Bursa Malaysia Berhad issued Consultation Paper No. 1/2023 (“CP1/2023”) to seek public feedback on the proposed amendments to the Main Market Listing Requirements (“Main LR”) and the ACE Market Listing Requirements (“ACE LR”) of Bursa Malaysia Securities Berhad (“the Exchange”).
 
The proposed amendments are undertaken as part of the Exchange’s periodic review to ensure that the Main LR and the ACE LR (collectively “LR”) remain fit for purpose in line with the evolving capital market and to promote greater transparency in the capital market.
 
The objectives of the proposed amendments under CP1/2023 are three-fold: 

a)	to enhance transparency in relation to fund-raising activities and the framework for employee share schemes;
b)	to enhance remuneration disclosures of chief executives; and
c)	to refine the LR to codify current practices and improve clarity where appropriate.

For the purposes of this article: (i) “paragraph” refers to a paragraph of the Main LR; and (ii) “rule” refers to a rule of the ACE LR; and (iii) unless expressly stated otherwise, “listed issuer” refers to an entity whose securities are listed on the Main Market or the ACE Market.

 
Enhancing transparency on fund-raising exercises involving new issue of securities
 
1.  Quarterly announcements on details of placement exercises undertaken on a staggered basis
 
Currently, a listed issuer that undertakes an issuance and placement of securities in stages over a period of time is required upon placement of the securities, to immediately announce to the Exchange, the number and issue price of the securities.

To provide shareholders and investors with easier access to information pertaining to a placement exercise on a regular basis, it is proposed that a listed issuer be required to consolidate and announce the following information pertaining to each staggered issuance simultaneously with the announcement of its quarterly report: 

a)	the price-fixing date and issuance date of each staggered issuance;
b)	the number of securities issued and allotted for each staggered issuance;
c)	the issue price and basis of determining the issue price for each staggered issuance; and
d)	the aggregate number of securities issued and allotted pursuant to the placement at the end of each quarter.1

​2.  Financial capability of placees

 
In addition to the existing information to be submitted to the Exchange in relation to the placees of a placement exercise, e.g. name, home or business address, identity card/ passport/ company registration numbers, occupation/ principal activities, securities account numbers and the amount and price of securities placed to each placee, a listed issuer will also be required to provide details of the financial standing and source of funds of each placee.²
 
For the above purposes, ‘financial standing’ includes the financial strength, status or net worth as evidenced, inter alia, by the placee’s assets and liabilities, savings in bank accounts or record of salary payments, and ‘source of funds’ refers to where the funds used as payment for the placement securities are transferred from, including the placee’s bank account, or any loan, credit or margin financing account.
 
3.  Quarterly announcements on status and details of utilisation of proceeds from a fund-raising exercise
 
Currently, a listed issuer must, among others, disclose the details and status of equity fund-raising exercises undertaken in the 12 months preceding the date of announcement of a new issue of securities, including the total proceeds raised, details and status of the utilisation of the proceeds, in the immediate announcement and circular to shareholders. Regular updates on the status of utilisation of proceeds must also be provided in the quarterly and annual reports.
 
To enhance transparency, the Exchange proposes that for a new issue of securities for fund-raising purposes, a listed issuer must announce the following information, on a quarterly basis simultaneously with the announcement of its quarterly report: 

a)	the details of the projects, initiatives or purposes funded by the proceeds together with their status and progress; and
b)	the amount of the unutilised proceeds, if any, including the place and name of the entity where the proceeds are deposited or kept.3

A listed issuer is expected to disclose the key milestones of the projects, initiatives or purpose pending full utilisation of the proceeds raised.

 
4.  Disclosures relating to equity fund-raising exercises where proceeds raised have yet to be fully utilised
 
In addition to the existing requirement for a listed issuer to disclose details and status of the past 12 months’ equity fund-raising exercises in its immediate announcement and circular to shareholders relating to a new issue of securities, it is proposed that the disclosure requirements be extended to include all equity fund-raising exercises implemented in the past where the proceeds raised have yet to be fully utilised.⁴
 
This enhanced disclosure will enable shareholders to make better informed decisions and to question the status of past fund-raising exercises undertaken by the listed issuer.
 
Proposed amendments to Employee Share Scheme framework
 
1.  Application of prescribed threshold
 
Presently, a listed issuer must ensure at all times that the maximum number of shares to be issued under its Share Issuance Scheme⁵ must not exceed 15% and 30% for Main Market and ACE Market listed issuers respectively, of the total issued shares of the listed issuer at any one time (‘prescribed threshold’). The prescribed threshold does not apply to a Share Grant Scheme⁶.
 
The Exchange proposes to impose the prescribed threshold to all existing Employee Share Schemes, i.e. Share Issuance Scheme and Share Grant Scheme, implemented by a listed issuer.⁷
 
It is interesting to note that the present position under the LR is similar to the position in Hong Kong and Singapore and that the Exchange has made a conscious decision to depart from the practices in its benchmark jurisdictions in making the proposed amendment.
 
2.  Enhanced disclosure requirements in annual reports
 
The LR presently only requires a listed issuer to disclose prescribed information in its annual report in relation to its Employee Share Schemes for specified categories of persons, e.g. directors, chief executive and senior management.
 
It is proposed that the disclosure of information by a listed issuer in its annual report relating to its Employee Share Schemes be enhanced by requiring the following information to be disclosed based on categories of participants: 

a)	date of offer or grant;
b)	aggregate options or shares granted (in number and percentage) together with the number of participants during the financial year;
c)	aggregate options exercised or shares vested (in number and percentage) together with the number of participants during the financial year;
d)	aggregate options or shares outstanding at the beginning and at the end of the financial year; and
e)	exercise price or purchase price.8

Although the Exchange has not prescribed the manner in which the participants are to be categorised, it has, by way of example, suggested that participants may be categorised as directors, senior management, middle management, junior management, executive and non-executive.

 
Enhancing remuneration disclosure for chief executive
 
It is proposed that the remuneration of a listed issuer’s chief executive be disclosed on a named basis in the annual report.⁹ This proposal will promote greater transparency and enable shareholders to make informed assessments on the appropriateness of the remuneration. The proposal will align the requirements in the LR with those under the listing rules of Singapore and Hong Kong and applicable laws in Australia and the United Kingdom. The requirement will also apply to a chief executive of a closed-end fund and a business trust under the Main LR.¹⁰
 
Other proposed amendments
 
1.  Extension of 50% limit to convertible debt securities
 
Currently, a listed issuer is required to ensure that the maximum number of new shares arising from the exercise or conversion of all outstanding convertible equity securities must not exceed 50% of its total issued shares at all times (‘50% limit’). The Exchange proposes to extend the 50% limit to convertible debt securities¹¹ to provide parity of treatment for all types of convertible securities.
 
2.  Interim corporate proposals by a PN17 Issuer / GN3 Company
 
A listed issuer that has: (a) suspended or ceased all or its major business or its entire or major operations or has insignificant operations (‘affected listed issuer’); or (b) triggered any of the criteria prescribed by the Exchange under the LR (‘PN17 Issuer / GN3 Company’)¹² is required to regularise its condition within 12 months from its announcement that it is an affected listed issuer or a PN17 Issuer / GN3 Company, as the case may be.
 
To ensure that an affected listed issuer or a PN17 Issuer / GN3 Company prioritises its efforts and resources to regularising its condition, it has been the Exchange’s practice to not permit an affected listed issuer or a PN17 Issuer / GN3 Company to undertake any interim corporate proposal that does not address the issues giving rise to it being classified as an affected listed issuer or a PN17 Issuer / GN3 Company except under exceptional circumstances. The Exchange now proposes to codify this practice¹³ in the LR to provide greater clarity and transparency.
 
In considering whether there are any exceptional circumstances, the Exchange will take into account, among others, whether there are any extraneous factors which warrant the interim corporate proposal and whether the absence of such interim corporate proposal would adversely affect the ability of the affected listed issuer or a PN17 Issuer / GN3 Company to regularise its condition. For example, the Exchange may consider allowing a placement exercise by a PN17 Issuer / GN3 Company as an interim measure to raise funds expeditiously and pay its creditors to prevent a winding-up.
 
3.  Enhancement of requirements for chain listing of subsidiaries
 
The existing chain listing requirements in the LR apply only where a listed issuer proposes to list its subsidiary on the Main Market or the ACE Market of the Exchange and do not apply where a listed issuer proposes to list its subsidiary on a stock exchange outside Malaysia. To address this gap and align our chain listing requirements with the requirements in Hong Kong and Singapore, the Exchange proposes to amend the LR to require a listed issuer to: (a) obtain approval at a general meeting for the listing of the subsidiary; and (b) ensure that the chain listing requirements stipulated in the Security Commission Malaysia’s Equity Guidelines (for the Main Market) or rule 3.03 of the ACE LR (for the ACE Market) are complied with if the listed issuer wishes to list its subsidiary on the Exchange or any other stock exchange.¹⁴
 
In addition, the ACE LR will be amended to require an ACE Market listed issuer to: (a) procure confirmation from its Sponsor or an Adviser that after the listing of the subsidiary, the listed issuer remains suitable for listing on the ACE Market; (b) have sufficient level of working capital to fund its continuing operations for at least 12 months from the date of its shareholders’ approval after excluding the interest of the said subsidiary; (c) ensure that the listing of the subsidiary is not detrimental to the interest of its shareholders; and (d) provide its shareholders an assured entitlement to any offering of existing or new shares in the subsidiary (collectively “the additional ACE requirements”).¹⁵
 
A listed issuer will also be required to disclose the following information in the circular to its shareholders: (a) confirmation that the applicable chain listing requirements are met, and in the case of an ACE Market listed issuer, the additional ACE requirements are met; and (b) a statement from the listed issuer’s board of directors on the rationale for the listing of the subsidiary.¹⁶
 
4.  Requirements relating to a special auditor
 
The LR empowers the Exchange to direct a listed issuer to appoint a special auditor to investigate the affairs of the listed issuer, its subsidiaries or both, if it suspects that a breach of the LR may have occurred.
 
The Exchange proposes to: 

a)	require a listed issuer to ensure that the review or investigation undertaken by the special auditor is sufficiently comprehensive and capable of addressing the issues raised by the Exchange;17 and
b)	permit any person (who need not be an auditor) with the relevant expertise on the subject matter being reviewed or investigated to be appointed as the special auditor.18

​5.  Plantation and timber corporations

 
It is also proposed that additional quarterly reporting requirements be imposed on Main Market listed issuers in the plantation or timber sectors in relation to their production figures.¹⁹
 
Deadline for comments
 
The deadline for submitting comments and feedback to the Exchange on the proposed amendments is 26 January 2024.
 
Comments
 
The following proposed amendments, namely: (a) the extension of the prescribed threshold to all Employee Share Schemes; (b) the extension of the 50% limit to convertible debt securities; and (c) the extension of the chain listing requirements to the listing of a subsidiary of a listed issuer on a foreign bourse, enhance the requirements under the LR. The other proposed amendments in CP1/2023 enhance transparency or formalise current practices by codifying them in the LR.
 
CP1/2023 and detailed amendments to the LR can be accessed through the following links: CP1/2023, Annexure A - Main LR and Annexure B - ACE LR.
 
 
Article by Kok Chee Kheong (Partner) and Chong Cai Yi (Associate) of the Corporate Practice of Skrine. 
 

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