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Bursa Malaysia amends Listing Requirements to introduce additional disclosures on conflict of interest and other amendments

31 May 2023

On 26 May 2023, Bursa Malaysia Securities Berhad (‘the Exchange’) announced amendments to the Main Market Listing Requirements (‘Main LR’) and the ACE Market Listing Requirements (‘ACE LR’) (collectively ‘LR’).1
 
According to the Exchange, the amendments are part of its on-going efforts to ensure that the LR remain fit for purpose. The amendments broadly cover two areas, namely: 
  • enhancing disclosure of conflict of interest (‘COI’) and potential COI of directors, senior management and other stakeholders, as well as the role of the Audit Committee (‘AC’) in this regard; and 

  • enhancing the LR in other areas to address issues and gaps in the market and ensure the LR remains balanced, clear, relevant and updated. 
The amendments had previously been subject to public consultation under Consultation Paper No. 4/2021 issued by the Exchange on 30 November 2021 and incorporate relevant feedback and comments received in response to the public consultation.
 
A summary of the main amendments is provided below. For the purposes of this article, a reference to a ‘listed issuer’ refers to a company or corporation or collective investment scheme or business trust or an issuer of any other securities listed on the Main Market or the ACE Market of the Exchange,  a ‘Paragraph’ refers to a Paragraph in the Main LR and a ‘Rule’, to a Rule in the ACE LR.
 
COI
 
The existing provisions of the LR require disclosure of COI in relation to certain personnel of a listed issuer in the circumstances specified in the LR. The amendments enhance and align these provisions in the following respects: 
  • extending disclosure of COI to include potential COI (including interest in any competing business); 

  • extending the disclosure to include COI and potential COI with the subsidiaries of a listed issuer in certain instances where such requirement had hitherto been omitted from the LR; and 

  • extending the disclosure requirements on COI and potential COI to certain other stakeholders. 
The provisions of the LR which are amended are as follows:
 
Amendments to include potential COI (including interest in any competing business) and subsidiaries of a listed issuer 
  • the statement accompanying a notice of annual general meeting pertaining to individuals standing for election as directors of the listed issuer (excluding directors standing for re-election) (paragraph 1(f) of Appendix 8A of the LR); 

  • the contents of an announcement relating to the appointment of a director of the listed issuer (paragraph (e) of Part A of Appendix 9A of the LR); 

  • the contents of the annual report relating to each director of the listed issuer (paragraph (3)(g) of Part A of Appendix 9C of the LR); 

  • the contents of the annual report relating to a chief executive officer who is not a director of the listed issuer (paragraph (4)(g) of Part A of Appendix 9C of the LR); and 

  • the contents of the annual report relating to key senior management2 of the listed issuer (paragraph (4A)(f) of Part A of Appendix 9C of the LR). 
Amendment to include potential COI (including interest in any competing business)3 
  • the contents of an announcement relating to the appointment of a chief executive (paragraph (e) of Part B of Appendix 9A of the LR); and 

  • the contents of an announcement relating to the appointment of a chief financial officer of the listed issuer (paragraph (d) of Part B(A) of Appendix 9A of the LR). 
Amendment to include potential COI (without reference to competing business) and subsidiaries of the listed issuer 
  • the contents of the annual report relating to the Shariah adviser of an Islamic business trust (paragraph (4)(b) of Part C of Appendix 9C of the Main LR); 

  • the contents of the annual report relating to a member of the investment committee of a real estate investment trust (paragraph (5)(c) of Part E of Appendix 9C of the Main LR); and 

  • the contents of the annual report relating to the Shariah adviser of an Islamic real estate investment trust (paragraph (16)(b) of Part E of Appendix 9C of the Main LR). 
Amendment to include potential COI (without reference to competing business or to subsidiaries of the listed issuer) 
  • the contents of the annual report relating to the manager of a closed-end fund (paragraph (2)(c) of Part B of Appendix 9C of the Main LR); and 

  • the contents of the annual report relating to the Shariah adviser of an Islamic exchange traded fund (paragraph (13)(b) of Part F of Appendix 9C of the Main LR). 
Imposition of new category of disclosure requirement on COI, potential COI (including competing business), and subsidiaries of the listed issuer 
  • the contents of an announcement relating to the change in a legal representative4 (or person of equivalent authority) (paragraph (e) of Part B(B) of Appendix 9A of the LR). 
AC
 
The provisions in the LR on the AC have been amended as follows:
 
First, the role of the AC has been enhanced. In addition to reviewing and reporting, inter alia, on related party transactions and COI that may arise within the listed issuer or group, Paragraph 15.12(1)(h) of the Main LR and Rule 15.12(1)(h) of the ACE LR have been expanded to include reviewing and reporting on related party transactions and COI that ‘arose or persisted’ and on the measures taken to resolve, eliminate or mitigate such COI.
 
Second, Paragraph 15.15 of the Main LR and Rule 15.15 of the ACE LR have been amended to include a requirement for the AC report to include a summary of any COI situation that has been reviewed by the AC (excluding a related party transaction) pursuant to Paragraph 15.12(1)(h) of the Main LR and Rule 15.12(1)(h) of the ACE LR and the measures taken to resolve, eliminate or mitigate such COI.
 
Third, Paragraph 15.17(c) of the Main LR and Rule 15.17(c) of the ACE LR have been amended to provide that, in addition to the listed issuer’s existing obligation to give full and unrestricted access to information on the listed issuer to the AC, similar access must be given to the AC to any information pertaining to the listed issuer’s group.
 
Transactions
 
The definition of ‘acquisition and disposal of assets’ in Paragraph 10.02 of the Main LR and Rule 10.02 of the ACE LR has been amended to include ‘an issue of securities by a listed issuer’s subsidiary which will result in the reduction of the listed issuer’s equity interest in such subsidiary’.
 
A new Paragraph 10.03(4A) and Rule 10.03(4A) have been introduced into the Main LR and ACE LR respectively to clarify that the basis of valuation of a transaction entered into by a listed issuer’s subsidiary is ‘the consideration for the transaction is the entire amount of the consideration paid or received, and not the listed issuer’s proportionate interest in such consideration’.
 
Related party transactions
 
Paragraph 10.08(9) of the Main LR and Rule 10.08(9) of the ACE LR exempt a listed issuer from, inter alia, the requirement to obtain approval of its shareholders in a general meeting and from appointing the specified advisers in relation to a related party transaction that satisfies the following conditions: (a) where any percentage ratio is 5% or more; (b) the transaction only involves the interest of a director or major shareholder of a subsidiary or the holding company of the listed issuer or a person connected with such director or major shareholder; and (c) the board of directors of the listed issuer approves the transaction before the terms of the transaction are agreed upon and ensures that the transaction is fair and reasonable to, and is in the best interests of, the listed issuer. This requirement has been clarified by providing that where any percentage ratio of the related party transaction is 25% or more, the listed issuer is still required to comply with the requirements in the following provisions of the LR, as applicable: 
  • Paragraph 10.07 of the Main LR and Rule 10.07 of the ACE LR (requirement for shareholders’ approval in general meeting); and 

  • Part F (additional information for foreign acquisitions where any percentage ratio is 25% or more) or Part F(A) (major disposal of assets resulting in the listed issuer being no longer suitable for listing) of the LR, as the case may be. 
A new Paragraph 10.08(11)(fA) of the Main LR and Rule 10.08(11)(fA) of the ACE LR now provide that ‘insurance coverage and indemnities for directors as permitted under the Companies Act (2016)’ will not normally be regarded as related party transactions.
 
Paragraph 10.08(11)(g) of the Main LR and Rule 10.08(11)(g) of the ACE LR, which provide that the supply of certain goods and services at a non-negotiable price or rate that is published or publicly quoted and where all material terms are applied consistently to all customers or classes of customers are not normally regarded as related party transactions, have been redrafted in a more organised manner and updated to extend certain exempt transactions carried out at physical outlets, such as hypermarkets, to include such transactions carried out through electronic commerce transactions.
 
Contact particulars
 
The requirements in the LR for a listed issuer to disclose the contact particulars of its registered office and each office where a register of securities is kept has been updated to include the disclosure of the email address of such offices.
 
In addition, the requirement under the Main LR to disclose in an annual report, the contact particulars of certain stakeholders, such as the manager of a closed-end fund, the trustee-manager of a business trust and the Shariah adviser of an Islamic business trust, the management company of a real estate investment trust and the Shariah adviser of an Islamic real estate investment trust, the management company of an exchange traded fund and the Shariah adviser of an Islamic exchange traded fund, has been expanded to include the disclosure of the email address of such stakeholders.
 
Effective dates of amendments
 
The amendments discussed above came into effect on 26 May 2023 except for the following: 
  • the amendments to (i) COI disclosures of key persons in immediate announcements to the Exchange under Chapter 9 of the LR (i.e. Paragraph (e) in Parts A and B, paragraph (d) in Part B(A), and paragraph (e) in Part B(B), of Appendix 9A of the LR) and in the statements accompanying notices of annual general meetings (Paragraph (1)(f) of Appendix 8A of the LR); and (ii) expand the role of the AC (Paragraph 15.12(1)(h) of the Main LR and Rule 15.12(1)(h) of the ACE LR) will come into effect on 1 July 2023; and 

  • the amendments to (i) COI disclosures of key persons (i.e. Paragraphs 3(g), 4(g), 4A(f) in Part A of Appendix 9C of the LR, and paragraphs 1(c) and 2(c) in Part B, paragraphs 3(c) and 4(b) in Part C, paragraphs 3(c), 5(c) and 16(b) in Part E, and paragraphs 3(c) and 13(b) in Part F, of Appendix 9C of the Main LR); and (ii) enhance the AC report (i.e. Paragraph 15.15(3)(f) of the Main LR and Rule 15.15(3)(f) of the ACE LR) will apply in respect of annual reports issued by listed issuers on or after 30 June 2024. 
Additional guidance
 
In addition to the amendments to the LR, the Exchange has also issued Issuers Communication Notes No. 1/2023 – Guidance on Conflict of Interest5, and updated the Questions and Answers6 to assist listed issuers and their advisers to have a better understanding of the amendments.
 
Article by Sheba Gumis (Partner) and Tan Wei Liang (Senior Associate) of the Corporate Practice of Skrine.
 
 
1 The full text of the amendments to the Main LR and the ACE LR can be accessed here and here.
2 For the purposes of Paragraph 4A of Part A of Appendix 9C, ‘key management personnel’ refers to a person who, in the opinion of the listed issuer, is the key management personnel of the group, and must include a person who is primarily responsible for the business operations of the listed issuer’s core business and principal subsidiaries.
3 The provisions of the LR referred to in this sub-section already include a reference to the subsidiaries of the listed issuer.
4 According to Paragraph 9.19(14B) of the Main LR and Rule 9.19(14B) of the ACE LR, a legal representative (or person of equivalent authority) is a person with sole powers to represent, exercise rights or enter into binding obligations, on behalf of the listed issuer or its foreign principal subsidiary pursuant to any relevant law applicable to the listed issuer or its foreign principal subsidiary.
5 The Issuers Communication Notes No. 1/2023 can be accessed here.
6 The Questions and Answers in relation to the amendments to the Main LR and the ACE LR can be accessed here and here.

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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