Policies and Guidelines on

Issue/Offer of
Securities
Revised Edition: 1 April 2003
Effective Date: 1 May 2003
 TABLE OF CONTENTS

Page
PART I: GENERAL

Chapter 1
Introduction 1-1 – 1-4

Chapter 2
Definitions and Interpretation 2-1 – 2-3

Chapter 3
Advisers 3-1 – 3-3

Chapter 4
Corporate Governance 4-1 – 4-3

Chapter 5
Pricing, Utilisation of Proceeds and Valuation of Assets 5-1 – 5-8

PART II: POLICY GUIDELINES

Chapter 6
Public Offerings and Listings on KLSE 6-1 – 6-14

Chapter 7
Special Requirements for the Listing of Specific
Companies 7-1 – 7-5

Chapter 8
Equity Offerings 8-1 – 8-4

Chapter 9
Warrants, Options, Convertibles and Preference Shares 9-1 – 9-3

Chapter 10
Related-Party Transactions 10-1 – 10-3

Chapter 11
Acquisitions of Foreign Assets 11-1 – 11-2

Chapter 12
Significant Changes in Business Direction 12-1 – 12-6

Chapter 13
Proposals by Distressed Listed Companies 13-1 – 13-4

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Chapter 14
Proposals by Unlisted Public Companies 14-1

Chapter 15
Miscellaneous 15-1 – 15-2

PART III: SUBMISSION AND IMPLEMENTATION OF

PROPOSALS

Chapter 16
Information and Documents 16-1 – 16-3

Chapter 17
Submission of Proposals 17-1 – 17-2

Chapter 18
Implementation of Proposals 18-1 – 18-2

PART IV: SCHEDULES

Schedule 16.02(1)
Declaration by the Applicant S.1 - S.3
Schedule 16.02(2)
Declaration by the Principal Adviser S.4 – S.6
Schedule 16.02(3)
Declaration by a Director of an Applicant Undertaking a
Proposal S.7 – S.8
Schedule 16.05(1)
Acceptable Form of Reporting Accountants’ Report on Profit
Forecast S.9 – S.10
Schedule 16.05(2)
Acceptable Form of Reporting Accountants’ Report on Cash
Flow Forecast S.11 – S.12
Schedule 17.08
Fees And Charges S.13 – S.18

GUIDANCE NOTES

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PART I : GENERAL
 CHAPTER 1
1. INTRODUCTION

1.01 The Policies and Guidelines on Issue/Offer of Securities is a set of guidelines

applied by the SC in considering proposals under section 32 of the Securities
Commission Act 1993 (SCA).

1.02 The purpose of these guidelines is to set out the requirements of the SC
which have to be met by public companies and other relevant parties before
embarking on corporate proposals, and are designed and formulated to
ensure a fair and consistent application of policies. Public companies
embarking on proposals must observe the spirit as well as the wording of
these guidelines. In circumstances not explicitly covered, the intent and
purpose of these guidelines will apply.

1.03 These guidelines relate to the following:-

(a) Issues and offerings of equity and equity-linked securities (including

preference shares) by public companies, both listed and unlisted;
(b) Listing of companies or corporations; and
(c) Significant changes in the business direction of listed companies under
section 32(2)(g) of the SCA.

However, these guidelines do not cover proposals undertaken by

companies/corporations seeking listing/listed on the MESDAQ Market of KLSE,
save for the principle s outlined in paragraph 1.13 below. The proposals
undertaken by such companies/corporations are governed by the Listing
Requirements of KLSE for the MESDAQ Market.

1.04 Any proposals falling under paragraphs 1.03(a) to (c) above that also involve
the issuance of debentures must comply with the Guidelines on the Offering
of Private Debt Securities and/or the Guidelines on Asset-Backed Debt
Securities issued separately by the SC, whichever is/are applicable.

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1.05 In relation to other proposals falling within the ambit of section 32 of the SCA
for which there are no specific guidelines issued, such proposals will be
considered by the SC on a case-by-case basis.

1.06 The SC may -

(a) approve proposals subject to such terms and conditions as it deems

fit;
(b) approve proposals with such revisions and subject to such terms and
conditions as it deems fit; or
(c) reject proposals.

If the approval of the SC is subject to conditions, the applicant and any other
party involved in the proposals must ensure that the conditions are complied
with. This includes compliance with the Listing Requirements of KLSE.

1.07 The SC may revoke or revise an approval, or impose further terms and
conditions in relation to a proposal approved by it, in such circumstances
provided for under the SCA.

1.08 The SC may exempt or, upon application, grant waivers from compliance with
any requirements of these guidelines.

1.09 The SC may, from time to time, issue Guidance Notes to further clarify any
provisions in these guidelines, or to provide administrative or operational
procedures in relation to these guidelines. The Guidance Notes must be
complied with in the same manner as these guidelines.

1.10 These policies and guidelines (including the Guidance Notes and any other
accompanying documents) may be reviewed as and when necessary in the
light of changing circumstances and market conditions.

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 Compliance with and Enforcement of Guidelines

1.11 The SC may take any actions against persons who fail to comply with or
observe any of the provisions in these guidelines, as are permitted under
section 158 and relevant provisions of the SCA.

Submission Approaches

1.12 There are two types of approaches for the submission of proposals to the SC
which are within the ambit of these guidelines.

(a) Declaratory Approach

Waivers from any provisions of these guidelines should be sought and

obtained prior to the submission of the proposal proper.

Proposals submitted under this approach will be decided upon by the

SC within 21 working days, except in cases where –

• the information submitted is incomplete;

• waivers and exemptions from any provisions of these guidelines
are being sought as part of the submission;
• the SC requests a second-opinion valuation for assets;
• the issuer is acquiring from a related party, an identified
asset/company;
• the SC has corporate governance concerns on the issuer or its
directors;
• the SC is of the opinion that the proposal is not in line with, or
may contravene, matters of national interest/public policy; and/or
• there are other reasons that warrant a longer approval process.

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 (b) Assessment Approach

Waivers from any provisions of these guidelines may be –

(i) sought and obtained prior to the submission of the proposal

proper; or
(ii) sought as part of the submission proper.

The types of proposals whic h must be submitted under the

assessment approach are as follows:-

• Initial public offerings;

• Acquisitions resulting in a significant change in business direction;
• Disposals resulting in a significant change in business direction
and the use of the proceeds from the disposals ;
• Acquisitions of substantial foreign assets, whether financed by
direct issuance of securities or by the proceeds from the issuance
of securities;
• All proposals by distressed listed companies; and
• All proposals by unlisted public companies.

For proposals to be considered under the assessment approach, the

issuer and the principal adviser must submit relevant information and
documents to enable the SC to determine the suitability of each case.

Corporate Governance and National Interest/Public Policy Matters

1.13 The SC reserves the right to vary or reject any proposal submitted if –

(a) the issuer or its directors have adverse corporate governance records;
and/or
(b) the proposal is not in line with, or may contravene, matters of national
interest or public policy.

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 CHAPTER 2
2. DEFINITIONS AND INTERPRETATION

Definitions

2.01 In these guidelines, the following definitions have the following meanings,
unless the context otherwise requires:-

adviser means a merchant bank, firm of chartered

after-tax profit
aggregate market value
of the ordinary shares of
the listed company prior
to the announcement
Board
common directors
company
controlling shareholder
corporation
dominant shareholder
core business
accountants, law firm, stockbroking company or
such other person who provides
advice/information to the applicant where such
advice/information is submitted to the SC in
relation to or in connection with any proposal
refers to the profit after adjusting for profit or
loss attributable to minority interest and
excluding all extraordinary items
shall have the same meaning as the market value
of the equity share capital of the company as
stated in Chapter 10 of the Listing Requirements
of KLSE
means the board of directors of the applicant
means a situation where the majority of the
boards of directors of the companies in question
are made up of the same individuals
shall have the same meaning as given in section
4 of the Companies Act 1965
means a person (or a group of persons) who
is/are the registered or beneficial owners of
more than 50% of the voting shares of the
company
shall have the same meaning as given in section
4 of the Companies Act 1965
means a person (or group of persons) who is
the single largest shareholder of the applicant
means the business which is the single largest
contributor for the company/group in terms of
the following:-
• Profits;
• Turnover; or
• Assets employed.

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debenture shall have the same meaning as given in section
2 of the SCA
director shall have the same meaning as given in section
4 of the Companies Act 1965
expert shall have the meaning as given under section
32(1) of the SCA
general public means the general public within Malaysia
holding company shall have the meaning given in section 5 of the
Companies Act 1965
independent director shall have the meaning given in the Listing
Requirements of KLSE
infrastructure project means a project, whether located in Malaysia or
outside Malaysia, -
• that contributes to the overall economic
growth of Malaysia or which is in
accordance with national economic
objectives and policies;
• for which a concession or licence has been
awarded by a government or a state
agency, in or outside of Malaysia, with a
remaining concession or licence period of
not less than 15 years from the date the
submission is made to the SC; and
• with project costs of not less than RM500
million.
infrastructure project means a public company which has its core
company business in an infrastructure project
interest in shares shall have the meaning given in section 6A of
the Companies Act 1965
KLSE means Kuala Lumpur Stock Exchange
NDP means the National Development Policy
NVP means the National Vision Policy
offer for sale means an invitation to the general public by, or
on behalf of, an existing holder to purchase
securities of the issuer already in issue or
allotted
offer for subscription means an invitation to the general public by, or
on behalf of, an issuer to subscribe for securities
of the issuer not yet in issue or allotted
offering to the general means an offer for sale and/or an offer for
public subscription
persons connected shall have the same meaning as given in section
122A of the Companies Act 1965
placement means the marketing of securities to specified
persons

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 principal adviser means the adviser responsible for making
submissions to the SC for proposals requiring
approval of the SC
property asset includes all rights, interests and benefits in land
and/or buildings, plant, machinery and
equipment and depleting assets
related party shall have the meaning given in the Listing
Requirements of KLSE
related-party transaction shall have the meaning given in the Listing
Requirements of KLSE
restricted offer for sale means an invitation to an identifiable group/pool
of investors by, or on behalf of, an existing
holder to purchase securities of the issuer
already in issue or allotted
restricted offer for means an invitation to an identifiable group/pool
subscription of investors by, or on behalf of, an issuer to
subscribe for securities of the issuer not yet in
issue or allotted
SC means the Securities Commission
SCA means the Securities Commission Act 1993
significant change in shall have the same meaning as in Chapter 12
business direction of these guidelines
subsidiary shall have the meaning given in section 5 of the
Companies Act 1965
substantial shareholder shall have the meaning given in section 69D of
the Companies Act 1965

Interpretation

2.02 In general, the provisions in Chapters 6, 7, 8, 9, 10, 12, 13 and 15 are not
applicable to corporate proposals by unlisted public companies (excluding
proposals for listing) except where clearly specified in Chapter 14 of the
guidelines.

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 CHAPTER 3
3. ADVISERS

3.01 Advisers and experts have a professional responsibility to satisfy themselves

and ensure, based on all available information, that an application which is
submitted to the SC is suitable for the specific proposal being submitted for
consideration.

3.02 The principal adviser submitting an application to the SC has a duty to ensure
that -

(a) the proposal meets the requirements of the SC as set out in these
guidelines and relevant provisions of the securities laws; and
(b) after having made all reasonable enquiries, statements or information
submitted to the SC are not false or misleading or contain any
material omission.

The principal adviser is also responsible for dealing with the SC on all matters
in connection with an application.

3.03 The categories of persons that may act as principal advisers are as follows:-

(a) All proposals by listed companies and proposals by unlisted companies

for flotation on KLSE – Merchant banks and universal brokers;

(b) All proposals by unlisted companies other than applications for

flotation on KLSE – Merchant banks, universal brokers or firms of
chartered accountants;

(c) All applications for revisions to the terms and conditions of an

approval given by the SC for proposals in (a) above and applications
for extension of time for implementation of proposals in (a) above –
Merchant banks and universal brokers; and

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 (d) All applications for revisions to the terms and conditions of an
approval given by the SC for proposals in (b) above and applications
for extension of time for m
i plementation of proposals in (b) above -
Merchant banks, universal brokers or firms of chartered accountants.

3.04 Applications for the lifting of the moratorium on the disposal of securities
condition and the pledging of moratorium securities proposed by affected
securities’ holders could be made directly by the affected securities holders
themselves.

3.05 A principal adviser must take all reasonable steps to ascertain whether a
conflict of interest exists, or is likely to exist, in relation to its role as a
principal adviser to a client company. Where a conflict of interest exists or is
likely to exist, all possible steps must be taken to avoid or resolve such
conflicts of interest. Full disclosure should be made to the SC and the client
company of the nature of the conflict of interest (including any equity or
financial relationship with the company being advised) and the steps taken to
address these conflicts. The same principles are also applicable to other
advisers/experts.

3.06 The right of appointment of a principal adviser or other advisers/experts lies

with the directors of the client company. The SC, however, reserves the right
to -

(a) request the appointment of an independent adviser or an independent

expert; or
(b) not allow/accept submissions made by a principal adviser or other
advisers/experts, in cases where -
• it considers the principal adviser or other advisers/experts to
be incapable of giving impartial advice; or
• the principal adviser or other advisers/experts has/have an
interest in the outcome of the proposal which interferes with
the independence and objectivity of the principal adviser or expert.

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3.07 Where the directors of the company decide to appoint an independent
adviser/expert because of the conflict of interest of the principal adviser or
other advisers/experts, the appointment of the independent adviser/expert
should be made before the submission of the proposal to the SC. In addition,
the report of the independent adviser/expert for the proposal should be
included as part of the submission to the SC.

3.08 An independent adviser/expert, if appointed, should be independent of the

management or board of directors of the client company (or principal adviser
or other advisers/experts, as the case may be), and free from any business or
other relationship which could interfere with the exercise of independent
judgment by the independent adviser/expert.

3.09 In the event that an independent adviser is appointed owing to a conflict of

interest involving the principal adviser, the independent adviser appointed
should be another eligible principal adviser as described in paragraph 3.03
above.

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 CHAPTER 4
4. CORPORATE GOVERNANCE

4.01 Public companies submitting proposals to the SC are expected to have good
corporate governance practices.

4.02 The SC may vary or reject a proposal where it has grounds to believe that the
proposal is oppressive to the minority shareholders of the applicant.

4.03 The SC, in considering whether or not to approve a proposal, would take into
account the applicant’s corporate governance record, including whether or
not there have been previous actions taken against the applicant for any
breach of relevant laws, these guidelines or any other guidelines or rules
issued by the SC and/or KLSE.

4.04 Each applicant is required to declare to the SC, in the form stipulated in the
Schedule of these guidelines, as to whether it has -

(a) been convicted or charged with any offence under the securities laws,
corporations laws or any other laws involving fraud or dishonesty in a
court of law, for the last 10 years prior to the submission to the SC;
and

(b) been subject to any action by KLSE for any breach of the Listing
Requirements or rules issued by the KLSE, during the last five years
prior to the submission to the SC.

4.05 Directors and management of public companies are required to act honestly
and diligently in the discharge of their duties. The SC will not tolerate any
compromise on the integrity and public accountability of the directors and
management.

4.06 In this regard, the following categories of persons are required to submit
declarations to the SC regarding their fitness and competence to act as
directors:-

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 (a) For initial public offerings – Directors and proposed directors of the
company seeking listing;
(b) For acquisitions – Directors to be appointed to the Board of the listed
company pursuant to the acquisition; and
(c) For corporate proposals by listed and unlisted companies – Directors
and proposed directors of the company.

4.07 To comply with paragraph 4.06 above, each director concerned is required to
give a declaration in the form stipulated in the Schedule of these guidelines
as to his/her fitness and competence.

4.08 Where the SC is not satisfied with the applicant’s past record or where the SC
is concerned with the integrity of the applicant’s director(s), the SC may
reject the proposal, or approve the proposal subject to appropriate conditions
such as the following:-

(a) The applicant to take appropriate measures to improve its governance

structure;
(b) The disclosure of the past record of the applicant and/or the director
in question in relevant public documents;
(c) The director in question to step down from the Board and the
management of the company;
(d) Prohibition of the director’s participation in the proposal; and/or
(e) Imposition of a moratorium, or prohibition, on any trading or dealing
in securities.

4.09 For initial public offerings and/or acquisitions, the applicant is required to
disclose all material terms and conditions imposed by the relevant authorities
on the applicant and the acquiree asset, and the extent to which these terms
and conditions have been complied with. The SC may reject and/or impose
appropriate conditions in the event of non-compliance with these terms and
conditions.

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4.10 For initial public offerings and/or acquisitions which result in significant
changes in business direction, up-to-date submissions of tax returns and
settlement of tax liabilities with the Inland Revenue Board (IRB) are required
for the following:-

• The applicant company;

• The directors and proposed directors of the applicant company; and
• The Malaysian-incorporated subsidiaries of the applicant company.

For all other proposals, disclosure of whether or not such submissions of tax
returns and tax liabilities have been made must be included in the submission
to the SC.

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 CHAPTER 5
5. PRICING, UTILISATION OF PROCEEDS AND VALUATION OF ASSETS

5.01 This chapter describes the following:–

(a) The parameters for the approval of proposals by the SC;

(b) The circumstances requiring the submission of valuation reports; and
(c) The procedures to be complied with for submission of valuation
reports.

5.02 The term “identified assets” includes the following:-

(a) Development properties, including development rights;

(b) Plantation land;
(c) Purpose-built commercial/leisure properties;
(d) Plant, machinery and equipment;
(e) Timber concessions;
(f) Mining land; and
(g) Any other types of assets which the SC may specify from time to time,

where –

• the assets are/will be revalued, or have been revalued in the past five
years prior to the submission to the SC; and
• the revalued amount is used, whether partially or exclusively, as the
basis for the purchase/sale consideration in an acquisition/disposal.

5.03 The term “identified companies” refers to companies which hold/own

identified assets.

5.04 The term “valuation reports” includes any expert reports on the value of any
assets.

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 Parameters for Approval of Corporate Proposals

5.05 The SC will apply certain regulatory parameters for approval of corporate
proposals in the following manner:-

(a) Pricing of Securities

Applicants have the discretion in the pricing of all securities issued,

except where securities of a listed company are issued to related
parties (as outlined in Chapter 10 of these guidelines).

The SC, however, expects public companies to price their securities

based on market-based principles and at a level which is in the best
interests of the company, and to take into account the interests of
minority shareholders.

Offerings of securities to the general public under an initial public

offering may be set at an appropriate discount to the price of
securities offered under a placement tranche and/or restricted offer
for sale/restricted offer for subscription that is undertaken as part of
the initial public offering scheme. Securities offered to Bumiputera
investors for purposes of meeting the requirements of the NDP/NVP
may be priced no higher than the offering of securities to the general
public.

(b) Utilisation of Proceeds

The applicant has the discretion to utilise the proceeds raised from the
issuance of securities.

Nevertheless, where the proceeds raised from the issuance of

securities will be used to finance -
• acquisitions resulting in a significant change in business direction;
• acquisitions of substantial foreign assets; and/or
• acquisitions of assets from related partie s,

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 or where the proceeds are raised from securities issued by distressed
listed companies, the applicant must also comply with the
requirements governing those transactions, where applicable.

The utilisation of proceeds raised from the disposal of assets resulting

in a significant change in business direction will be subject to the prior
approval of the SC.

The SC expects issuers to use the proceeds raised from the issuance
of securities for the benefit of the company.

(c) Valuation of Assets

The parameters governing the SC’s assessment of the valuation of

assets are as follows:-

(i) Initial Public Offerings, Acquisitions Resulting in a Significant

Change in Business Direction, Acquisitions of Assets from
Related Parties and Acquisitions of Substantial Foreign Assets

The SC will directly assess the valuation of identified

assets/identified companies in the acquisitions of such
assets/companies. The valuation approved by the SC must be
used as the basis for the purchase consideration in the
acquisition. Where there is a material difference in the
valuation submitted by the applicant and the valuation
approved by the SC, both valuations must be disclosed in the
prospectus/circular/any other offer documents issued in
relation to the proposal.

For acquisitions of all other assets/companies, the SC will not

directly assess the valuation of such assets/companies, but will
reserve the right to seek a second-opinion valuation. Where a
second-opinion valuation is obtained, the issuer will be
required to adopt the lower of the two valuation amounts to

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 be used as the basis for the purchase consideration. Both
valuations must be disclosed in the prospectus/circulars/any
other offer documents issued in relation to the proposal.

(ii) Disposals Resulting in a Significant Change in Business

Direction

The SC will directly assess the valuation of identified

assets/identified companies in the disposal of such
assets/companies. The valuation approved by the SC must be
used as the sale consideration in the disposal. Where there is a
material difference in the valuation submitted by the applicant
and the valuation approved by the SC, both valuations must be
disclosed in the prospectus/circular/any other offer documents
issued in relation to the proposal.

For disposals of other assets/companies, the SC will not

directly assess the valuation of such assets/companies, but will
reserve the right to seek a second-opinion valuation. Where a
second-opinion valuation is obtained, the issuer will be
required to adopt the higher of the two valuations to be used
as the sale consideration. Both valuations must be disclosed in
the prospectus/circulars/any other offer documents issued in
relation to the proposal.

(iii) Proposals by Distressed Listed Companies

For the purpose of compliance with paragraph 13.03 of

Chapter 13 of these guidelines, -

• the SC will directly assess the valuation of assets listed in

paragraphs 5.02(a) to (g) above (as well as the valuation
of companies which own such assets), where such assets
are/will be revalued, or have been revalued in the past five
years prior to the submission to the SC. The valuation

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 approved by the SC must be adopted as the figure to be
used in the computation of the proforma net-tangible-asset
position; and

• for all other assets/companies, the SC will not directly

assess the valuation of such assets/companies, but will
reserve the right to seek a second-opinion valuation.
Where a second-opinion valuation is obtained, the issuer
will be required to adopt the lower of the two valuation
amounts as the figure to be used in the computation of the
proforma net-tangible-asset position.

; and

(iv) All Other Proposals

The SC will not directly assess the valuation of any

assets/companies used to support the purchase consideration
in an acquisition, but will reserve the right to seek a second-
opinion valuation. Where a second-opinion valuation is
obtained, the issuer will be required to adopt the lower of the
two valuation amounts to be used in support of the purchase
consideration. Both valuations must be dis closed in the
prospectus/circulars/any other offer documents issued in
relation to the proposal.

Requirements for Submission of Valuation Reports

Property Assets

5.06 The types of assets which require the submission of valuation reports are as
follows:-

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(a) For all proposals (with the exception of proposals by distressed listed
companies) which involve the acquisition (as part of a listing scheme
or otherwise) of or the disposal (resulting in a significant change in
business direction) of -

(i) Landed properties and/or strata properties;

(ii) Plantation land;
(iii) Timber concessions;
(iv) Mining land;
(v) Plant, machinery and equipment;
(vi) Any other assets as the SC may specify from time to time; and
(vii) Companies which own the assets listed in (i) to (vi) above,

where –

• these assets are/will be revalued, or have been revalued in the

past five years prior to the submission to the SC; and
• the revalued amount is used, whether partially or exclusively,
as the basis for the purchase/sale consideration in an
acquisition/disposal.

(b) For all proposals by distressed listed companies

(i) Landed properties and/or strata properties;

(ii) Plantation land;
(iii) Timber concessions;
(iv) Mining land;
(v) Plant, machinery and equipment;
(vi) Any other assets as the SC may specify from time to time; and
(vii) Companies which own the assets listed in (i) to (vi) above,

where these assets are/will be revalued, or have been revalued in the

past five years prior to the submission to the SC.

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5.07 Such valuations must be carried out by registered valuers or experts who
should ensure that the valuation report, if applicable, complies with the
Guidelines on Asset Valuations issued separately by the SC.

Other Assets

5.08 For all corporate proposals -

• involving the acquisition (as part of a listing scheme or otherwise) of;
• involving the disposal (resulting in a significant change in business
direction) of;
• by distressed listed companies which own,
other assets, the company should still submit a basis of valuation (including
methodology, assumptions and computations) and determination of
purchase/sale consideration for these assets. Expert reports on the valuation
should be submitted where available.

Procedures to be Complied with for Submission of Valuation Reports

5.09 The registered valuer or expert responsible for the valuation report must be
appointed by the applicant.

5.10 For proposals under paragraph 5.06 above, the relevant valuation reports
should be submitted before the submission proper, for purposes of
expediency. The submission proper should be made after two weeks but not
later than one month from the date of the submission of the valuation report.
In addition, -

(a) two copies of the valuation reports must be submitted to the SC; and
(b) the date of valuation should not be more than six months before the
date of receipt of the submission proper by the SC.

5.11 For proposals under paragraph 5.08 above where expert reports on the
valuation are available, such expert reports should be dated not more than
one year before the date of the submission to the SC.

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5.12 In the event that the SC seeks a second-opinion valuation, the second-
opinion valuer will be appointed by the SC. The fee for the second-opinion
valuation must be paid for by the applicant.

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PART II : POLICY GUIDELINES
 CHAPTER 6
6. PUBLIC OFFERINGS AND LISTINGS ON KLSE

6.01 A public company seeking listing of and quotation for its securities must be a
going concern or be the successor of a going concern.

Offering of Securities as Part of a Listing Scheme

6.02 The method of offering should take into consideration the capital needs of
the company seeking listing, the opportunity for the general public to
participate in the offering and the shareholding spread requirements to be
complied with by the company.

6.03 A company is required, as part of its listing scheme, to undertake an offering

of securities to the general public.

6.04 However, the company is not required to make an offering of securities to the
general public if listing of securities is sought under the following
circumstances:-

(a) Where the securities for which listing is sought on the Main Board or
Second Board of KLSE are already listed on the MESDAQ Market; or
(b) Where a listed company intends to undertake a restricted offer for
sale or distribute in specie to its shareholders the securities of its
subsidiary which is seeking listing.

6.05 Restricted offers for sale and restricted offers for subscription which are
undertaken as part of the listing scheme may only be made to the following
groups of investors:-

(a) The directors and employees of the applicant;

(b) The directors and employees of the subsidiary/subsidiaries of, and the
holding company/companies of, the applicant;

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 (c) Other persons who have contributed to the success of the applicant,
such as suppliers, distributors, dealers and customers. If the persons
who have contributed to the success of the applicant are business
entities, the issuer must ensure that the securities are allocated to
those business entities, and not to their officers or employees, except
where the business entities are sole proprietorships or partnerships;
(d) The shareholders of the holding company/companies, if the holding
company/companies is/are listed; and
(e) Any other persons as may be allowed by the SC from time to time.

6.06 The SC has the discretion not to allow or to vary any particular method of
offering/method of listing chosen by the company if it is of the view that the
method in question is not in the interests of the public.

6.07 Placements of existing and new securities which are intended to be

undertaken as part of a listing scheme should comply with the requirements
of Chapter 8 of these guidelines.

6.08 At least 30% of the securities allocated (over and above the securities issued
to/reserved for Bumiputera investors to comply with the NDP/NVP
requirements) should, to the extent possible, be allocated to Bumiputera
investors, under the following circumstances:-

(a) Under an offering to the general public; and

(b) Under a placement exercise, excluding all placement exercises to fulfil
the NDP/NVP requirements imposed by any other authorities.

6.09 Any expenses incurred relating to an offer for sale or restricted offer for sale
of securities shall be borne by the offeror.

6.10 Where securities are issued/offered to related parties as part of the listing
scheme, -

(a) the price of the securities issued/offered should be set at least at the
offer price to the general public; and

6-2
 (b) the exercise/conversion price of any options or convertible securities
issued should be set at least at the offer price to the general public.

6.11 Paragraph 6.10 does not apply to the classes of related parties listed in
paragraphs 10.04(a) and (b) of Chapter 10.

Quantitative Requirements for Listing

The quantitative requirements that should be fully complied with by

applicants for listing are set out below.

6.12 Issued and Paid-Up Share Capital

(a) Listing on Main Board

An applicant seeking listing of and quotation for its securities on the

Main Board should have a minimum issued and paid-up capital of
RM60 million comprising ordinary shares with par value of at least
RM0.10 each.

(b) Listing on Second Board

An applicant seeking listing of and quotation for its securities on the

Second Board should have a minimum issued and paid-up capital of
RM40 million comprising ordinary shares with par value of at least
RM0.10 each.

(c) An applicant seeking listing is allowed to issue and list any securities
as part of its listing scheme, including preference shares, options,
convertible securities and debt securities, subject to adherence to the
following requirements:-

6-3
 (i) Maintenance of Controlling Shareholding

The company should, if applicable, ensure that the

shareholdings of controlling shareholders are not significantly
diluted (to the extent that they would lose control), on the
assumption that any options or convertible securities which are
outstanding or intended to be issued as part of the listing
scheme are fully exercised/converted at the point of listing.

; and

(ii) Exercise/Conversion Price

The exercise/conversion price of any options or convertible

securities that are intended to be issued as part of the listing
scheme should be set at a price not lower than the price of the
ordinary shares of the company offered to the general public.

The issue/offer of any options or convertible securities as part

of the listing scheme should comply with the requirements of
Chapter 9 of these guidelines.

6.13 The applicant should fulfil one of the following tests:-

(a) Historical Profit Track Record Test

(i) Listing on Main Board

The applicant (company/group) should have an uninterrupted

profit record of three to five full financial years prior to
submission to the SC, with an aggregate after-tax profit of not
less than RM30 million over the said three to five full financial
years and an after-tax profit of not less than RM8 million in
respect of the most recent financial year.

6-4
(ii) Listing on Second Board

The applicant (company/group) should have an uninterrupted

profit record of three to five full financial years prior to
submission to the SC, with an aggregate after-tax profit of not
less than RM12 million over the said three to five full financial
years and an after-tax profit of not less than RM4 million in
respect of the most recent financial year.

(iii) For purposes of the historical profit track record requirement, -

• the SC only accepts results based on audited accounts;

• accumulated losses for all earlier years, if any, must
have been completely absorbed by profits of later
years. The latest audited balance sheet at the time of
the submission shall not show any accumulated losses;
and
• “after-tax profit” refers to the profit after adjusting for
profit or loss attributable to minority interest and
excluding all extraordinary items.

(iv) Where a group of companies is seeking listing using the

historical profit track record test, at least one company (which
is the qualifying company) within the group should be able to
fulfil the profit track record requirements. If no one company
qualifies, listing based on the strength of the group’s proforma
accounts may be considered provided that the companie s
within the group which collectively qualify –

• are involved in the same or complementary business

activities;
• have common directors; and
• have common shareholders who, on a collective basis,
have controlling shareholding,

6-5
 over the profit track record period.

(b) Market Capitalisation Test

(i) The applicant must be seeking listing on the Main Board and is
not involved in property-development or construction
activities;
(ii) The applicant’s ordinary shares should have a market
capitalisation of at least RM250 million based on the tentative
issue price and enlarged paid-up capital at the point of
submission to the SC. This requirement should also be met at
the time the prospectus is issued;
(iii) The applicant should have an after-tax profit of at least RM8
million for the most recent full-financial year prior to
submission; and
(iv) Where a group of companies is seeking listing using the
market capitalisation test, all the companies in the group
must–

• be involved in the same or complementary business

activities;
• have common directors; and
• have common shareholders with controlling shareholding,
on a collective basis,

over a minimum period of three full financial years prior to

submission to the SC.

; or

(c) Infrastructure Project Company

There are no minimum historical profit track record or market

capitalisation requirements for applicants which are considered as

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 infrastructure project companies (IPC). The term “infrastructure
project company” is as defined in Chapter 2 of these guidelines.

IPC applicants must be seeking listing only on the Main Board. All IPC
applicants must comply with the additional moratorium, submission,
disclosure and prudential requirements for listing stated in these
guidelines, regardless of whether the applicant qualifies for another
route for listing or otherwise.

6.14 Business Operations

(a) Listing Under Historical Profit Track Record Test

Where listing is sought on the basis of the strength of group proforma

accounts, the company which is the single largest contributor to the
profits of the group on an average basis for the past three full
financial years should have been incorporated and have been
operating in the same or complementary business for at least five full
financial years prior to making the submission to the SC.

Where listing is not on the basis of the strength of group proforma

accounts, the applicant company (or the qualifying company in the
case where the qualifying company is to be used by the applicant
company for the purpose of meeting the profit track record
requirement) should have been incorporated and have been operating
in the same or complementary business for at least five full financial
years prior to making the submission to the SC.

(b) Listing Under Market Capitalisation Test

Where a group of companies is seeking listing on the basis of the

market capitalisation of the group, the company which is the single
largest contributor to the profits of the group on an average basis for
the past three full financial years, if applicable, should have been
incorporated and have been operating in the same or complementary

6-7
 business for at least five full financial years prior to making the
submission to the SC.

(c) Listing Under Infrastructure Project Company

IPC applicants need not comply with any business operation

requirements.

6.15 Financial Position and Liquidity

The company must be in a healthy financial position. In addition, the

company should have a sufficient level of working capital at the point of
listing.

Qualitative Requirements for Listing

The qualitative requirements that will be taken into consideration by the SC in

its assessment of the company seeking listing are set out below.

6.16 Independence of Business

The principal or sole asset of the applicant seeking listing should not be an
investment in another listed company.

6.17 Core Business

The applicant must have at least one identifiable core business which is
controlled by the listing vehicle. In fulfilling the historical profit track record
requirement under paragraph 6.13(a) above and the latest after-tax profit
requirement of the market capitalisation test under paragraph 6.13(b)(iii)
above, contributions from associated companies cannot exceed that from
subsidiary companies.

6-8
6.18 Prospects of the Company

The applicant should have a viable business/businesses with healthy growth

prospects.

The future profits of the applicant (as shown in the profit forecast of the
applicant) should be derived from the same core business as that supporting
the historical profits of the applicant.

6.19 Continuity of Management

The applicant seeking listing should have had continuity of substantially the
same management for at least three full financial years prior to making the
submission to the SC. In determining whether or not this requirement has
been met, the SC will have to be satisfied that, throughout the relevant
period, -

(a) the current executive directors of the applicant have had direct
management responsibilities for, and played a significant role in, the
company’s core business; and
(b) the senior management of the company has not changed materially.

Where this requirement has not been met, the controlling shareholders of the
company seeking listing should demonstrate to the SC the expertise and
capability of management in ensuring the effective operation of the company.

6.20 Conflict of Interest

No material conflict of interest between the company and its directors or

substantial shareholders should exist.

Where a company has (or is likely to have) a direct or indirect relationship

with a substantial shareholder or a shareholder –

(a) which/who has influence on the management of the company; or

6-9
(b) which/who has an interest in a business which competes (or is likely
to compete) with the company’s business,

and where this relationship could result in a conflict of interest between the company’s
obligations towards that shareholder and its duties to the general body of shareholders,
the company is required to declare the nature, character and extent of the relationship
and the conflict of interest to the SC. The SC may regard the company as unsuitable for
listing in such circumstances.

Prior to listing, -

• all non-trade debts owing to the applicant company by its directors/substantial

shareholders and other companies controlled by the directors and substantial
shareholders (with the exception of the applicant company’s subs
idiary/subsidiaries) must have been settled; and

• all trade debts owing to the applicant company by its directors / substantial
shareholders and other companies controlled by the directors and substantial
shareholders (with the exception of the applicant company’s
subsidiary/subsidiaries) which exceed the normal credit period must have been
settled.

6.21 Transactions with Related Parties

Any transactions prior to listing between the company (or its subsidiary/subsidiaries) and
any related parties must be based on terms and conditions which are not unfavourable
to the company. The presence of related-party transactions with terms and conditions
unfavourable to the company may cause the SC to regard the company as unsuitable for
listing.

6-10
 Other Requirements

6.22 Chain Listing

Chain listing is a term used to describe a situation where a subsidiary or a

holding company of an already-listed company is seeking listing on its own.

The entity seeking listing on the Main Board or Second Board (i.e. either the
subsidiary of the already-listed company, or the holding company of the
already-listed company) must fulfil the following additional requirements:-

(a) The entity seeking listing must be involved in a distinct and viable
business of its own;

(b) The relationship between the entity seeking listing and the other
companies within the group, including the already-listed company,
must not give rise to intra-group competition or conflict-of-interest
situations;

(c) The entity seeking listing should demonstrate that it is independent

from the already-listed company and other companies within the
group in terms of its operations, including purchases and sales of
goods, management, management policies and finance;

(d) The already-listed company must have a separate autonomous

business of its own, and will be able to sustain its listing in the future;

(e) Where a holding company of an already-listed company is seeking

listing, the applicant must meet the profit track record requirement for
listing without taking into account the profit contributions from its
already-listed subsidiary(ies); and

(f) The subsidiary seeking listing is not allowed to seek listing on KLSE if –

6-11
 (i) it was injected previously into the listed holding company
through a reverse take-over or a back-door listing exercise; or
(ii) it was a business which previously formed part of the historical
profit track record at the time of the initial listing,

until five full financial years have elapsed from the date of the reverse
take-over/back-door listing exercise or the date of the direct listing,
whichever is applicable.

6.23 Underwriting

(a) Underwriting arrangements must be in place before the offering of

securities is made (for offerings to the general public and restricted
issues/offers), other than those securities in respect of which
allocations have been made to certain parties, such as Bumiputera
investors, directors and employees, or for which certain shareholders
have given written irrevocable undertakings to subscribe. Underwriting
may be arranged on a minimum level of subscription basis.

(b) The minimum level of subscription should be determined by the

issuer. Examples of the factors that could determine the minimum
level of subscription are as follows:-

(i) The level of funding needed by the issuer; and

(ii) The extent of the shareholding spread required by the issuer.

(c) The minimum level of subscription must be disclosed in the

submission to the SC and in the prospectus issued in conjunction with
the initial public offering, together with the basis for determining the
minimum level of subscription.

(d) The principal adviser making the initial public offering application to
the SC must be part of the syndicate of underwriters underwriting the
securities offered under the initial public offering. The full list of
underwriters, together with their respective commitments, must be

6-12
 submitted by the principal adviser to the SC for its records, and the SC
should be informed immediately should there be any subsequent
changes.

6.24 Moratorium on Disposal of Shares

A moratorium will be imposed on the disposal of shares held in the following

companies:–

(a) Main Board applicant companies with core businesses in property

development or construction;
(b) All Second Board applicant companies;
(c) All applicant companies applying for listing under the market
capitalisation route; and
(d) All IPCs applying for listing, regardless of the listing route taken.

The moratorium to be complied with is as follows:-

For companies listing under categories (a), (b) and (c) above

The affected shareholders will not be allowed to sell, transfer or assign their
shareholdings amounting to 45% of the nominal issued and paid-up capital
for one year from the date of admission of the company to either the Main
Board or Second Board.

In the case where the affected shareholder is an unlisted company, every

shareholder of the unlisted company (if an individual) or ultimate individual
shareholder (if the shareholder of the unlisted company is another unlisted
company) must give an undertaking that he/she will not sell, transfer or
assign his/her shareholding in the rela ted unlisted company for the period as
stipulated above.

; and

6-13
For companies listing under category (d) above

The affected shareholders will not be allowed to sell, transfer or assign their
shareholdings amounting to 45% of the nominal issued and paid-up capital
for at least one year from the date of admission of the company to the Main
Board. Thereafter, 50% of the moratorium shares will be released from the
moratorium per annum on a straight-line basis, upon the infrastructure
project achieving one full financial year of audited operating revenue.

In the case where the affected shareholder is an unlisted company, every

shareholder of the unlisted company (if an individual) or ultimate individual
shareholder (if the shareholder of the unlisted company is another unlisted
company) must give an undertaking that he/she will not sell, transfer or
assign his/her shareholding in the related unlisted company for the period as
stipulated above.

The IPC/affected shareholder should apply to the SC for the lifting of the
moratorium upon achievement of the audited operating revenue requirement.

6-14
 CHAPTER 7
7. SPECIAL REQUIREMENTS FOR THE LISTING OF SPECIFIC
COMPANIES

This chapter covers special requirements for the listing of certain types of
companies, in addition to those stipulated in Chapter 6 of these guidelines.

Cash Companies

7.01 Companies other than financial services companies described under

paragraph 7.07 below, whose assets consist wholly or substantially of cash or
short-term investments, will not normally be considered for listing.

Property-Development Companies

7.02 Property-development companies seeking listing are only allowed to do so on

the Main Board of KLSE. Such applicant companies are also subjected to the
following additional criteria:-

(a) The company should be a reputable property-development company

having an uninterrupted historical profit record of five full financial
years in property development, with –

(i) an aggregate after-tax profit of not less than RM30 million

over the said five financial years;
(ii) an after-tax profit of not less than RM4 million per annum for
at least three out of the first four financial years; and
(iii) an after-tax profit of not less than RM8 million in respect of the
most recent financial year.

(b) The company should, at the time of application, possess a minimum

land-bank of 500 acres, situated at strategic locations or in growth
areas which should be able to sustain development and profits at
reasonable levels over a period of at least five years after listing; and

7-1
 (c) The company should, at the time of application, have sufficient on-
going property-development projects to be able to sustain profits at
reasonable levels for at least five years after listing.

The term “possess” above includes both situations where –

• the property-development company has legal ownership of the land;
or
• the property-development company owns irrevocable development
rights to the land.

7.03 Property-development companies cannot seek listing under the market

capitalisation test mentioned in paragraph 6.13(b) of Chapter 6.

Construction Companies

7.04 Construction companies seeking listing are only allowed to do so on the Main
Board of KLSE. Such applicant companies are also subjected to the following
additional criteria:-

(a) The company should be a reputable construction company having an

uninterrupted historical profit record of five full financial years in
construction activities, with –

• an aggregate after-tax profit of not less than RM30 million over

the said five financial years;
• an after-tax profit of not less than RM4 million per annum for at
least three out of the first four financial years; and
• an after-tax profit of not less than RM8 million in respect of the
most recent financial year.

; and

(b) The company should, at the time of application, have sufficient

contracts-in-hand secured from non-related parties to sustain a
reasonable level of profits for at least three years after listing.

7-2
7.05 Construction companies cannot seek listing under the market capitalisation
test mentioned in paragraph 6.13(b) of Chapter 6.

Financial Services Companies

7.06 Financial services companies can only seek listing on the Main Board of KLSE.

7.07 The following would generally be considered as financial services companies:-

(a) Banking institutions;

(b) Insurance companies;
(c) Stockbroking companies;
(d) Venture-capital companies;
(e) Asset management companies;
(f) Unit trust management companies;
(g) Discount houses; and
(h) Any other businesses which the SC may specify as financial services
companies.

Stockbroking Companies

7.08 Stockbroking companies seeking listing must comply with the SC’s
consolidation policy on stockbroking companies.

Trading/Retailing Companies

7.09 Trading/retailing companies can only seek listing on the Main Board of KLSE.
Such companies should have sizeable operations dealing in a broad base of
products.

7-3
 Shipping and Transportation Companies

7.10 Shipping and transportation companies can only seek listing on the Main
Board of KLSE.

Infrastructure Project Companies

7.11 The historical profit track record and market capitalisation tests outlined in
paragraphs 6.13(a) and (b) of Chapter 6 are not applicable to infrastructure
project company applicants.

7.12 Offers for sale and/or restricted offers for sale cannot be undertaken unless
the infrastructure project company has generated two consecutive full
financial years of audited operating revenue prior to submission to the SC.

Companies with Substantial Foreign-Based Operations/

Subsidiaries/Associated Companies

7.13 Applicants seeking listing on either the Main Board or the Second Board of
KLSE will be considered as having substantial foreign-based operations if the
applicant’s foreign-based operations constitute 25% or more of the group’s –

(a) net tangible assets; or

(b) after-tax profits,

based on the latest available audited accounts at the point of submission to

the SC.

7.14 Applicants with substantial foreign-based operations must comply with the
following additional criteria:-

(a) There must be no net outflow of funds from the country by the
applicant or its subsidiaries arising from the foreign-based operations
for a period of three years from the date of submission to the SC; and

7-4
(b) The foreign-based operations must bring benefits to the applicant and
to the country.

7-5
 CHAPTER 8

8. EQUITY OFFERINGS

8.01 This chapter deals with the issue/offer/listing of equity and equity-linked
securities by listed companies.

8.02 Applicants may issue/offer shares and other securities, and/or bring the said
securities to listing by any of the following methods:-

(a) An offer for sale;

(b) A restricted offer for sale;
(c) An offer for subscription;
(d) A restricted offer for subscription;
(e) A placement;
(f) A rights issue;
(g) A bonus issue;
(h) A consideration issue for acquisition;
(i) An issue arising from the conversion or exercise of options, warrants
and convertible securities; or
(j) Such other methods as may be accepted by the SC.

In considering such proposals, the SC will apply the parameters for approval
as outlined in Chapter 5 of these guidelines.

Placements of Securities

8.03 All placements of securities must be done through a placement agent (a

merchant bank or a stockbroking company), except where –

(a) the securities are to be issued to the directors or substantial

shareholders of the issuing company; or
(b) the securities are to be issued to Bumiputera investors for purposes of
meeting the requirements of the NDP/NVP.

8-1
8.04 The securities may be placed with persons other than parties connected to
the placement agent.

8.05 If the securities are placed with nominee companies, the names of the
ultimate beneficiaries must be disclosed.

8.06 Placements of securities to related parties must comply with paragraphs

10.02 to 10.05 of Chapter 10 of these Guidelines.

8.07 On implementation of the placement exercise, the principal adviser or

placement agent, where applicable, must submit a final list of the placees and
a confirmation to the SC that the placement complies with paragraphs 8.03 to
8.06 above.

Back-to-Back Placements

8.08 Back-to-back placements involving –

• an existing shareholder selling down existing shares of the issuer to a

placement agent for subsequent placement to placees; and
• an issuer issuing new shares to the said existing shareholder to
replace the shares sold earlier to the placement agent,

may be undertaken by an issuer listed on the Main Board of KLSE subject to

fulfilment of the following conditions:-

(a) The issuer has an average daily market capitalisation of at least RM1
billion in the three months ending on the last business day of the
calendar month immediately preceding the date of the placement;
(b) The issuer meets the shareholding spread requirements under the
Listing Requirements of KLSE; and
(c) The existing shareholder involved in the back-to-back placement
arrangement is to give a declaration to the SC that he/she/it would
not derive any financial benefits from such an arrangement, whether
directly or indirectly.

8-2
8.09 The back-to-back placement exercise must also comply with paragraphs 8.03
to 8.07 above.

Rights Issues of Securities

8.10 Underwriting arrangements must be in place before the offering of securities

is made to existing shareholders, other than those securities for which certain
shareholders have given written irrevocable undertakings to subscribe.
Underwriting and/or undertakings to subscribe by the shareholders are
allowed to be arranged on a minimum level of subscription basis.

8.11 The minimum level of subscription should be determined by the issuer, based
on factors such as the funding objectives of the issuer.

8.12 The following conditions are applicable in the event that certain shareholders
wish to irrevocably undertake to subscribe to the securities offered under the
rights issue:-

(a) The shareholders must confirm to the SC that they have sufficient
resources to take up the securities. The confirmation must be verified
by an acceptable independent party, preferably the principal adviser
making the application to the SC for the rights issue; and
(b) The shareholders must observe and comply with the Malaysian Code
on Take-Overs and Mergers 1998, if applicable.

8.13 The minimum level of subscription and the basis for determining the
minimum level of subscription must be disclosed in -

(a) the submission to the SC;

(b) the circular to shareholders; and
(c) the abridged prospectus issued in conjunction with the rights issue.

8.14 Where underwriting is arranged for the securities offered under the rights
issue, the principal adviser making the application to the SC must be part of

8-3
 the syndicate of underwriters. The full list of underwriters, together with their
respective commitments, must be submitted by the principal adviser to the
SC for its records. The SC should be informed immediately if there are any
subsequent changes.

Securities Issued to Finance Acquisitions

8.15 If an applicant wishes to issue securities to finance an acquisition of assets,

the applicant must use the valuation/purchase consideration figure specified
by the SC in the acquisition, if applicable. The specified valuation/purchase
consideration figure may arise from a direct assessment of the valuation by
the SC, or from a second-opinion valuation sought by the SC. If the specified
valuation/consideration figure is lower than the submitted
valuation/consideration figure, the applicant must not make up the difference
by way of internally -generated funds or borrowings.

8.16 Paragraph 8.15 above applies to both acquisitions financed by the direct
issuance of securities to the vendor of the assets, as well as acquisitions
financed by the proceeds from the issuance of securities.

8.17 Paragraph 8.15 above applies to both proposed acquisitions and proposed
refinancings of completed acquisitions which are submitted to the SC within
one year from the date of completion of the acquisition.

8.18 Paragraph 8.15 above does not apply to the acquisition of assets by way of
issuance of non-equity-linked debentures.

8.19 The issuance of securities to related parties as consideration for acquisitions

must comply with paragraph 10.07 of Chapter 10.

8.20 The principal adviser must comment on the reasonableness of the purchase
consideration for acquisitions in the submission to the SC.

8-4
 CHAPTER 9

9. WARRANTS, OPTIONS, CONVERTIBLES AND PREFERENCE SHARES

9.01 This chapter deals with requirements governing the issuance of warrants,
options, convertible securities and preference shares by listed companies.

Issuance of Warrants

9.02 The number of new shares which would arise from all outstanding warrants in
the event of exercise must not exceed 50% of the issued and paid-up capital
of the company (before the exercise of the warrants) at all times.

9.03 Any step-up or step-down pricing mechanisms to be incorporated in the

exercise price of the warrants, including the amount of step-up/step-down
and the time-frames involved, should be determined and disclosed upfront in
the deed poll and the prospectus/circular/any other offer documents issued in
relation to the proposal. Such step-up/step-down pricing mechanisms must
be set on a fixed basis, i.e. the step-up/step-down must be stated in absolute
amounts and must not be made conditional upon the occurrence of certain
events.

9.04 Warrant deed polls must not include any provisions for -

(a) the extension or shortening of tenure of the warrants; and

(b) changes to the number of shares received for the exercise of each
warrant and changes to the pricing mechanism for the exercise price
of the warrants, except where these changes are adjustments
pursuant to capitalisation issues, rights issue, consolidation or sub-
division of shares or capital-reduction exercises.

9.05 All provisions for changes in the terms of the warrants must be clearly
determined and disclosed upfront in the warrant deed poll and the
prospectus/circular/any other offer documents issued in relation to the
proposal.

9-1
9.06 Once determined, the terms of the warrants cannot be changed in mid-
stream.

Issuance of Convertible Securities

9.07 The minimum par/nominal value for convertible securities is RM0.10.

9.08 Any step-up or step-down pricing mechanisms to be incorporated in the

conversion price must be clearly determined and disclosed upfront in the
trust deed and the prospectus/circular/any other offer documents
issued in relation to the proposal. Such step-up/step-down pricing mechanisms
must comply with the following:-

(a) For listed convertibles – The amount of step-up/step-down (which

must be stated in absolute terms) and time-frames for the conversion
price adjustment must be determined upfront. The step-up/step-down
mechanism must be set on a fixed basis, i.e. the step-up/step-down
must not be made conditional upon the occurrence of certain events;
and
(b) For non-listed convertibles – The conditions governing the step-
up/step-down pricing mechanism and time-frames for the conversion
price adjustment must be determined upfront.

9.09 Provisions for changes to the coupon rate of the convertibles may be
incorporated for both listed and non-listed convertibles, as long as the
mechanisms are determined and disclosed upfront in the
trust deed and the prospectus/circular/any other offer documents issued
in relation to the proposal. For traded convertibles, the changes to the
coupon rate must be stated in absolute terms.

9.10 Trust deeds for convertible securities must not include any provisions for -

(a) the extension or shortening of tenure of the convertibles; and

9-2
 (b) changes to the number of shares received for the conversion of each
convertible and changes to the pricing mechanism for the conversion
price of the convertibles, except where these changes are
adjustments pursuant to capitalisation issues, rights issue,
consolidation or sub-division of shares or capital-reduction exercises.

9.11 All provisions for changes in the terms of the convertibles must be clearly
determined and disclosed upfront in the trust deed and
prospectus/circular/any other offer documents issued in relation to the
proposal.

9.12 Once determined, the terms of the convertibles cannot be changed in mid-
stream.

Issuance of Preference Shares

9.13 The minimum par value for preference shares is RM0.10.

9-3
 CHAPTER 10

10. RELATED-PARTY TRANSACTIONS

10.01 This chapter deals with the requirements governing -

(a) placements of securities to related parties by listed companies; and

(b) acquisitions of assets from related parties by listed companies,
whether financed by way of issuance of securities or by proceeds from
the issuance of securities.

Placements of Securities to Related Parties by Listed Companies

10.02 Shares which are placed out to related parties must be priced at least at the
weighted average market price of the shares of the company for the five
market days prior to a price-fixing date to be set on a date after the approval
of the SC for the placement.

10.03 For warrants/convertible securities, the exercise/conversion price must be set

at least at the weighted average market price of the shares of the company
for the five market days prior to a price-fixing date to be set on a date after
the approval of the SC for the placement.

10.04 Paragraphs 10.02 and 10.03 above do not apply to placements of securities
to the following categories of related parties:-

(a) Independent directors; and

(b) Substantial shareholders which -

(i) hold not more than 15% of the issued and paid-up capital of
the company, whether directly or indirectly; and

(ii) are either –

10-1
 • statutory institutions managing funds belonging to
contributors or investors who are members of the
public; or
• entities established as collective investment schemes,
such as closed-end funds, unit trusts or investment
funds (but excluding investment-holding companies).

10.05 In addition, placements of securities to related parties for purposes of

meeting the NDP/NVP requirements which are imposed by other authorities
need not comply with paragraphs 10.02 and 10.03 above. This exemption
from paragraphs 10.02 and 10.03 above applies for NDP/NVP requirements
up to a maximum of 30% Bumiputera equity participation.

Acquisitions of Assets from Related Parties

10.06 This section applies to both –

(a) acquisitions of assets from related parties financed by way of direct

issuance of securities to the vendor; and
(b) acquisitions of assets from related parties financed by proceeds from
the issuance of securities.

10.07 For acquisitions of assets from related parties financed by way of direct
issuance of shares to the vendors, the pricing of the shares issued to the
vendors as consideration must be set at least at the weighted average market
price for the five market days prior to the date on which the terms of the
transaction were agreed upon.

10.08 For acquisitions of assets from related parties financed by way of direct
issuance of warrants/convertible securities to the vendors, the
exercise/conversion price of the warrants/convertibles issued to the vendors
as consideration must be set at least at the weighted average market price
for the five market days prior to the date on which the terms of the
transaction were agreed upon.

10-2
10.09 In the case of acquisitions of assets from related parties financed by proceeds
from the issuance of securities which fall under the shareholders’ mandate for
recurrent related-party transactions (given under paragraph 10.09 of the
Listing Requirements of KLSE), such acquisitions are not subject to –

(a) the valuation parameters stated in paragraph 5.05(c)(i) of Chapter 5

of these guidelines; and
(b) the requirements for the submission of basis of valuation and
determination of purchase consideration as stated in paragraph 5.08
of Chapter 5 of these guidelines.

10-3
 CHAPTER 11

11. ACQUISITIONS OF FOREIGN ASSETS

11.01 This chapter deals with the requirements governing the acquisitions of foreign
assets by public companies which are to be financed either directly through
the issuance of equity/equity-linked securities as consideration, or indirectly
through proceeds from the issuance of equity/equity-linked securities.

11.02 Acquisitions of foreign assets by way of issuance of equity/equity-linked

securities (whether directly or indirectly) will be considered substantial if any
of the following ratios is at least 25% or more:-

(a) The consideration for the foreign assets divided by the net tangible
assets of the public company;
(b) The consideration for the foreign assets divided by the aggregate
market value of all the ordinary shares of the listed company prior to
announcement of the acquisition; or
(c) The consideration shares to be issued divided by the equity share
capital of the public company.

11.03 Such acquisitions of substantial foreign assets would only be allowed by the
SC if the assets are of acceptable quality and –

(a) the acquisition is financed entirely through the direct issuance of new
equity/equity-linked securities as consideration to the vendors of the
foreign assets;
(b) there will be no net outflow of funds from the country by the public
company arising from the acquisition (which is attributable to the
public company or its subsidiaries) for a period of three years from the
completion date of the acquisition; and
(c) the acquisition brings benefits to the public company and the country.

11-1
11.04 All other acquisitions of foreign assets by way of issuance of securities
(whether directly or indirectly) that do not fall under paragraph 11.02 above
will be treated with similar parameters as for acquisitions of domestic assets.

11-2
 CHAPTER 12

12. SIGNIFICANT CHANGES IN BUSINESS DIRECTION

General

12.01 Section 32(2)(g) of the SCA imposes approval requirements for any person
who proposes to “acquire or dispose assets (whether or not by way of issue
of securities) which results in a significant change in the business direction or
policy of a listed public company.”

12.02 This chapter deals with the situations which require the SC’s approval for
proposals which result in significant changes in business direction of listed
companies, and the factors that the SC takes into account when assessing
such proposals.

Definitions

12.03 In this chapter, the terms “acquisition”, “disposal” and “transaction”–

(a) include acquisitions and disposals by a subsidiary of a listed company;

and
(b) exclude transactions of a revenue nature in the ordinary course of
business.

12.04 The following percentage ratios are used in determining whether or not a
transaction by a listed company constitutes a significant change in business
direction:-

(a) Assets
The net tangible assets attributable to the subject transaction divided
by the net tangible assets of the listed company;
(b) Profits
The after-tax profits attributable to the subject transaction divided by
the after-tax profit of the listed company;

12-1
 (c) Consideration to Market Capitalisation
The consideration for the subject transaction divided by the aggregate
market value of all the ordinary shares of the listed company prior to
announcement;
(d) Consideration to Net Tangible Assets
The consideration for the subject transaction divided by the net
tangible assets of the listed company;
(e) Number of Shares
The number of new shares issued by the listed company as
consideration for an acquisition divided by the number of shares
outstanding in the listed company prior to the transaction; and
(f) Cost of Investment to Net Tangible Assets
The aggregate cost of investment of the subject transaction, in the
case of disposal, divided by the net tangible assets of the listed
company.

12.05 A significant change in business direction is defined as follows:-

(a) A situation where the listed company acquires new assets or disposes
of existing assets such that -

(i) the percentage ratio is 100% or more based on the

computations in any of the ratios described in paragraph 12.04
above;
(ii) in the case of an acquisition, the acquisition results in a
change in the core business within 12 months of the
acquisition or in a change in dominant shareholder/Board of
the listed company; or
(iii) in the case of a listed company with negative net tangible
assets, the acquisition or disposal is more than RM1 million in
size per transaction.

; or

12-2
 (b) A restructuring situation where another company acquires the listed
company and simultaneously intends to transfer the listing status
together with the introduction of new assets.

12.06 The SC may require transactions that are entered into during the 12 months
prior to the date of the latest transaction to be aggregated with the latest
transaction for the purpose of computing the percentage ratios. Transactions
will normally need to be aggregated if they –

(a) are entered into by a listed company with the same party or with
parties connected with one another;
(b) involve the acquisition or disposal of assets in one particular company;
or
(c) together lead to substantial involvement in a business activity which
did not previously form a part of the company’s core business(es).

Criteria which Apply to Acquisitions Resulting in Significant Changes

in Business Direction

12.07 Historical Profit Track Record

(a) Main Board Companies

(i) Acquisitions which do not result in a change in dominant

shareholder/Board

Assets to be injected should already be income-generating,

with an uninterrupted track record of profitability of two years
and have good immediate prospects of strong profits and
cashflows which will be beneficial to the listed company.

12-3
 (ii) Acquisitions which result in a change in dominant
shareholder/Board

Assets to be injected should have uninterrupted profits for the

past three to five years, with a minimum aggregate after-tax
profit of RM18 million, and have good immediate prospects of
strong profits and cashflows which will be beneficial to the
listed company.

The injection of property-development or construction assets, whether

or not resulting in a change in dominant shareholder/Board, must
comply with paragraphs 7.02 to 7.05 of Chapter 7.

(b) Second Board Companies

(i) Acquisitions which do not result in a change in dominant

shareholder/Board

Assets to be injected should already be income-generating,

with an uninterrupted track record of profitability of two years
and have good immediate prospects of strong profits and
cashflows which will be beneficial to the listed company.

(ii) Acquisitions which result in a change in dominant

shareholder/Board

Assets to be injected should have uninterrupted profits for the

past three to fiv e years, with a minimum aggregate after-tax
profit of RM12 million, and have very good immediate
prospects of strong profits and cashflows which will be
beneficial to the listed company.

The injection of property-development or construction assets, whether

or not resulting in a change in dominant shareholder/Board, must
comply with paragraphs 7.02 to 7.05 of Chapter 7.

12-4
12.08 Other Requirements

The assets to be injected must also comply with the provisions in

paragraphs –
(a) 6.13(a)(iv), if applicable;
(b) 6.14(a);
(c) 6.16; and
(d) 6.18 – 6.21,

of Chapter 6.

12.09 Moratorium on Disposal of Securities

For acquisitions resulting in a change in dominant shareholder/Board, a

moratorium on disposal will be imposed on 50% of the consideration
securities to be receiv ed by the vendor of the assets to be injected, whereby
the vendor will not be allowed to sell, transfer or assign his/her/its holdings of
securities for one year from the date the securities issued as consideration for
the acquisition are listed on KLSE, or from the date of issue if the securities
are unlisted.

In the case where the affected securities holder is an unlisted company,

every shareholder of the unlisted company (if an individual) or ultimate
individual shareholder (if the shareholder of the unlisted company is another
unlisted company) must give an undertaking that he/she will not sell, transfer
or assign his/her shareholding in the related unlisted company for the period
as stipulated above.

For acquisitions not resulting in a change in dominant shareholder/Board,

moratorium will not generally be imposed on consideration securities received
by the vendor.

12-5
12.10 Exceptions to Criteria

The criteria for significant changes in business direction set out in paragraph
12.07 above do not apply to the following cases:-

(a) Distressed Listed Companies

Distressed listed companies undertaking proposals which result in a

significant change in business direction should comply with the
requirements in Chapter 13; and

(b) Privatisation Cases

Privatisation cases acceptable to the SC are taken as those which

involve the transfer of any Government entity/project to the private
sector and which have been considered and approved by the
Economic Planning Unit (EPU) of the Prime Minister’s Department.
There should be certainty of benefits and significant enhancement in
profit and cashflow to the listed company after injection of the
privatised entity/project.

Criteria which Apply to Disposals Resulting in a Significant Change

in Business Direction

12.11 Listed companies which undertake disposals of assets resulting in a significant

change in business direction must comply with the following:-

(a) The disposal must be done on terms and conditions which are fair to
the divesting listed company; and
(b) The proceeds from the disposal must be used for the benefit of the
company.

12-6
 CHAPTER 13

13. PROPOSALS BY DISTRESSED LISTED COMPANIES

13.01 Distressed listed companies are defined as the following:-

(a) A listed company which is classified as an “affected listed issuer”

under Practice Note 4/2001 issued by KLSE;

(b) A listed company with an inadequate level of operations as defined in

Practice Note 10/2001 issued by KLSE. This is limited to a company
which has an inadequate level of operations arising from operational
problems, as opposed to a company which has an inadequate level of
operations purely arising from disposal of its assets resulting in the
company becoming a “cash” company;

(c) A listed company under the purview of Danaharta Nasional Berhad

(Danaharta). The submission for the corporate proposal must include
certification from Danaharta that the corporate proposal is a proposal
promoted and sponsored by Danaharta;

(d) A listed company under section 176 of the Companies Act 1965, to the
extent that it is insolvent (subject to confirmation to the SC by an
independent firm of chartered accountants) or a restraining order has
been granted; or

(e) A listed company which is classified as a “rescue case”, i.e. –

(i) the listed company has suffered losses in the past two full
financial years, and is expected to incur further losses, while
its paid-up capital has been reduced by more than 50% as
represented by its shareholders’ funds; or

(ii) the listed company has been/is facing financial problems which
could have an impending effect on its viability as a going

13-1
 concern. In this regard, a report from an independent firm of
chartered accountants that expresses an opinion to that effect
should be submitted.

13.02 All proposals by distressed listed companies should comply with the following
principles:-

(a) The proposal should be sufficiently comprehensive and capable of

resolving all financial problems faced; and
(b) The proposal must demonstrate that it will increase shareholder value.

Net Tangible Asset (NTA) Requirements

13.03 The proforma NTA-per-share position of the distressed listed company

immediately on implementation of its corporate proposal should be positive
and be at least 33% of the par value of its ordinary shares.

Injection of Assets into Distressed Listed Companies

13.04 Paragraphs 13.05 to 13.07 below apply to the injection of assets into all
distressed listed companies which is –

(a) financed by the direct issuance of securities as consideration to the

vendors of those assets; or
(b) financed indirectly through proceeds from the issuance of securities,

and would result in a significant change in business direction of the distressed

listed company according to paragraph 12.05 of Chapter 12.

13.05 The asset to be injected must have at least one year of after-tax profit based
on the latest audited accounts, or one year of revenue which is verified by an
independent firm of chartered accountants (in the case of assets which are
not companies), where applicable.

13-2
13.06 For the injection of property-development or construction assets into
distressed listed companies which results in a significant change in business
direction, the asset to be injected must have a minimum aggregate after-tax
profit of RM30 million computed over a period of not more than 5 years prior
to the submission to the SC. In addition, the following guidelines must be
complied with:-

(a) For injection of property -development assets - Paragraphs 7.02(b)

and (c) of Chapter 7; and

(b) For injection of construction assets - Paragraph 7.04(b) of Chapter 7.

13.07 Where the property-development/construction asset cannot meet the RM30

million aggregate after-tax profit benchmark, the asset could still be
considered for injection, provided that –

(a) the asset has at least an aggregate after-tax profit of RM21 million
computed over a period of not more than the past five years prior to
the submission to the SC; and
(b) the asset has enough on-going projects and/or contracts-in-hand
(where sales and/or contracts are secured from non-related parties)
to meet the balance of the requisite RM30 million after-tax profit in
the current or next financial year after the injection.

Interim Corporate Proposals

13.08 Where a distressed listed company intends to undertake interim corporate

proposals such as rights issues or placements which will not fulfil the
requirements of paragraphs 13.02(a) and 13.03 above, the distressed listed
company must declare to the SC the interim status of the proposal. In such
cases, the SC may approve the interim proposal subject to the condition that
the distressed listed company submits a comprehensive proposal which will
fulfil the requirements of paragraphs 13.02(a) and 13.03 within a certain
time-frame. Distressed listed companies may only undertake one such interim
proposal.

13-3
13.09 Forward-looking profit and cashflow statements are not required for interim
proposals in paragraph 13.08 above.

13-4
 CHAPTER 14

14. PROPOSALS BY UNLISTED PUBLIC COMPANIES

14.01 All proposals by unlisted public companies will be considered by the SC on a

case-by-case basis.

14.02 The general policies and principles adopted by the SC in considering such
proposals are as follows:-

(a) The corporate-governance record of issuers and directors;

(b) The fairness of the proposal to shareholders and other stakeholders;
and
(c) The impact of the proposal on matters of national interest and public
policy.

14.03 Unlisted public companies undertaking acquisitions of foreign assets financed

either directly through the issuance of equity/equity-linked securities as
consideration, or indirectly through proceeds from the issuance of
equity/equity-linked securities, must comply with paragraphs 11.02 to 11.04
of Chapter 11 of these guidelines. The ratio in paragraph 11.02(b) is not
applicable to unlisted public companies.

14-1
 CHAPTER 15

15. MISCELLANEOUS

Transfer of Listing from Second Board to Main Board of KLSE

15.01 A company listed on the Second Board that wishes to transfer its listing to the
Main Board must comply with the following:-

(a) The company must have been listed for at le ast one year;
(b) The company must have met its profit forecast as disclosed in the
prospectus, if the company is seeking transfer after being listed for
less than two years;
(c) The company must meet the requirements of listing on the Main
Board with respect to issued and paid-up capital;
(d) The company must meet the historical profit track record requirement
for listing on the Main Board with respect to -
(i) the minimum aggregate after-tax profit requirement;
(ii) the uninterrupted profit track record requirement; and
(iii) the minimum after-tax profit for the latest financial year
requirement.
; and
(e) If the company is seeking a transfer based on its original core
business, it will not need to comply with the uninterrupted profit
record test as stipulated in paragraph 6.13(a) of Chapter 6.

15.02 A Second Board company which has undertaken acquisitions of assets

resulting in a significant change in business direction within 5 years prior to
the proposed transfer exercise can only transfer to the Main Board upon -

(a) the new injected assets meeting the historical profit track record
requirement of the Main Board; or
(b) the original core business meeting the historical profit track record
requirement of the Main Board.

15-1
15.03 The historical profit track record requirement for Second Board companies
seeking a transfer to the Main Board should be based on the latest available
annual audited financial results at the point of submission and not at the
tentative date of transfer.

Transfer of Listing Status Between Companies

15.04 The SC will only allow the transfer and granting of listing status to a new
listing vehicle (for example, as part of a restructuring exercise for distressed
listed companies) in the event of a take-over of a listed company , provided
that the shares of the existing listed company are exchanged, in so far as
possible, for shares in the new listing vehicle.

15-2
PART III : SUBMISSION AND IMPLEMENTATION OF
PROPOSALS
 CHAPTER 16

16. INFORMATION AND DOCUMENTS

Minimum Information and Documents Required by the SC

16.01 Proposals submitted to the SC for approval should be accompanied by the

relevant information and documents as specified in the Format and Content
of Applications issued separately by the SC.

16.02 In addition, proposals submitted under either the declaratory approach or

assessment approach should include the submission of a declaration by the
applicant, principal adviser and each of the directors of the applicant in
accordance with the form specified in Schedules 16.02(1) – (3) of these
guidelines.

Future Profit and Cashflow

16.03 For proposals which require the submission of profit/cashflow forecasts, if the
submission is received by the SC within the last three months of the current
financial year of the company, the forecast period should extend to the next
financial year as well.

16.04 The requirements for submission of profit and cashflow forward-looking

statements are as follows:-

16-1
 Profit Cashflow
Proposal Forecast Projections Forecast Projections
Initial Public Offerings Current FY - Current FY -
after proposal after proposal
Initial Public Offerings – Current FY 4 FYs after Current FY -
Property-development and after proposal forecast FY after proposal
construction companies
Initial Public Offerings – Current FY - Current FY Projections to
Substantial foreign after proposal after proposal extend up to
operations 3 FYs from
the date of
submission
Acquisitions resulting in a Current FY - Current FY -
significant change in before and before and
business direction after proposal after proposal
Acquisitions resulting in a Current FY, 4 FYs after Current FY, -
significant change in before and forecast FY before and
business direction – Change after proposal after proposal
in core business to
property-development and
construction
Acquisitions of substantial Current FY, - Current FY, Projections to
foreign assets before and before and extend up to
after proposal after proposal 3 FYs from
the tentative
date of
completion of
the acquisition
Proposals by distressed Profit and cashflow forecasts and projections should extend for a
listed companies period of time such that the SC will be able to judge the
suitability of the proposal and how the proposal will turn the
distressed listed company around
(FY – Financial Year)

16.05 Where profit and cashflow forecasts are submitted to the SC, the forecasts
should be reported on by the reporting accountants as per the prescribed
format in Schedule 16.05. The report by the reporting accountants should be
submitted to the SC.

16.06 The reporting accountants are not required to report on the financial
projections of the company.

16.07 The principal adviser should ensure that there is sufficient evidence to
support the profit/cashflow forecasts and projections.

16-2
 Further Information and Documents Required by the SC

16.08 The SC may, at its discretion, request any additional information and
documents other than those specified in these guidelines.

16.09 The SC should be immediately informed of –

(a) any material change in circumstances that would affect the

consideration of the SC; and
(b) any material change/development in circumstances relating to a
proposal occurring subsequent to the SC giving its approval. Where
such material change/development occurs prior to issue of documents
to shareholders and/or members of the public, it must be disclosed in
those public documents.

16.10 In the event certain circumstances are made known to the SC after the
proposal has been considered, where such circumstances would have
affected the decision made had the SC known of the circumstances prior to
the decision, the SC may review the decision. For this purpose, an application
with full justifications and effects should be submitted for the SC’s review.

16-3
 CHAPTER 17

17. SUBMISSION OF PROPOSALS

17.01 All applications for proposals requiring the approval of the SC (including
applications for waivers/exemptions) should be submitted in three copies and
addressed to the Chairman of the Securities Commission at the following
address:-

Suruhanjaya Sekuriti
3 Persiaran Bukit Kiara
Bukit Kiara
50490 Kuala Lumpur

17.02 The principal adviser submitting an application has a duty to ensure that all
the SC’s requirements pertaining to submission of proposals are met and is
responsible for dealing with the SC on all matters in connection with an
application. Submissions which do not comply with the requirements of the
SC or are deemed unsatisfactory may be rejected, or returned to the
applicant. In relation to this, the applicant (including its directors), advisers,
experts and other persons accepting responsibility for all or any part of the
information and documents that are submitted to the SC should exercise due
diligence in all matters relating to or in connection with any proposal.

17.03 The application letter submitted by the principal adviser must be signed by at
least 2 authorised signatories.

17.04 Any person who is aggrieved by the decision of the SC may, within 30 days
after the aggrieved person is notified of such decision, make an application
for a review of the decision to the SC whose decision shall be final.

17.05 An application for a revision to the terms and conditions of an approval given
by the SC is not subjected to any time limit. Such applications should be
made through a principal adviser. The principles adopted by the SC in respect
of such applications are as follows:-

17-1
 (a) Such applications should be supported by evidence of genuine new
grounds or developments beyond the control of the relevant parties;
and
(b) Such applications which do not comply with (a) above may be
considered by the SC at its discretion based on exceptional reasons.

17.06 Any proposal that has been rejected by the SC may be re-submitted but only
after a lapse of at least one year from the date the application for the
proposal or for a review of decision, as the case may be, is rejected.

17.07 The SC must be informed of the dates of completion for all approved
proposals implemented.

Fees and Charges for Processing of Proposals

17.08 The details of fees payable to the SC for the various types of proposals, in
accordance with the Securities Commission (Fees and Charges) Regulations
1993, are set out in Schedule 17.08.

17.09 Charges for any incidental expenses incurred in the processing of proposals
by the SC may also be payable.

17-2
 CHAPTER 18

18. IMPLEMENTATION OF PROPOSALS

Announcements

18.01 Upon receipt of the SC’s decision on a corporate proposal, the principal
adviser should make an announcement of the decision, including conditions
imposed/reasons for rejection (whichever is applicable), promptly, in line with
the continuing disclosure obligations under the Listing Requirements of KLSE.

Deadline

18.02 Companies should complete their proposals (excluding utilisation of proceeds)

within the time as stipulated below:-

Proposals Total period (Months)

• Placements to Bumiputera 12
investors to fulfil NDP/NVP
requirements
• Flotations, acquisitions, rights 6
issues and others

For cases that involve court proceedings, the implementation period should
be 12 months. Failure to complete the proposals within the said periods
would render the approvals lapsed. However, where the applicant has
submitted a request for a review of the SC’s decision, the time period for
implementation commences from the date on which the decision on the
review is conveyed to the applicant.

Extension of Time

18.03 An extension of time for implementation may be granted only in exceptional

cases. The application for extension should be supported by a full explanation
and must be made no later than 14 days before the approval expires. Such

18-1
 applications must be made through a principal adviser. However, all
applicants are advised that, if there is a likelihood of the applicant not being
able to implement the proposal in the prescribed period, this should be stated
in the submis sion.

18.04 All applications for extension of time for implementation must be

accompanied by a confirmation letter by the directors of the applicant that,
save as disclosed, there has been no material change/development in the
circumstances and information relating to the proposal.

18.05 If the approval has lapsed and an extension has not been sought/has not
been granted, the company may submit a fresh application to the SC for its
consideration no earlier than one year from the date of approval of the SC.

18.06 Subsequent to the approval of the SC, the following should be submitted to
the SC where applicable:-

(a) Where an indicative issue price or number of securities to be issued

are provided in the submission, the actual figure, once determined;
and
(b) A written confirmation of the compliance with terms and conditions of
the SC’s approval once the proposal has been completed.

18-2
PART IV : SCHEDULES
 Schedule 16.02(1)

Declaration by the Applicant

Date: …(Date of Application)…

The Chairman
Securities Commission

Dear Sir

APPLICANT …(Name of Applicant)…

Declaration Pursuant to Paragraph 16.02 of the Policies and Guidelines on

Issue/Offer of Securities

We, …(Name of Applicant)…. are proposing to undertake the following proposals:-

(a) ………..
(b) ………..
(c) ……….

(hereinafter referred to as “the Proposal”).

2. We confirm that after having made all reasonable enquiries, and to the best of
our knowledge and belief, there is no false or misleading statement contained in, or
material omission from, the information that is provided to the adviser(s)/expert(s) or to
the SC in relation to the above Proposal.

3. We declare that we are satisfied after having made all reasonable enquiries that
the Proposal is in full compliance with the following:-

(i) the Policies and Guidelines on Issue/Offer of Securities(1);

(ii) the Guidelines on the Offering of Private Debt Securities* ;

(iii) the Guidelines on the Offering of Asset-Backed Debt Securities as may be

applicable to the issuer during the tenor of the Proposal* ;

(iv) the requirements of the Controller of Foreign Exchange with respect to

the Proposal* ; and

(v) other requirements under the Securities Commission Act 1993 as may be
applicable.

S.1
4. Save as otherwise disclosed in the attachment accompanying this declaration,
the Applicant has not -

(i) been convicted or charged with any offence under the securities laws,
corporations laws or other laws involving fraud or dishonesty in a court of
law, for the last 10 years prior to the submission(2); and

(ii) been subject to any action by the stock exchange for any breach of the
listing requirements or rules issued by the stock exchange, for the past 5
years prior to the submission(3).

5. We declare the following:-

(i) the Proposal involves/does not involve any acquisition of substantial

foreign assets, in accordance with Chapter 11 of the Policies and
Guidelines on Issue/Offer of Securities(4);

(ii) the Proposal results/does not result in a significant change in the

business direction of the listed company, in accordance with Chapter 12
of the Policies and Guidelines on Issue/Offer of Securities(5);

(iii) the Applicant is/is not a distressed listed company, in accordance with
Chapter 13 of the Policies and Guidelines on Issue/Offer of Securities(6);
and

(iv) the Proposal is/is not a related-party transaction in accordance with

Chapter 10 of the Policies and Guidelines on Issue/Offer of Securities(7).

6. We declare that we will ensure continuous compliance with the requirements and
conditions imposed by the SC in relation to the above Proposal.

7. We undertake to provide to the SC all such information as the SC may require in

relation to the Proposal.

The above Declaration has been signed by me as …(designation of director)… of the

Applicant pursuant to authority granted to me by a resolution of the Board of Directors
on …(date of resolution)…

Yours faithfully,

……………………….
Date:
Signature:
Name:
Name of Applicant:

S.2
 Notes
(1) Applicable only in relation to Proposals falling under the Policies
and Guidelines on Issue/Offer of Securities. Where an application
is being made to the SC for proposals under the assessment
approach and exemptions are being sought, to insert the words
“except paragraph(s) ..(refer to paragraph where exemption is
being sought).. where exemption(s) is/are being sought as part
of the submission to the SC.”
(2) and (3) Applicable only to proposals in relation to public companies.
(4) Applicable only to the issue, offer or listing of equity or equity-
linked securities by public companies.
(5), (6) and (7) Applicable only to proposals in relation to listed companies.

* To delete if not applicable

S.3
 Schedule 16.02(2)

Declaration by the Principal Adviser

Date: …(Date of Application)…

The Chairman
Securities Commission

Dear Sir

APPLICANT …(Name of Applicant)…

Declaration Pursuant to Paragraph 16.02 of the Policies and Guidelines on

Issue/Offer of Securities

…(Name of Applicant)…. is proposing to undertake the following proposals:-

(a) ……….
(b) ……….
(c) ……….

(hereinafter referred to as “the Proposal”).

We,..(Name of Principal Adviser)…, are advising ..(Name of Applicant).. on the Proposal.

2. We confirm that after having made all reasonable enquiries, and to the best of
our knowledge and belief, there is no false or misleading statement contained in, or
material omission from, the information that is provided to the SC in relation to the
above Proposal.

3. We declare that we are satisfied after having made all reasonable enquiries that
the Proposal is in full compliance with the following:-

(i) the Policies and Guidelines on Issue/Offer of Securities(1);

(ii) the Guidelines on the Offering of Private Debt Securities as may be

applicable to the principal adviser* ;

(iii) the Guidelines on the Offering of Asset-Backed Debt Securities as may be

applicable to the principal adviser * ;

(iv) the requirements of the Controller of Foreign Exchange with respect to

the Proposal* ; and

S.4
 (v) other requirements under the Securities Commission Act 1993 as may be
applicable.

4. We declare the following:-

(i) the Proposal involves/does not involve any acquisition of substantial

foreign assets, in accordance with Chapter 11 of the Policies and
Guidelines on Issue/Offer of Securities(2);

(ii) the Proposal results/does not result in a significant change in the

business direction of the listed company, in accordance with Chapter 12
of the Policies and Guidelines on Issue/Offer of Securities(3);

(iii) the Applicant is/is not a distressed listed company, in accordance with
Chapter 13 of the Policies and Guidelines on Issue/Offer of Securities(4);
and

(iv) the Proposal is/is not a related-party transaction in accordance with

Chapter 10 of the Policies and Guidelines on Issue/Offer of Securities(5).

5. We undertake to immediately inform the SC if it has come to our knowledge that

the Applicant has breached or failed to comply with such requirements, after submission
of this declaration relating to the Proposal until the implementation of the Proposal.

6. We undertake to provide to the SC all such information as the SC may require in

relation to the Proposal.

Yours faithfully

………………………

Date:
Signature:
Name:
Name of Principal Adviser:

S.5
 Notes
(1) Applicable only in relation to Proposals falling under the Policies
and Guidelines on Issue/Offer of Securities. Where an application
is being made to the SC for proposals under the assessment
approach and exemptions are being sought, to insert the words
“except paragraph(s) ..(refer to paragraph where exemption is
being sought).. where exemption(s) is/are being sought as part of
the submission to the SC.”
(2) Applicable only to the issue, offer or listing of equity or equity-
linked securities by public companies.
(3), (4) and (5) Applicable only to proposals in relation to listed companies.

* To delete if not applicable

S.6
 Schedule 16.02(3)

Declaration by a Director of an Applicant Undertaking a Proposal

Date: … (Date of Application) …

The Chairman
Securities Commission

Dear Sir

APPLICANT (Name of Applicant)

Declaration Pursuant to Paragraph 16.02 of the Policies and Guidelines on

Issue/Offer of Securities

…(Name of Applicant)…. is proposing to undertake the following proposals:-

(a) …………
(b) ………..
(c) ………..

(hereinafter referred to as “the Proposal”).

2. I declare that, save as otherwise disclosed in the attachment accompanying this

declaration, -

(i) I am not an undischarged bankrupt nor am I presently subject to any

proceedings under bankruptcy laws;

(ii) I have never been charged with, convicted for or compounded for any
offence under securities laws, corporations laws or any other laws
involving fraud or dishonesty in a court of law;

(iii) No action has ever been taken against me for any breach of the listing
requirements or rules issued by the stock exchange for the past 5 years
prior to the submission; and

(iv) To the best of my knowledge, I have not been subject to any inquiry or
investigation by any government or regulatory authority or body for the
past 5 years prior to the submission.

3. This declaration is made by myself as part of the Applicant’s application to the SC

for approval to implement and carry out the Proposal.

S.7
Yours faithfully

Signature :
Name :
NRIC No:
Name of Applicant:

S.8
 Schedule 16.05(1)

Acceptable Form of Reporting Accountants’ Report on Profit Forecast

The Board of Directors

Model Company Berhad

Dear Sirs

MODEL COMPANY BERHAD

We have reviewed the consolidated profit forecast of Model Company Berhad Group for
the year ending ……… as set out in the accompanying statement (which we have
stamped for the purpose of identification) in accordance with the standard [ISA 810]
applicable to the review of forecasts. The forecast has been prepared for submission to
the Securities Commission in connection with ……… and should not be relied on for any
other purposes. ……….

Our review has been undertaken to enable us to form an opinion as to whether the
forecast, in all material respects, is properly prepared on the basis of the assumptions
made by the Directors and is presented on a basis consistent with the accounting
policies adopted and disclosed by the Group in its audited financial statements for the
year ended……… The Directors of Model Company Berhad are solely responsible for the
preparation and presentation of the forecast and the assumptions on which the forecast
is based.

The forecast of Company S (e.g. wholly -owned subsidiary or the proposed acquiree
company), which is forecast to contribute xx% to the profit after taxation after minority
interests of the Group, was reviewed by Audit Firm and Co., another firm of
accountants, whose report (see Appendix………) has been furnished to us. Our opinion,
insofar as it relates to the amount included for Company S, is based on the report of the
other firm of accountants.

[In this circumstance, a similar report on Company S etc must also be made available to
the SC.]

Forecasts, in this context, means prospective financial information prepared on the basis
of assumptions as to future events which management expects to take place and the
actions which management expects to take as of the date the information is prepared
(best-estimate assumptions). While information may be available to support the
assumptions on which forecast is based, such information is generally future oriented
and therefore uncertain. Thus, actual results are likely to be different from the forecast
since anticipated events frequently do not occur as expected and the variation could be
material.

S.9
[Where relevant, insert an emphasis of matter paragraph to highlight a matter affecting
the profit forecast.]

Subject to the matters stated in the preceding paragraphs:-

(i) nothing has come to our attention which causes us to believe that the
assumptions made by the Directors, as set out in the accompanying statement,
do not provide a reasonable basis for the preparation of the profit forecast; and

(ii) in our opinion, the profit forecast, so far as the calculations are concerned, is
properly prepared on the basis of the assumptions made by the Directors and is
presented on a basis consistent with the accounting policies adopted and
disclosed by the Group in its audited financial statements for the year ended
……… (except for the changes in accounting policies as disclosed in note ………).

Yours faithfully

(Audit Firm)
[AF:8888]
Chartered Accountants

(Partner)
[9999/3/01(J/PH)]
Partner

(Date)

S.10
 Schedule 16.05(2)

Acceptable Form of Reporting Accountants’ Report on Cash Flow Forecast

The Board of Directors

Model Company Berhad

Dear Sirs

MODEL COMPANY BERHAD

We have reviewed the consolidated cash flow forecast of Model Company Berhad Group
for the year ending ……… as set out in the accompanying statement (which we have
stamped for the purpose of identification) in accordance with the standard [ISA 810]
applicable to the review of forecasts. The forecast has been prepared for submission to
the Securities Commission in connection with ……… and should not be relied on for any
other purposes. ……….

Our review has been undertaken to enable us to form an opinion as to whether the
forecast, in all material respects, is properly prepared on the basis of the assumptions
made by the Directors and is presented on a basis consistent with the accounting
policies adopted and disclosed by the Group in its audited financial statements for the
year ended……… The Directors of Model Company Berhad are solely responsible for the
preparation and presentation of the forecast and the assumptions on which the forecast
is based.

The forecast of Company S (e.g. wholly -owned subsidiary or the proposed acquiree
company), which is forecast to contribute xx% to the net increase in the cash flows of
the Group, was reviewed by Audit Firm and Co., another firm of accountants, whose
report (see Appendix………) has been furnished to us. Our opinion, insofar as it relates
to the amount included for Company S, is based on the report of the other firm of
accountants.

[In this circumstance, a similar report on Company S etc must also be made available to
the SC.]

Forecasts, in this context, means prospective financial information prepared on the basis
of assumptions as to future events which management expects to take place and the
actions which management expects to take as of the date the information is prepared
(best-estimate assumptions). While information may be available to support the
assumptions on which forecast is based, such information is generally future oriented
and therefore uncertain. Thus, actual results are likely to be different from the forecast
since anticipated events frequently do not occur as expected and the variation could be
material.

S.11
[Where relevant, insert an emphasis of matter paragraph to highlight a matter affecting
the cash flow forecast.]

Subject to the matters stated in the preceding paragraphs:-

(i) nothing has come to our attention which causes us to believe that the
assumptions made by the Directors, as set out in the accompanying statement,
do not provide a reasonable basis for the preparation of the cash flow forecast;
and

(ii) in our opinion, the cash flow forecast, so far as the calculations are concerned,
is properly prepared on the basis of the assumptions made by the Directors.

Yours faithfully

(Audit Firm)
[AF:8888]
Chartered Accountants

(Partner)
[9999/3/01(J/PH)]
Partner

(Date)

S.12
 Schedule 17.08

FEES AND CHARGES

Proposals for Issue of Securities

(1) In computing the amount of fees and charges payable in respect of any
proposal submitted, the following conditions shall apply:-

(a) In respect of proposals submitted in relation to the issue of securities

by unlisted public companies, the maximum amount of fees and
charges payable, regardless of the applicable formula for
computation, is fifty thousand ringgit (RM50,000);

(b) In respect of proposals submitted in relation to the issue of securities

by listed public companies, the maximum amount of fees and charges
payable, regardless of the applicable formula for computation, is
three hundred thousand ringgit (RM300,000);

(c) In respect of any proposal for the subdivision or consolidation of

securities of unlisted public companies, the Commission shall have
the discretion to impose such amount of fees and charges as it thinks
fit but such amount of fees and charges shall not exceed ten
thousand ringgit (RM10,000);

(d) In respect of any proposal for the subdivision or consolidation of

securities of listed public companies, a nominal amount of fifteen
thousand ringgit (RM15,000) is payable;

(e) In respect of any revised proposal submitted, additional charges

computed at the rate of ten per cent (10%) of the total amount of
fees and charges paid in respect of the original submission shall be
payable; and

(f) Where a proposal is rejected by the Commission, only the nominal

amount of fees and charges specified in the First Schedule shall be
payable.

S.13
Proposals for Issue of Private Debt Securities

(1) Subject to (2) below, the fees and charges payable in respect of proposals
submitted to the Commission for the issue of private debt securities shall be
such amount as is specified in the Second Schedule.

(2) In computing the amount of fees and charges payable in respect of any
proposal submitted, the following conditions shall apply:-

(a) In respect of any revised proposal submitted, additional charges

computed at the rate of ten per cent (10%) of the total amount of
fees and charges paid in respect of the original submission shall be
payable; and

(b) Where a proposal is rejected by the Commission, a nominal amount

of five thousand ringgit (RM5,000) shall be payable.

Proposals for Take-Overs and Mergers

(1) Subject to (2) below, the fees and charges payable in respect of proposals
submitted to the Commission in relation to a take-over or merger shall be
such amount as is specified in the Third Schedule.

(2) In computing the amount of fees and charges payable in respect of any
proposal submitted, the following conditions shall apply:-

(a) For the clearance of offer documents, the fees and charges payable
shall be the sum of a nominal amount of three thousand ringgit
(RM3,000) and 0.05 per cent of the value of the offer but such
amount of fees and charges shall not exceed seventy-five thousand
ringgit (RM75,000) in addition to other fees and charges as are
specified in the Third Schedule; and

(b) Where offer documents are withdrawn, a nominal amount of three

thousand ringgit (RM3,000) shall be payable.

S.14
Review of SC's Decision

Where any application is made for the review of the Commission's decision, the
following amounts shall be payable:-

(a) In relation to the issue of securities, an amount of five thousand

ringgit (RM5,000) or ten per cent (10%) of the nominal amount
specified in the First Schedule, whichever is the lower; and

(b) In relation to the issue of private debt securities and in relation to

take-overs and mergers, an amount of five thousand ringgit
(RM5,000).

S.15
 First Schedule
SCHEDULE OF FEES AND CHARGES FOR THE ISSUE OF SECURITIES BY PUBLIC COMPANIES

Unlisted Public Company Listed Public Company

Paid-up Capital of Less than RM2 million to RM10 million and Less than RM20 RM20 million to RM100 million and
Issuer: RM2 million less than RM10 more million less than RM100 more
million milliion
Formula for Nominal Nominal Amount Nominal Amount Nominal Amount Nominal Amount Nominal Amount
computation of Amount (RM) (RM) percentage of percentage of percentage of percentage of
fees and charges: nominal value of nominal value of nominal value of nominal value of
total issue of total issue of total issue of total issue of
securities securities securities securities
(RM) (RM) (RM) (RM)

PROPOSAL:

Flotation Nil Nil Nil 30,000 + 0% 30,000 + 0.05%* 50,000 + 0.05%*

Rights Issue 300 700 1,000 + 0.05% 7,500 + 0.05% 10,000 + 0.05% 15,000 + 0.05%
Private 200 500 1,000 + 0.01% 5,000 + 0.01% 7,500 + 0.01% 10,000 + 0.01%
Placement/
Special Issue
Scheme of 1,000 2,000 1,000 + 0.05% 10,000 + 0.05% 15,000 + 0.05% 20,000 + 0.05%
Arrangement or
scheme of
reconstruction
Acquisition 300 700 1,000 + 0.05% 5,000 + 0.05% 7,500 + 0.05% 10,000 + 0.05%
Acquisitions (2 or 500 1,500 1,000 + 0.05% 10,000 + 0.05% 15,000 + 0.05% 20,000 + 0.05%
more)
Any other issue 200 500 1,000 + 0.05% 5,000 + 0.05% 7,500 + 0.05% 10,000 + 0.05%

*The computation shall be the sum of the nominal amount + 0.05% of the issued and paid-up capital that is or is to be listed on the stock exchange.

S.16
 Second Schedule

SCHEDULE OF FEES AND CHARGES FOR THE ISSUE OF

PRIVATE DEBT SECURITIES

Value of Total Issue of Private Amount of Fees and

Debt Securities Charges Payable
(RM)

Less than RM50 million 10,000

RM50 million to less than 15,000

RM100 million

RM100 million to less than 20,000

RM300 million

RM300 million and more 25,000

S.17
 Third Schedule

SCHEDULE OF FEES AND CHARGES FOR

TAKE-OVERS AND MERGERS

Serial Nominal value of Less RM5 RM20 RM50 RM100

Issued Capital of than million million million million
No. Offeree Companies RM5 to less to less to less and
million than than than more
RM20 RM50 RM100
million million million
(RM) (RM) (RM) (RM) (RM)

1. Clearance of 2,500 2,500 2,500 2,500 2,500

Independent
Adviser's Circular

2. Application for 2,000 3,000 4,000 5,000 7,000

waiver from a
mandatory general
offer in respect of
rescue operations

3. Application for 1,000 2,000 3,000 4,000 5,000

waiver from a
mandatory general
offer other than for
item 2 above

4. Application for 1,000 2,000 3,000 4,000 5,000

exemption under
provisions of the
Code

5. Other applications 500 for 500 for 1,000 for 1,000 for 1,000 for
including each each each each each
appointment of application application application application application
independent adviser,
application for
extension of time
and application for
confirmation on
rulings of the
Commission

S.18
GUIDANCE NOTES
GUIDANCE NOTE 5
Issued Pursuant to Chapter 5 (Pricing, Utilisation of Proceeds and Valuation of
Assets)

Introduction

1. This Guidance Note is published to clarify certain aspects of the provisions in

Chapter 5 (Pricing, Utilisation of Proceeds and Valuation of Assets).

Identified Assets

2. The terms “development properties” and “purpose-built commercial/leisure

properties” as used in paragraphs 5.02(a) and (c) of Chapter 5 are clarified as
follows:-

Development Properties

2.1 Development properties are landed properties that are currently being
developed/redeveloped or with development potential, and include
development rights.

2.2 Development rights are those rights to develop pursuant to a joint-venture

agreement, privatisation agreement or pursuant to some other form of joint
arrangement.

Conditions Imposed in the Case of Development Rights

2.3 The valuation of such development rights is subject to the following

conditions:-

(a) Approval of the relevant authority on the layout plan for the proposed
development must be in place prior to the implementation of the
corporate proposal;
(b) The development/joint-venture agreement between the acquiree
company and the registered/beneficial owner of the subject land

GN5-1
 which gives rise to the development rights must be irrevocable and
must not be to the disadvantage of the acquiree company;
(c) Salient features of the development/joint venture agreement must be
fully disclosed in the related prospectus/circular to shareholders;
(d) The company (holding the development rights) will be required to
submit the following:-
(i) A written confirmation that to date all terms and conditions of
the development/joint-venture agreement have been fully
complied with; and
(ii) A written undertaking that the company will fully comply with
and adhere to the terms and conditions of the
development/joint-venture agreement so as to avoid any
circumstances that may result in the termination of the said
agreement.
(e) Declaration from both joint venture parties on their intention and
commitment in respect of the joint venture development must be
given; and
(f) In the event of any breach of the development/joint-venture
agreement by any of the parties concerned, timely announcement of
such breaches and the remedies to be undertaken must be made to
KLSE.

Purpose-Built Commercial/Leisure Properties

2.4 Examples of such developments are shopping/office complexes, theme parks,

hotel/service apartments, medical centres and golf courses.

2.5 Typical shophouses and shopoffices which are of standard design and
construction are excluded from the definition of purpose-built
commercial/leisure properties.

GN5-2
GUIDANCE NOTE 6
Issued Pursuant to Chapter 6 (Public Offerings and Listings on KLSE)

Introduction

1. This Guidance Note is published to clarify certain aspects of the provisions in

Chapter 6 (Public Offerings and Listings on KLSE).

Minimum Public Offer Size

2. Paragraphs 6.02 and 6.03 of Chapter 6 state the following:-

“6.02 The method of offering should take into consideration the capital
needs of the company seeking listing, the opportunity for the general
public to participate in the offering and the shareholding spread
requirements to be complied with by the company.

6.03 A company is required to, as part of its listing scheme, undertake an

offer of securities to the general public.”

2.1. Pursuant to the requirements above, the public offer size must, at the
minimum, be at a size equivalent to the minimum number of public
shareholders as stated in the shareholding spread requirements of the Listing
Requirements of KLSE, for the purpose of complying with the requirements
above.

2.2. Specifically, the (balloted) public offer portion should, at a minimum, be of a

size equivalent to three times the minimum number of public shareholders
holding 100 shares each as stipulated in the Listing Requirements of KLSE.

GN6-1
Bumiputera Share Allocation

3. Paragraph 6.08 of Chapter 6 states the following:-

“At least 30% of the securities allocated (over and above the securities issued
to/reserved for Bumiputera investors to comply with the NDP/NVP
requirements) should, to the extent possible, be allocated to Bumiputera
investors, under the following circumstances:–

(a) Under an offering to the general public; and

(b) Under a placement exercise, excluding all placement exercises to fulfil the
NDP/NVP requirements imposed by any other authorities.”

3.1. Applicants should endeavour to secure Bumiputera investors to take up the

offered shares under the Bumiputera allocation. However, in the event that
the applicant is unable to do so even after all efforts have been exhausted,
the applicant should confirm this in writing to the SC.

Flexibilities for Government-Owned Companies Seeking Listing Under the

Historical Profit Track Record Route

4. Government-owned companies are exempted from the uninterrupted after-

tax profit test of the historical profit track record requirement in paragraph
6.13(a) of Chapter 6.

4.1. A Government-owned company 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 directly or indirectly.

GN6-2
Proforma Accounts

5. The paragraphs below clarify the provisions in paragraph 6.13 of Chapter 6.

5.1. Bumiputera-controlled companies are exempted from the proforma accounts

requirements in paragraphs 6.13(a)(iv) or 6.13(b)(iv), whichever is
applicable, subject to the following conditions:-

(a) The group must have a genuine pooling arrangement;

(b) The company which is the single largest contributor, on an average
basis for the past three full financial years, to the proforma group’s
profits should have been incorporated and have been operating in the
same or complementary business for at least five full financial years
prior to making submission to the SC;
(c) Each company to be pooled together must have been a Bumiputera-
controlled company under the control of the same Bumiputera
shareholders with controlling shareholding for at least three financial
years prior to making submission to the SC (or throughout the life of
the company if the company has been incorporated for less than three
financial years); and
(d) The company used as the listing vehicle must, upon listing and for the
next five years subsequent to listing, be a Bumiputera-controlled
company.

5.2. Similarly, a group of stockbroking companies which have consolidated and

are eligible for “universal broker” status under the SC’s stockbroking
consolidation policy can apply for listing based on the strength of the group’s
proforma accounts, without having to comply with the requirements in
paragraphs 6.13(a)(iv) or 6.13(b)(iv), whichever is applic able.

5.3. A company is classified as a Bumiputera-controlled company if either one of

the following two criteria is satisfied:-

GN6-3
(a) Where more than 50% of its equity is owned by Bumiputera
shareholders; or
(b) Where at least 35% of its equity is owned by an identifiable
Bumiputera shareholder and –

(i) there is no other non-Bumiputera group holding more than

10% of the voting power of the company, or, the identifiable
non-Bumiputera groups should not, in aggregate, own more
than 24% of the voting power of the company;
(ii) the shareholding of the Bumiputera group is not associated
directly or indirectly with any non-Bumiputera group;
(iii) the Bumiputera group is the rightful owner and each
Bumiputera party is capable of exercising the voting power
attached to his/her/its shareholding free of any influence;
(iv) the Chairman, Chief Executive Officer/Managing Director and
at least 51% of the company’s Board are Bumiputera
individuals; and
(v) at least 51% of the management, professional and supervisory
staff comprise Bumiputera individuals.

GN6-4
GUIDANCE NOTE 7
Issued Pursuant to Chapter 7 (Special Requirements for the Listing of Specific
Companies)

Introduction

1. This Guidance Note is published to clarify certain aspects of the provisions in

Chapter 7 (Special Requirements for the Listing of Specific Companies).

Flexibilities for Government-Owned Companies

2. Government-owned property-development companies are exempted from the

uninterrupted after-tax profit test of the historical profit performance
requirement in paragraph 7.02(a) of Chapter 7.

3. Government-owned construction companies are exempted from the

uninterrupted after-tax profit test of the historical profit performance
requirement in paragraph 7.04(a) of Chapter 7.

4. The term “Government-owned company” is as defined in paragraph 4.1 of

Guidance Note 6 (Public Offerings and Listings on KLSE).

GN7-1
GUIDANCE NOTE 8
Issued Pursuant to Chapter 8 (Equity Offerings)

Introduction

1. This Guidance Note is published to clarify certain aspects of the provisions in

Chapter 8 (Equity Offerings).

Rights Issues of Securities

2. Listed companies may undertake two-call rights issues, and are allowed to –

(a) use the entire balance of their retained profits or share premium
account for the second-call capitalisation; and
(b) capitalise their revaluation reserves for purposes of the second call,
subject to the listed company retaining 20% of any new valuation
amount if the revaluation surplus arose from the revaluation of land
and buildings.

Procedural Requirements in Relation to Back-to-Back Placements

3. For back-to-back placements, –

(a) where the cumulative size of the placement for a rolling period of 12
months is less than or equal to 10% of the company’s issued and
paid-up capital immediately prior to the placement, prior approval of
the SC for the placement is not required before the existing
shareholder sells down existing shares of the issuer for subsequent
placement to placees. However, the applicant should submit a
declaration of compliance with the requirements in paragraphs 8.08(a)
– (c) of Chapter 8 to the SC prior to the existing shareholder selling
down the existing shares to the placement agent. The applicant
should still make a submission for the issuance of new shares to the
SC prior to issuance; and

GN8-1
 (b) where the cumulative size of the placement for a rolling period of 12
months exceeds 10% of the company’s issued and paid-up capital
immediately prior to the placement, the procedural requirements are
the same as for normal placements.

Bonus Issues of Securities

4. Only companies which are listed on KLSE and those seeking listing on KLSE
are required to seek the prior approval of the SC for making bonus issue of
securities. Approval of the SC is, however, not required where such issues are
made out of unappropriated profits.

5. The following requirements would need to be complied with in seeking

approval of the SC for bonus issue of securities:-

(a) The company must have the necessary reserves for capitalisation to
be made for the bonus issue. In this regard, the available reserves for
capitalisation should be verified and confirmed by the external
auditors/reporting accountant to the company, if the available
reserves are not based on the audited accounts of the company; and

(b) Where the bonus issue is to be made by way of the capitalisation of

capital reserves arising from revaluation of assets, -

(i) the SC only allows surplus arising from revaluation of

investments in subsidiary/associated companies and land and
buildings to be capitalised for the purpose of the bonus issue;
and
(ii) at least 20% of the new valuation amount of the revalued land
and buildings, if the surplus arising from revaluation of land
and buildings are to be capitalised for the purpose of the
bonus issue, is to be retained in the revaluation reserves after
the capitalisation for bonus issue.

GN8-2
6. The application submitted to the SC for the bonus issue of securities should
include details of the reserves from which the bonus securities are to be
capitalised, together with the verification and confirmation, if applicable, of
the available reserves by the external auditors/reporting accountant, as
stipulated in paragraph 5(a) above. Future financial information of the
company, comprising the profit and cashflow forecasts, is not required to be
included in the application to the SC.

7. Listed companies are also allowed to implement bonus issues in stages, i.e,
where bonus shares are allotted to shareholders in multiple stages over a
period of time.

8. The following must be complied with by listed companies intending to

implement bonus issues in stages:-

(a) The submission to the SC for approval should state the extended
implementation period up-front.

(b) Full disclosure up-front of all relevant details in the first

announcement for the bonus issue and in the circular for
shareholders’ approval, including the following:-

(i) Total size of the bonus issue and capitalisation details;

(ii) Basis for allotment;
(iii) Tentative dates of allotment;
(iv) Effects of the bonus issue on share capital, net tangible assets,
reserves, earnings and dividends;
(v) A statement that the listed company has adequate reserves to
cover the entire bonus issue;
(vi) A statement drawing shareholders’ attention to the staggered
implementation of the bonus issue and the potential price
effects of the staggered implementation; and
(vii) Rationale/justification for the implementation of the bonus
issue on a staggered basis.

GN8-3
 ; and

(c) Specific announcements before each date of allotment notifying

shareholders of the upcoming bonus issue of shares. The
announcement should also contain a statement that the listed
company has adequate reserves to implement the bonus issue.

GN8-4
GUIDANCE NOTE 9
Issued Pursuant to Chapter 9 (Warrants, Options, Convertibles and Preference
Shares)

Introduction

1. This note is published to clarify certain aspects of the provisions in Chapter 9

(Warrants, Options, Convertibles and Preference Shares).

Employee Share Option Schemes

2. An employee share option scheme, a summary of which must be circulated to

shareholders, must be approved by shareholders in a general meeting.

Criteria for Employee Share Option Schemes

3. The following principles and policies have been adopted by the SC in

considering share option schemes for employees:-

(a) Number of Shares Offered

(i) The number of options offered under the scheme should not
exceed 10% of the issued capital of the company at any one
time. There should be equitable allocation to the various
grades of eligible employees, such that not more than 50% of
the shares available under the scheme should be allocated, in
aggregate, to directors and senior management. In addition,
not more than 10% of the shares available under the scheme
should be allocated to any individual director or employee
who, either singly or collectively through his/her associates,
holds 20% or more in the issued and paid-up capital of the
company.

The term “associates” has the same meaning as that in the

Companies Act 1965.

GN9-1
 (ii) In the event of a share buy-back exercise of the company, the
resultant number of options that have been offered under the
scheme may have exceeded 10% of the issued capital of the
company. In such an event, there should be no granting of
additional options at any point in time after the share buy-
back, unless the number of options that have been granted
under the scheme falls below 10% of the issued capital of the
company. If this is complied with, there is no need to submit a
specific application to the SC for a waiver from paragraph (i)
above.

(b) Pricing

The price payable for the shares under the scheme shall be -

(i) for a listed company, based on the five-day weighted average

market price of the underlying shares at the time the option is
granted, with a discount of not more than 10% if deemed
appropriate; and

(ii) for an unlisted company, based on the net tangible assets of

the company, but in any event not less than the par value of
the underlying shares.

A scheme may provide for adjustments of the subscription or option

price or the number of shares (excluding options already exercised)
under the scheme, in the event of a rights issue, bonus issue or other
capitalisation issues, consolidation of shares or capital reduction. Such
adjustments should give a participant the same proportion of the
capital as that to which he/she was previously entitled. The issue of
securities as consideration for an acquisition, for example, will not be
regarded as a circumstance requiring such adjustments. In this
regard, -

GN9-2
 • The requirement to carry out adjustments to the subscription
or option price or the number of shares in favour of all the
participants in an employee share option scheme pursuant to
rights issues, capitalisation issues, consolidation of shares or
capital-reduction exercises is at the discretion of the Board,
who should accordingly assess the practicality of complying
with the requirement;

• Where it is decided that no adjustments will be made, such

decision must be made known to all the participants. This can
be effected by either including a provision in the by-laws at the
outset or giving a timely notice to all participants that no
adjustments will be made;

• Where it is decided that an adjustment will be made, it is

important that all participants are given the same proportion of
the capital as that to which they were previously entitled to, by
ensuring that the capital outlay to be incurred by option
holders in exercising their options remains unaffected; and

• Where it is decided that an adjustment will be made but it is

not practicable to ensure that all participants are given the
same proportion of the capital, the issuer must, in such
circumstances, seek a waiver from the SC, together with
justifications.

(c) Eligibility

(i) Only staff and executive directors of the group are eligible to
participate in the scheme, the group being the company and
its subsidiary/subsidiaries as defined under the Companies Act
1965 (provided that they are not dormant). In this connection,

GN9-3
 executive directors are those involved in the day-to-day
management and on the payroll of the company.

(ii) The company’s Board is given the discretion to determine the

share-allocation criteria. A set of criteria on staff eligibility and
allocation should be clearly specified and all employees made
aware of it through, for example, posting on a notice board or
notification in writing to the employees. Verification of
allocation is required to be carried out by a firm of chartered
accountants as part of its annual audit exercise and this should
be disclosed in the annual report.

; and

(d) Time Limit

An employee share option scheme shall be for a duration of not more

than 10 years.

Subsequent Employee Share Option Schemes

4. A company may establish a new employee share option scheme after the
expiry of the current scheme or upon termination of the current scheme.
However, the new scheme shall be subject to the approval of the SC.

Implementation of Employee Share Option Schemes

5. An employee share option scheme can be launched or implemented by a

company upon receipt of relevant approvals from the SC, KLSE and
shareholders, the fulfillment of any conditions attached thereto and upon the
principal adviser for the scheme submitting to the SC the following:-

(a) Final copy of the by-laws of the scheme; and

(b) Confirmation letter from the principal adviser that the company –

GN9-4
 • has fulfilled the SC’s conditions of approval for the scheme and
that the by-laws do not contravene any of the provision of
these guidance notes; and

• has obtained other relevant approvals for the scheme and has
fulfilled any conditions imposed therein.

6. The date of the confirmation letter submitted by the principal adviser would
signify the effective date for the launch or implementation of the scheme.

Listing and Quotation

7. Blanket approval may be granted for the listing of and quotation for the
additional shares arising from the scheme.

Termination of Employee Share Option Schemes

8. A company is allowed to terminate an employee share option scheme in mid-

stream if the by-laws of the scheme contain a provision that empowers the
company to terminate the scheme.

9. Prior to the termination of a scheme, the company must satisfy all of the
following conditions:-

(a) To obtain the approval of the SC for the termination of the existing
scheme;

(b) To obtain the consent of its shareholders at a general meeting,

wherein at least a majority of the shareholders present should vote in
favour of the termination; and

(c) To obtain the written consent of all option-holders who have yet to
exercise their options, either in part or in whole.

GN9-5
10. In seeking to obtain the approval of the SC and the consent of shareholders
and option-holders for the termination of the scheme, the company must
provide sufficient information on the following matters:-

(a) Reasons for termination (whether or not the reasons are specified in
the termination clause of the by-laws);

(b) Whether or not the termination of the scheme would be in the best
interest of the company; and

(c) Any other information that would justify termination of the scheme.

Modifications/Changes to By-Laws

11. Any subsequent modifications/changes to the by-laws do not need the prior
approval of the SC. However, the company is required to submit to the SC,
each time a modification/change is made, a confirmation letter that the
modification/change does not contravene any of the provision of these
guidance notes.

12. The modification/change clause of the by-laws should reflect the above.

13. With respect to any by-laws which still contain a provision stating that any
modifications or changes to the by-laws would require the approval of the SC,
the SC wishes to clarify that the approval of the SC for amendments to the
by-laws would not be required, in spite of the existence of the provision
requiring the approval of the SC. Thus, for any amendments to the by-laws,
issuers/principal advisers will only need to submit, to the SC, the letter of
notification/confirmation as per the requirements of paragraph 11 above.

GN9-6
GUIDANCE NOTE 12
Issued Pursuant to Chapter 12 (Significant Changes in Business Direction)

Introduction

1. This Guidance Note is published to clarify certain aspects of the provisions in

Chapter 12 (Significant Changes in Business Direction).

Computation of Percentage Ratios

2. The listed company’s net tangible assets figure used in the computation of the
ratios should be based on –

(a) the latest available published audited consolidated accounts, if the

transaction is announced within the first 6 months after the issuance of
the said audited accounts; and
(b) the latest available announced quarterly consolidated results, in all other
cases.

3. The listed company’s after-tax profits figure used in the computation of the ratios
should be based on the latest available published audited consolidated accounts,
or the latest available announced 12-month quarterly consolidated results,
whichever is more up to date. In addition, -

(a) if the asset to be acquired or disposed of is an interest in another listed

company, the after-tax profits figure used in the numerator should be
based on the latest available published audited consolidated accounts, or
the latest available announced 12-month quarterly consolidated results,
whichever is more up to date; and

(b) if the asset to be acquired or disposed of is not an interest in another

listed company, the after-tax profits figure used in the numerator should

GN12-1
 be based on the latest available published audited accounts of the subject
transaction.

4. The net tangible assets and after-tax profits figures used in the computation of
the ratios may be adjusted to take into account subsequent completed
transactions which have a highly significant impact on the financial position of
the listed company. Such adjustments must be reviewed by a firm of chartered
accountants.

Percentage Ratios for Disposals

5. In the case of a disposal, the denominator for the -

(a) assets percentage ratio;

(b) profits percentage ratio;
(c) consideration to net tangible assets ratio; and
(d) cost of investment to net tangible assets ratio,

should exclude the net tangible assets or the after-tax profits of the subject
transaction, whichever is applicable.

Profits Percentage Ratio

6. If either the company to be acquired/disposed of and/or the listed company itself

has suffered losses, the profits percentage ratio is not applicable.

Consideration to Market Capitalisation/Consideration to Net Tangible Assets

Ratio

7. In determining the consideration for any transaction, the SC may also require the
inclusion of other amounts, such as the vendor’s liabilities that the purchaser
agrees to assume, as part of the terms of the transaction.

GN12-2
Listed Companies with Negative Net Tangible Assets

8. Listed companies with negative net tangible assets (NTA) are not exempted from
calculating the assets percentage ratio, consideration to assets ratio and cost of
investment to assets ratio. For listed companies with negative NTA, any further
acquisitions or disposals above the RM1 million threshold would normally be
considered material, and thus requires the approval of the SC. However, if the
principal adviser is of the opinion that the acquisition/disposal is not significant
and does not indicate a change in business direction, a waiver can be sought
formally in writing to the SC.

Definition of Change in Board of a Listed Company

9. A change in the Board of the listed company is defined as a change within a 12-
month period from the date of the acquisition in –

(a) at least one-half of the membership of the Board of the listed company;
or
(b) at least one-third of the membership of the Board of the listed company,
including the chief executive.

GN12-3
GUIDANCE NOTE 13
Issued Pursuant to Chapter 13 (Proposals by Distressed Listed Companies)

Introduction

1. This Guidance Note is published to clarify certain aspects of the provisions in

Chapter 13 (Proposals by Distressed Listed Companies).

Net Tangible Asset (NTA) Requirements

2. Paragraph 13.03 of Chapter 13 states the following:–

“The proforma NTA-per-share position of the distressed listed company

immediately on implementation of its corporate proposal should be positive
and be at least 33% of the par value of its ordinary shares.”

3. In computing the NTA-per-share position, -

(a) the current year forecast profit can be incorporated into the
computation of the proforma NTA;
(b) the revaluation of assets, if any, can be incorporated into the
computation of the proforma NTA; and
(c) for cases involving the issuance of convertible securities, the
convertible securities can be incorporated into the computation of the
proforma NTA based on the assumption that they are already
converted, provided that there must be a firm undertaking to convert
the convertible securities into ordinary shares within 3 years of
issuance.

GN13-1
GUIDANCE NOTE 15
Issued Pursuant to Chapter 15 (Miscellaneous)

Introduction

1. This Guidance Note is published to clarify certain aspects of the provisions in

Chapter 15 (Miscellaneous).

Transfer from Second Board to Main Board – Lifting of Moratorium

2. Affected shareholders of Second Board companies may apply for a lifting of

the moratorium imposed on the disposal of their shares (if applicable) as part
of the transfer exercise, if the company has fully served out all profit forecast
and, if applicable, projection years. In considering the application for the
lifting of the moratorium, the SC will assess the suitability of the case,
including whether or not the company has achieved its profit forecast and, if
applicable, projections subsequent to listing on the Second Board.

3. Second Board companies involved in property development or construction

are not eligible for the lifting of the moratorium as in paragraph 2 above
when transferring to the Main Board.

0.

GN15-1