Bursa Malaysia Extends Validity Period of General Mandates for Private Placements and Rights Issues

Bursa Malaysia Berhad (‘the Exchange’) announced on 23 December 2021 a 12-month extension of the temporary relief measures for the increased general mandate of 20% for new issue of securities by way of private placement (‘20% General Mandate’) and the general mandate of 50% based on a pro rata entitlement for a new issue of securities by way of rights issue (‘Pro Rata 50% General Mandate’) (collectively, the ‘enhanced mandates’), each of which would have expired on 31 December 2021 (‘Expiry Date’).
 
According to the Exchange, the extension of the enhanced mandates will assist listed issuers to address their funding needs and working capital requirements by easing compliance and facilitating secondary fundraising in an expedient, efficient and cost-effective manner.
 
The extension applies to issuers that are listed on the Main Market and the ACE Market of the Exchange, and to real estate investment trusts (‘REIT’) listed on the Main Market.
 
The 20% General Mandate
 
The 20% General Mandate which was announced on 16 April 2020 will be extended until 31 December 2022 for listed issuers that have not raised any funds using the 20% General Mandate in 2020 or 2021. The following listed issuers may issue new securities under the 20% General Mandate:

  1. a listed issuer which has obtained shareholders’ approval for the 20% General Mandate at a general meeting in 2021 but has not utilised it to issue new securities on or before the Expiry Date; or 

  2. a listed issuer which has not sought shareholders’ approval for the 20% General Mandate at a general meeting in 2021.
A listed issuer must comply with the following requirements in order to issue new securities under the 20% General Mandate:

  1. procure its shareholders’ approval for the 20% General Mandate at a general meeting; 

  2. comply with all applicable legal requirements, including those in its constitution or constituent documents; 

  3. in addition to the existing disclosures required in the statement accompanying the proposed resolution under paragraph 6.03(3) of the Main Market Listing Requirements (‘Main LR’) / rule 6.04(3) of the ACE Market Listing Requirements (‘ACE LR’), disclose the views from the listed issuer’s board of directors that the 20% General Mandate is in the best interest of the listed issuer and its shareholders, as well as the basis for such views; and 

  4. continue to comply with all other requirements for the new issue of securities under the Main LR / ACE LR. 
It must be noted that the extended 20% General Mandate is not available to a listed issuer which has fully or partly utilised the 20% General Mandate on or before the Expiry Date. Such listed issuer will be subjected to the 10% general mandate limit under paragraph 6.03(1) of the Main LR / rule 6.04(1) of the ACE LR in 2022.
 
The Pro Rata 50% General Mandate
 
The Pro Rata 50% General Mandate which was first announced by the Exchange on 10 November 2020, may now be utilised by a listed corporation (including a REIT listed on the Main Market) with ‘existing controlling securities holders’1 (‘eligible listed issuer’) to issue new securities not exceeding 50% of the total issued shares (excluding treasury shares) or issued units, as the case may be, on a pro rata basis by way of a rights issue until 31 December 2022.
 
An eligible listed issuer must comply with the following requirements in order to issue new securities under the Pro Rata 50% General Mandate:

  1. procure approval of its shareholders or unit holders, as the case may be, for the Pro Rata 50% General Mandate at a general meeting; 

  2. comply with all applicable legal requirements, including those in its constitution or constituent documents; 

  3. in addition to the existing disclosures required in the statement accompanying the proposed resolution under paragraph 6.03(3) of the Main LR / rule 6.04(3) of the ACE LR, include the views from the eligible listed issuer’s board of directors that the Pro Rata 50% General Mandate is in the best interest of the eligible listed issuer and its shareholders or unit holders, as well as the basis for such views; 

  4. ensure the shares or units to be issued under the Pro Rata 50% General Mandate are not priced at more than 30% discount to the theoretical ex-rights price; 

  5. procure irrevocable letter(s) of undertaking from its existing controlling securities holders to subscribe for their full entitlements under the Pro Rata 50% General Mandate; and 

  6. continue to comply with all other requirements for the new issue of securities under the Main LR / ACE LR, including the obligation to announce the rights issue with the information prescribed in Appendix 6A of the Main LR / ACE LR upon implementation of the same under the Pro Rata 50% General Mandate. 
Greater flexibility is now accorded by the Exchange in that the Pro Rata 50% General Mandate, which could previously be used only to issue ordinary shares or units, may now be utilised to issue convertible equity securities together with ordinary shares or units as part of a rights issue, subject to compliance with paragraph 6.50 of the Main LR / rule 6.51 of the ACE LR.2
 
Comments
 
The extension of the deadline to 31 December 2022 to utilise the enhanced mandates for fundraising will be welcomed by the listed issuers that are struggling to recover from the economic downturn caused by the Covid-19 pandemic. The additional flexibility to include the issuance of convertible equity securities together with ordinary shares or units under the Pro Rata 50% General Mandate introduces additional flexibility to the use of a rights issue as a fundraising tool.
 
Alert prepared by Phua Pao Yii (Partner) and Tan Wei Liang (Senior Associate) of the Corporate Practice of Skrine.
 

1 The expression ‘existing controlling securities holder’ refers to a ‘controlling shareholder’ as defined in paragraph 1.01 of the Main LR / rule 1.01 of the ACE LR, and ‘controlling unit holder’ as defined in paragraph 1.01 of the Main LR and means any person who is, or a group of persons who together are, entitled to exercise or control the exercise of more than 33% (or such other percentage as may be prescribed in the Take-Overs and Mergers Code as being the level for triggering a mandatory general offer) of the voting shares in a company and the voting units in a unit trust scheme, or who are in a position to control the composition of a majority of the board of directors of such company.
2 Paragraph 6.50 of the Main LR / rule 6.51 of the ACE LR stipulates that the number of new shares arising from the exercise or conversion of all outstanding equity securities must not exceed 50% of the total number of issued shares of the listed issuer (excluding treasury shares and before the exercise of the convertible equity securities) at all times.

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.