The Keys to a more Vibrant Capital Market

Cheah Meng Choo examines the liberalisation measures in the Guidelines on the Offering of Equity and Equity-Linked Securities




The Securities Commission (“SC”) issued several sets of new and revised guidelines which took effect on 1 February 2008. The most significant of these guidelines are the Guidelines on the Offering of Equity and Equity-Linked Securities (“New Guidelines”) which replaces the Policies and Guidelines on Issue/ Offer of Securities dated 1 April 2003 which together with the related Guidance Notes and the Format and Content of Applications, formed the previous guidelines issued by the SC (“Previous Guidelines”).


As part of the efforts to create a more competitive capital market environment in Malaysia and to strengthen the position of Bursa Malaysia Securities Berhad (“Bursa Securities”) as the preferred market for fund-raising by both domestic and foreign corporations, the SC has liberalised various requirements for listing of securities on Bursa Securities. These liberalised requirements are benchmarked against international best practices.


Although there are many changes to the Previous Guidelines, this article highlights the more notable changes in the New Guidelines.




One of the routes available for listing on Bursa Securities is for the applicant to satisfy the requirements of the Market Capitalisation/Profit Test.


Under the Previous Guidelines, an applicant with foreign-based assets or operations which seeks a listing on Bursa Securities under the Market Capitalisation/Profit Test was required to have a total market capitalisation of at least RM1 billion based on the offer price stated in its prospectus and the enlarged paid-up share capital upon listing. Further, the applicant must also have an after-tax profit of at least RM60 million or its equivalent based on the audited accounts for the most recent full financial year prior to the submission of its listing application.


The aforesaid requirements have been liberalised under the New Guidelines and companies with foreign-based assets or operations which seek a listing under the Market Capitalisation/Profit Test are now subject to the same criteria as companies that have domestic operations. Paragraph 5.03(b) of the New Guidelines now requires the applicant to have a total market capitalisation of at least RM500 million based on the offer price stated in the prospectus and the enlarged issued and paid-up ordinary or voting share capital upon listing. The minimum after-tax profit requirement is reduced to RM30 million based on audited financial statements for the most recent full financial year prior to submission to the SC.




The Previous Guidelines prohibited companies involved in property development and construction activities from seeking listing on Bursa Securities via the Market Capitalisation/Profit Test route. This prohibition has been removed and such companies may now seek a listing on the Main Board if they satisfy the Market Capitalisation/Profit Test requirements under the New Guidelines.


Under the Previous Guidelines, a property development company seeking a listing is required to have a land bank of at least 500 acres situated at strategic locations or in growth areas and which enables the applicant to sustain development and profits at reasonable levels for at least 5 years after listing. The requirements for a minimum land bank and the location thereof have been dispensed with under the New Guidelines. It is now sufficient for the applicant to be a reputable property developer and to have, at the time of application, sufficient ongoing and planned projects to sustain development and profitability for at least 5 years after listing.


Similarly, the requirements for a construction-based company which seeks a listing on the Main Board of Bursa Securities have been liberalised with the dispensation of the quantitative profitability requirements under the Previous Guidelines. It is now sufficient for the applicant to be a reputable construction company and to have, at the time of the application, sufficient contracts-in-hand to sustain a reasonable level of profits for at least 3 years after listing.




Paragraph 7.02 of the New Guidelines clarifies that an acquisition of current assets or property, plant, machinery and equipment which are used for the existing core business of a listed company does not constitute a significant change in its business direction or policy. Thus, acquisitions of significant assets (such as property, plant, machinery and equipment) that are to be used for the company's existing core business no longer require the approval of the SC unless the consideration for such acquisitions are satisfied by an issue of securities.




The Previous Guidelines required proposals (including initial public offerings, acquisitions resulting in a significant change in business direction, acquisition of substantial foreign assets and proposals by distressed listed companies) to be accompanied by profit forecast and cash flow projections.


The New Guidelines dispense with the aforesaid requirements except for proposals relating to distressed listed companies which must be accompanied by profit and cash flow forecasts for such financial years as necessary to show that the proposals will turn the distressed listed company around.


Paragraph 10.03 of the New Guidelines now provides that for initial public offerings, acquisitions resulting in a significant change in the business direction or policy of a listed company and proposals by a distressed listed company, the applicant must provide a thorough discussion and analysis of its business, financial condition and prospects and where applicable, those of its group companies.




The SC stresses that the New Guidelines lay down the minimum standards to be met by an applicant. Although adherence to quantitative and qualitative requirements form the core focus of assessment, the review of an application by the SC covers a wider breadth of issues such as the company’s corporate governance standards.


The New Guidelines provide a list of suitability criteria and clarify the qualitative attributes expected of applicants for listing on Bursa Securities. The SC expects a greater role and higher levels of accountability from principal advisers, directors and promoters. Further, greater onus is placed on issuers and principal advisers to justify the appropriateness of corporate proposals and the benefits to the corporation and its shareholders.


The SC has further emphasised that it does not favour any particular industries and that there are no particular restrictions on the type of companies to be listed on Bursa Securities.




It is worthy to note that the appointment of principal advisers for the purposes of submission of applications to the SC (previously dealt with in Chapter 3 of the Previous Guidelines) are now dealt with separately in the Guidelines on Principal Advisers for Corporate Proposals (“Principal Advisers Guidelines”) issued by the SC. The Principal Advisers Guidelines, effective as of 1 February 2008, set out the eligibility criteria for corporate finance advisers, the categories of corporate financial advisers who are eligible to act as principal advisers and the types of corporate proposals which they are permitted to submit to the SC.




It is hoped that the liberalisation measures introduced under the New Guidelines will lead to a more vibrant capital market in Malaysia.




CHEAH MENG CHOO ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )







Who’s Who Legal Awards 2018


We are pleased to announce that Skrine has once again been named Malaysia Law Firm of the Year. The award was conferred at the Who’s Who Legal Awards 2018 on 8th May 2018 in London, United Kingdom.


Asian Legal Business Malaysia Law Awards 2018


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The Chambers Asia Pacific 2018 Rankings

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Our Tier 1 rankings are in the following areas: 
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Four Skrine partners were ranked as leading lawyers in their respective areas. 



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