favorable terms than the offer within 6 months after the close of the offer.


Is there any exemption from the 2010 Code for take-over offers by way of a scheme of compromise, arrangement, amalgamation or selective capital reduction?

PN 44 of the 2010 Code provides a list of provisions where exemptions could be sought and the basis of consideration by the SC where exemptions could be granted.