Bursa Malaysia Berhad issued Consultation Paper 1/2019 (“CP1/19) today seeking public feedback on proposed amendments to the Rules of Bursa Malaysia Depository Sendirian Berhad (“Bursa Depository”) and the Main Market Listing Requirements and ACE Market Listing Requirements to facilitate '“dematerialisation” in relation to securities that are listed on the Main Market or the ACE Market.
 
“Dematerialisation” signifies a scripless environment where there will not be any physical share certificate or other document to evidence title to, or ownership of, the securities issued by a company.
 
Presently, securities that are listed on the Main Market and the ACE Market are traded under a scripless trading system where trades are effected by crediting and debiting the securities accounts of the buyer and seller respectively. Legal ownership of listed securities is evidenced by jumbo certificates issued in the name of Bursa Malaysia Depository Nominees Sdn Bhd, which are deposited with Bursa Depository.
 
Under the dematerialised environment, legal ownership of listed securities will be evidenced by the register of members maintained by a listed issuer and the record of depositors maintained by Bursa Depository (“ROD”). In this regard, section 147(1) of the Companies Act 2016 (“CA 2016”) provides that a depositor named in the ROD shall be deemed to be a shareholder, debenture holder or option holder, as the case may be, of the company and be entitled to the number of securities stated in the ROD.
 
Dematerialisation is feasible due to section 97(1) of CA 2016 which stipulates that a company is not required to issue a share certificate except upon application by a shareholder in relation to shares owned by that shareholder in the company or unless otherwise provided in the company’s constitution. Section 98 of CA2016 imposes an obligation on the company to issue a share certificate to the shareholder within 60 days from receipt of an application under section 97(1).
 
To facilitate dematerialisation, a listed issuer is required to include a provision in its constitution that prohibits the company from issuing, and its members from applying for, any certificate or other document evidencing title or ownership in respect of the company’s listed securities.  The Rules of Bursa Depository will be amended to facilitate the return by Bursa Depository of scrips in its possession to the relevant listed issuer for cancellation.
 
According to CP1/19, existing listed issuers will be given two years from the introduction of the amendments to the listing requirements to migrate to the dematerialised framework.
 
A foreign corporation that is listed, or is seeking a listing, on the Main Market or the ACE Market is not required to implement the dematerialisation framework if it contravenes the laws of its place of incorporation.

CP1/2019 also states that the Securities Commission Malaysia will be issuing regulations under the Securities Industry (Central Depository) Act 1991 to cater for a dematerialised framework for securities of companies that are deposited with Bursa Depository.
 
The deadline for providing feedback on the proposed amendments is 24 May 2019.