Amendments to Bursa Malaysia’s Listing Requirements
18 August 2020
On 13 August 2020, Bursa Malaysia Berhad (‘the Exchange’) announced
amendments to the Main Market Listing Requirements (‘MMLR’) and the ACE Market Listing Requirements (‘ACE LR’) (collectively ‘LR’).
These amendments arise from some of the proposals set out in Consultation Paper No. 3/2019 issued by the Exchange on 30 August 2019, after the Exchange had considered the feedback received thereon.
The amendments seek to achieve the following objectives:
- strengthening board integrity and quality through enhanced board independence;
- ensuring announcements and circulars for new issue of securities are coherent, meaningful and easily comprehensible; and
- addressing gaps for greater shareholder protection and confidence.
The key amendments to the LR are highlighted below.
Enhancing board independence
The following measures will be introduced to enhance board independence:
- The definition of ‘independent director’ has been amended so that the cooling-off period before an existing or former officer (other than an independent director) of the listed issuer or any of its related corporations (collectively ‘listed corporation’) is eligible to be appointed as an independent director of a listed issuer has been extended from two years to three years;
- An amendment to the definition of ‘independent director’ also extends the 3-year cooling off period to a person who is a non-independent non-executive director; and
- The 2-year cooling-off period that previously applied to various other parties, such as advisers and persons who carry out prescribed transactions with a listed corporation, has also been extended to three years.
The revised criteria set out above will apply to any person who is appointed as an independent director on or after 1 October 2020.
New issue of securities
A new definition of ‘convertible equity securities’, which refers to warrants and
convertible preference shares, has been introduced for the purposes of Part I of Chapter 6 (New Issues of Securities) of the LR.
Paragraph 6.50 of the MMLR/ rule 6.51 of the ACE LR have been amended so that the requirement for a listed issuer to ensure that the number of new shares arising from the exercise of all outstanding warrants will not exceed 50% of the total number of issued shares of the listed issuer (excluding treasury shares) applies to convertible equity securities. These amendments will apply to all corporate exercises involving convertible equity securities announced on or after 1 October 2020.
Paragraph 6.55 of the MMLR/ rule 6.56 of the ACE LR have been amended to prohibit a listed issuer from making any alteration or adjustment to the terms of convertible securities that:
- extends or shortens the tenure of the convertible securities; or
- changes the number of shares received upon the exercise or conversion of each convertible security, or the pricing mechanism for the exercise or conversion price of such security, except where those changes are adjustments arising from capitalisation issues, rights issue, bonus issue, consolidation or subdivision of shares or capital reduction exercises.
Announcements and circulars for new issue of securities
The presentation of information to be included in announcements (Appendix 6A) and circulars (Appendix 6B) relating to new issues of securities have been reorganised by clustering information under the following key areas for better flow and improved readability:
The disclosure requirements relating to new issues of securities have been enhanced in the following respects:
- A listed issuer which proposes to issue new securities for fundraising, is required to provide specified details of the equity fund-raising exercises carried out in the past 12 months, such as the total proceeds raised and the details and status of utilisation of such proceeds;
- Where the proceeds from a new issue of securities are to be used for the existing business or a new business to be acquired or undertaken, a description and the outlook of the industry and the prospects of such business in light of the industry outlook;
- Where the proceeds from the new issue of securities are to be used for an investment which has yet to be identified, additional information as to how the proceeds will be utilised pending the identification of the investment;
- Where the proceeds from the new issue of securities are to be used for working capital, details and breakdown of such utilisation;
- Where shares or convertible securities are issued on a non-pro rata basis pursuant to a specific shareholder mandate under paragraph 6.05 of the MMLR/ rule 6.06 of the ACE LR, information of the persons to whom those securities will be issued, including, if such person is a corporation, the names of its directors and substantial shareholders and their respective direct and indirect shareholdings, or the website links to such information where the corporation is a statutory institution managing funds belonging to the public; and
- A chief executive is now required (together with the directors, major shareholders and persons connected with the directors or major shareholders) to disclose his interest (and interest of persons connected with him) in the new issue of securities and to abstain, and ensure that persons connected with him abstain, from voting on the resolution approving the issue at the general meeting of the listed issuer.
Addressing gaps to enhance shareholder protection
Several new provisions have been introduced to address gaps in the LR to enhance shareholder protection.
A new sub-paragraph 9.19(40A)/ sub-rule 9.19(41A) is introduced to the MMLR/ the ACE LR respectively whereby if an immediate announcement of a material loan or borrowing is made under paragraph/ rule 9.03 of the LR and the relevant loan documents contain conditions, covenants or restrictions in relation to the shareholdings of a controlling shareholder, the announcement must include –
- details of such conditions, covenants or restrictions, including any restriction placed on change in control of the listed issuer; and
- the aggregate level of the facilities that may be affected by a breach of such conditions, covenants or restrictions.
It has been clarified in the MMLR that the percentage ratio of a transaction entered into by a real estate investment trust is to be calculated by comparing the value of the transaction to the total asset value of such a trust.
The appointment of a judicial manager under the Companies Act 2016 over the asset of a listed issuer, its subsidiary or associated company which asset accounts for at least 50% of the total assets employed of the listed issuer on a consolidated basis, has been added as a criterion that triggers the requirement for the listed issuer to regularise its financial condition under paragraph/ rule 8.04 of the LR and Practice Note 17 of the MMLR/ Guidance Note 3 of the ACE LR.
The amendments to the LR take effect from 13 August 2020
save and except for:
- the enhanced requirements relating to independent directors which will apply to any independent director appointed on or after 1 October 2020; and
- the imposition of a 50% limit on the number of shares that will be issued upon the exercise or conversion of convertible equity securities which will apply to any corporate exercises involving convertible equity securities announced on or after 1 October 2020.
For this purpose, an ‘officer’, inter alia
, refers to a director, secretary or employee, a receiver and manager, and a liquidator appointed in a voluntary winding up (section 2 of the Companies Act 2016).
Prior to the amendment, sub-paragraph (b) of the definition of ‘independent director’ in paragraph 1.01 of the MMLR/ rule 1.01 of the ACE LR did not apply to a person who is a non-executive director, whether independent or non-independent.
This arises from the amendment of the two year periods stated in Practice Note 13 of the MMLR/ Guidance Note 9 of the ACE LR, which set out certain criteria relating to independent directors, to three years.
Paragraphs 6.49 to 6.58 of the MMLR/ rules 6.50 to 6.59 of the ACE LR.
New paragraph (14) of Appendix 6A of the LR and new paragraph (21) of Appendix 6B of the MMLR/ new paragraph (22) of Appendix 6B of the ACE LR.
New paragraph (16) of Appendix 6A of the LR which adopts existing paragraph (23) of Appendix 6B of the MMLR/ existing paragraph (24) of the ACE LR.
New paragraph (22)(b)(iii)(bb) of Appendix 6B of the MMLR/ new paragraph (23)(b)(iii)(bb) of Appendix 6B of the ACE LR. There is no corresponding provision in Appendix 6A of the LR.
New paragraph (22)(b)(iv) of Appendix 6B of the MMLR/ new paragraph (23)(b)(iv) of Appendix 6B of the ACE LR. There is no corresponding provision in Appendix 6A of the LR.
Amendment to paragraph (18)(a) of Appendix 6B of the MMLR/ paragraph (19)(a) of Appendix 6B of the ACE LR. There is no corresponding provision in Appendix 6A of the LR.
Amendment to paragraph (20) of Appendix 6A of the LR and to paragraph (29) of Appendix 6B of the MMLR/ paragraph (30) of Appendix 6B of the ACE LR.
Amendment to paragraph 10.02(g)(ix) of the MMLR. Prior to this amendment, the percentage ratio was to be calculated by comparing the total assets which are the subject matter of the transaction with the total assets of the listed issuer. There is no equivalent provision in the ACE LR.