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Leaping to the ACE Market

06 April 2023

On 31 March 2023, Bursa Malaysia Securities Berhad (‘the Exchange’) announced amendments to the ACE Market Listing Requirements (‘ACE LR’) to, inter alia, introduce a framework to facilitate the transfer of eligible LEAP Market listed corporations (‘transfer applicant’) to the ACE Market of the Exchange (‘LEAP Transfer Amendments’). The LEAP Transfer Amendments took effect on 1 April 2023.
 
This article will discuss the main requirements under the LEAP Transfer Amendments.
 
Background
 
The LEAP Market was launched by the Exchange on 25 July 2017 to provide an opportunity to small and medium-sized enterprises to access capital and raise their visibility and profile through their status as a public-listed company. The LEAP Market is a qualified market accessible only to sophisticated investors. On the other hand, the ACE Market is targeted at corporations with good business prospects, and is accessible to public and retail investors.
 
Main requirements
 
To transfer its listing from the LEAP Market to the ACE Market, a transfer applicant must satisfy, among others, the following: 
  1. have been listed for at least two years on the LEAP Market at the time of application for transfer of listing; 

  2. be assessed and considered as suitable for listing;1 

  3. obtain its shareholders’ approval in a general meeting for the proposals comprised in the transfer of listing; 

  4. comply with the admission requirements set out in Chapter 3 and the transfer of listing requirements in Chapter 3A of the ACE LR, as the case may be; 

  5. undertake an issue of shares to the general public as part of the transfer of listing; and 

  6. ensure there is a clear price discovery mechanism for the transfer applicant’s shares to be transferred to the ACE Market;2 

  7. implement an exit offer for the holders of its shares and other classes of securities (if any);3 and 

  8. comply with the relevant admission procedures and requirements as may be prescribed by the Exchange. 
Other important requirements
 
Other important criteria to be noted are set out below.
 
Moratorium
 
The moratorium imposed under the ACE LR4 will apply to the transfer applicant. The entire shareholdings of its specified shareholders5 will be subject to a moratorium for six months from the date of admission of the transfer applicant to the ACE Market. Upon the expiry of the 6-month period, at least 45% of the entire shareholding of the specified shareholders must remain under moratorium for a further six months. Thereafter, the specified shareholders may sell, transfer or assign up to a maximum of one-third per annum (on a straight-line basis) of the shares held under moratorium.
 
If the moratorium under the LEAP Market Listing Requirements is subsisting at the time of admission of the transfer applicant to the ACE Market, such moratorium will cease to apply as from the said date of admission to the ACE Market.
 
Shareholding spread
 
A transfer applicant must comply with the shareholding spread specified in the ACE LR6 which requires at least 25% of the total number of shares that are listed to be held by not less than 200 public shareholders holding not less than 100 shares each.7
 
Working capital
 
A transfer applicant must have sufficient working capital available for its present requirements and for at least 12 months from the date of its prospectus for the issue of shares to the public in conjunction with the transfer to the ACE Market.8
 
Continuity of management
 
A transfer applicant must have substantially the same management at the level of executive directors and senior management for three full financial years before submitting its transfer application to the Exchange or since commencement of its operations (if less than three full financial years).9
 
Requirement for Sponsor
 
To provide guidance and advice on its continuous compliance with the ACE LR, a transfer applicant must retain the services of a Sponsor for at least two full financial years after its admission to the ACE Market or at least one full financial year after it has generated operating revenue, whichever is the later. In addition, the Sponsor who submitted the transfer application for the transfer applicant is required to act as its Sponsor for at least one full financial year following the latter’s admission to the ACE Market.10
 
Procedures for transfer of listing
 
The procedures to effect a transfer of listing are set out in paragraph 2.2 of Guidance Note 15A of the ACE LR. The following is a summary of some of the key steps: 
  1. the transfer applicant announces to the Exchange, the proposed transfer of listing to the ACE Market and the withdrawal of listing from the LEAP Market together with the exit offer to the holders of its shares and other classes of securities (if any); 

  2. the transfer applicant seeks its shareholders’ approval for the proposal11 in a general meeting; 

  3. the transfer applicant commences pre-admission consultation with the Exchange on the transfer application by submitting the ‘pre-admission consultation pack’12 to the Exchange; 

  4. the transfer applicant files with the Exchange an application for the proposed transfer of listing, comprising the listing application, the final copy of its prospectus and the application for withdrawal of listing from the LEAP Market together with supporting documents; 

  5. the Exchange grants approval for the withdrawal of listing from the LEAP Market, the admission to the ACE Market, and approval-in-principle for the registration of the prospectus; 

  6. the transfer applicant implements the exit offer; 

  7. the transfer applicant implements the public issue after the Exchange registers the prospectus and issues the shares offered to the public under the prospectus; 

  8. the transfer applicant announces to the Exchange the withdrawal and the transfer date; and 

  9. the securities of the transfer applicant are admitted to the Exchange’s Official List for the ACE Market and quoted on the ACE Market. 
Comments
 
Prior to the introduction of the LEAP Transfer Amendments, there was no framework to facilitate the transfer of the listing status of eligible companies from the LEAP Market to the ACE Market. The LEAP Market Transfer Amendments are to be welcomed as they provide a structure to fill this void and will enable qualified companies to move from a market that is accessible only to sophisticated investors to a market that is accessible to the public.
 
Article by Kok Chee Kheong (Partner) and Joey Tiw (Senior Associate) of the Corporate Practice of Skrine.
 
 
1 The assessment is to be conducted by a Sponsor or both the Sponsor and Recognised Approved Adviser as Joint Transfer Sponsor. Refer to Rule 4.07(2) of the ACE LR for examples of areas to be covered by the assessment.
2 The price discovery mechanism must reflect the current valuation ascribed to similar business or sector as the transfer applicant, and be supported with sound and verifiable bases and justifications.
3 The exit offer must include a cash alternative or other reasonable alternative. The exit offer is to be made in accordance with Rule 8.06(1)(c) of the LEAP Market Listing Requirements, or subject to consulting with the Exchange, other mechanism that is equitable.
4 Rule 3.19(1) of the ACE LR. 
5 A specified shareholder is a controlling shareholder, a person connected to a controlling shareholder, and an executive director who is a substantial shareholder, of the transfer applicant, or any other person as specified by the Exchange.
6 Rule 3.10(1) of the ACE LR.
7 Rule 3.10(1) of the ACE LR further confers discretion on the Exchange to accept a percentage lower than the 25% threshold if it is satisfied that such lower percentage is sufficient for a liquid market in such shares.
8 Rule 3.05 of the ACE LR as modified by sub-paragraph (b) of Paragraph 7D of Part A of Annexure GN15-A of the ACE LR.
9 Rule 3.06 of the ACE LR read with sub-paragraph (c) of Paragraph 7D of Part A of Annexure GN15-A of the ACE LR.
10 Rule 3A.05 of the ACE LR.
11 The proposal would include, inter alia, the withdrawal from the LEAP Market, the application for admission to the ACE Market, the implementation of the exit offer and the issue of shares to the public in connection with the transfer application.
12  The ‘pre-admission consultation pack’ is available on the Exchange’s website (Paragraph 2A.1 of Part I of Guidance Note 15 of the ACE LR).

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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