listing malaysian-based operations abroad€¦ · * for shares listed or approved for listing on...

LISTING MALAYSIAN-BASED OPERATIONS ABROAD

- LEGAL PERSPECTIVE

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1. DUE DILIGENCE

2. RESTRUCTURING

4. PRE-IPO PRIVATE FUNDING

3. OFFERING & PLACEMENT IN

MALAYSIA

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PHASE 1 – RESTRUCTURINGAND IPO-RELATED APPROVALS

PHASE 2 – REGULATORYCOMPLIANCE AND CORPORATEGOVERNANCE ISSUES: ‘FITNESS’FOR LISTING

PHASE 3 – DISCLOSURE IN OFFERDOCUMENT/ PROSPECTUS

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1. DUE DILIGENCE: KEY AREAS

<<DUE DILIGENCE WORKING GROUP>>

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PHASE 1 – RESTRUCTURING AND IPO-RELATED APPROVALS

Typical examples of restrictions:-

(i) provisions prohibiting change of control or foreign ownership (Restructuring-relevant)(ii) provisions prohibiting listing, including becoming a subsidiary of a listed corporation

(IPO-relevant)

MAIN OBJECTIVE: Identifying required regulatory and other third party consents/waivers arising from restrictions under

regulatory/ licensing requirements or contractual arrangements

Change of control provisions are particularly common in bank

documents and sometimes, in licensing conditions and major

contracts

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PHASE 2 – COMPLIANCE AND CORPORATE GOVERNANCE

ISSUES: ‘FITNESS’ FOR LISTING

SCOPE: Normally determined by principal advisor/ lead counsel based on requirements of the foreign stock exchange;

typically include areas such as the Group’s compliance with law, related party transactions and conflicts of interest,

material contracts, real property & other assets, indebtedness & security, insurance, litigation etc. as well as information,

status & records of proposed directors, substantial shareholders & key management

Irregularities identified will be rectified prior to IPO

PHASE 3 – DISCLOSURE IN OFFER DOCUMENT/

PROSPECTUS

Third party consents identified from

confidentiality undertakings will be obtained for certain

disclosures in offer document

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Part 1. ‘HOUSING’ MALAYSIAN OPERATING ENTITIES UNDER NEWLYINCORPORATED FOREIGN LISTING VEHICLE

Normally by way of SHARE SWAP

2. RESTRUCTURING

2. RESTRUCTURING

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2. RESTRUCTURING

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1. Incorporation of ListCo

2. The Share Swap: Shareholders transfer entire share capital of ABC Sdn Bhd to ListCo in exchange for new shares in ListCo.

ListCo

2. RESTRUCTURING

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ListCo

IPO Group Structure

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X/ Y Sdn Bhd’s swapping of financial asset in Malaysia (ABC Shares) for financial asset outside Malaysia

(ListCo Shares)

INVESTMENT ABROAD

Q: Does the resident shareholder (X/Y SDN BHD) or its group of entities with parent-

subsidiary relationship have domestic ringgit borrowings (Note: including

redeemable preference shares but excluding borrowings within the group)?

An regulated by Central Bank of Malaysia pursuant to Financial Services Act 2013

(assuming no other investment abroad in the same year)

Allowed up to RM50 million equivalent in

aggregate per calendar year (on aggregate and group basis)

(For resident individual, sole proprietorship or partnership, the yearly cap is RM1 million)

Approval required if it will exceed the cap

Allowed, with no cap

NO YES

The answer is commonly yes for Y Sdn Bhd (being the holding

company) as the Malaysian operating entities normally would have local

bank borrowings

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APPLICATION PROCESS

Online Submission (Own Submission/ Submission by Consultant)

Q&As between Central Bank of Malaysia and Applicants(by way of emails and/or meetings)

Decision from Central Bank of Malaysia

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Part 2. WHEN TO IMPLEMENT?

2. RESTRUCTURING

AFTER obtaining approval(s)/ waiver(s) from Central Bank of Malaysia (ifrequired) and other third party(ies)

PREFERABLY AFTER obtaining listing approval from the foreign stock exchange (allowed by certain stock exchange, such as Singapore Stock Exchange, provided that a complete restructuring structure and plan is presented)

Unwinding the restructured group can be a complicated or costly process

Direct Overseas Listing of Malaysian Holdco

(ABC SDN BHD)? UNCOMMON

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PRE-IPO CONSIDERATIONS Pre-IPO conversion into public limited company

(Berhad) is required

Approval required from the SecuritiesCommission under Capital Markets and ServicesAct 2007 (CMSA)

Q: Does the foreign stock exchange allow listingof corporation with ringgit-denominated shares?

POST-IPO COMPLICATIONS

Application of take-overs regulations under CMSA andMalaysian Code on Take-overs and Mergers 2016?

3. OFFERING AND PLACEMENT IN MALAYSIA

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OFFERING TO PUBLIC IN MALAYSIA ? regulated by Securities Commission (SC)

under Capital Markets and Services Act2007 (CMSA)

APPROVAL required from SC Prospectus required

• must comply with CMSA requirements• must register with SC

• must be enclosed with form of application for securities

Section 232, CMSA

Section 212, CMSA

EXCEPTIONS ARE PROVIDED IN SCHEDULES 5, 6 AND 7 OF CMSA

3. OFFERING AND PLACEMENT IN MALAYSIA

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Approval from SC not

required*

Prospectus not required

PLACEMENT TO HIGH –

NET WORTH ENTITIES/ PRIVATE

PLACEMENT

Corporationwith total net

assets >RM10million or equivalent based on last

audited accounts

Partnershipwith total net

assets >RM10million or equivalent

Individual

whose total net personal assets, or total net joint assets with his spouse,

> RM3million or equivalent, excluding the value of the individual’s primary residence;

who has a gross annual income >RM300,000 or equivalent per annum in

preceding 12 months; or

who, jointly with his spouse, has a gross annual income >RM400,000 or equivalent

per annum in preceding 12 months

* for shares listed or approved for listing on member exchange of the World Federation of

Exchanges AND where the distribution of such shares is made by a holder of a Capital Markets Services Licence who carries on the business of

dealing in securities.

Person who acquires

shares, as principal,for a consideration

≥RM250,000 or

equivalent for eachtransaction whetherpaid for in cash orotherwise

Person who acquiressecurities pursuant to a

private placementif the aggregateconsideration for theacquisition is

≥RM250,000 or

equivalent for eachtransaction whether paidfor in cash or otherwise.

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OFFERING IN MALAYSIA NORMALLY EXCLUDED

e.g. “No Offer Document or other offering material or document in connection with the Placement and sale of our Placement Shares has been or will be registered with the

Securities Commission pursuant to the Capital Markets and Services Act and no approval for the offering of our Placement Shares has been obtained from the

Securities Commission pursuant to the Capital Markets and Services Act. Accordingly, this Offer Document and any other document or material in connection with the

Placement, or invitation for subscription, of our Placement Shares may not be circulated or distributed, nor may our Placement Shares be offered or sold, or be made the subject

of an invitation for subscription or purchase, whether directly or indirectly in Malaysia. This Offer Document does not constitute and may not be used for the purpose of a

public offering or an issue, offer for subscription, invitation to subscribe for any securities requiring the registration of an offer document with the Securities Commission

under the Capital Markets and Services Act. If you are in doubt as to the action you should take, you should consult your stockbroker, bank manager, solicitor or other

professional adviser immediately.”

Members of the World Federation of Exchanges as at 29 September 2016

Abu Dhabi Securities Exchange

Amman Stock Exchange

Athens Stock Exchange (ATHEX)

Australian Securities Exchange

Bahrain Bourse

BATS Global Markets

Bermuda Stock Exchange

BM&FBOVESPA S.A.

BME Spanish Exchanges

Bolsa de Comercio de Buenos Aires

Bolsa de Comercio de Santiago

Bolsa de Valores de Colombia

Bolsa de Valores de Lima

Bolsa Mexicana de Valores

Borsa İstanbul

Bourse de Casablanca

BSE India Limited

Bursa Malaysia

CBOE Holdings, Inc.

China Financial Futures Exchange

CME Group

Colombo Stock Exchange

Cyprus Stock Exchange

Dalian Commodity Exchange

Deutsche Börse AG

Dubai Financial Market

The Egyptian Stock Exchange

Euronext

Hochiminh Stock Exchange

Hong Kong Exchanges and

Clearing

Indonesia Stock Exchange

Intercontinental Exchange, Inc.

International Securities Exchange

Irish Stock Exchange

Japan Exchange Group, Inc.

Johannesburg Stock Exchange

Kazakhstan Stock Exchange

Korea Exchange

Luxembourg Stock Exchange

Malta Stock Exchange

Moscow Exchange

Muscat Securities Market

Nasdaq

National Stock Exchange of India

Limited

Nigerian Stock Exchange

NZX Limited

Oslo Børs

Philippine Stock Exchange

Qatar Stock Exchange

Saudi Stock Exchange (Tadawul)

Shanghai Futures Exchange

Shanghai Stock Exchange

Shenzhen Stock Exchange

Singapore Exchange

SIX Swiss Exchange

Stock Exchange of Mauritius

The Stock Exchange of Thailand

Taipei Exchange

Taiwan Futures Exchange

Taiwan Stock Exchange

Tel-Aviv Stock Exchange

TMX Group Inc.

Zhengzhou Commodity

Exchange

4. PRE-IPO PRIVATE FUNDING

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PRE-IPO RUND-RAISING SCHEME INVOLVING ISSUANCE OF SHARES TO PRIVATE INVESTORS

Such scheme normally contains the promoters’ commitment to secure listing within an agreed time frame/ promise of an investment return and accords the pre-IPO investors rights to ‘put’ the shares to the

promoters if the listing fails or does not occur.

The High Court has in 2014 and 2015 ruled in two cases in favour of the pre-IPO investors in their claims

when the SMEs failed in listing.

MALAYSIA VENTURE CAPITAL

MANAGEMENT BERHAD v. TEANG

SOO THONG & ANOR [2015] 1 LNS

948

MUAMALAT

VENTURE SDN BHD

v. KHOO KOAY

HOCK & ORS [2014]

1 LNS 727

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CASE STUDY

FACTS:

• A Sdn Bhd and B Sdn Bhd own the shares in C Sdn Bhd in 60:40 ratio. A Sdn Bhd and B Sdn Bhd intend to swap their shares in C Sdn Bhd in exchange for new shares in D Ltd, a corporation newly incorporated in England, which will act as the listing vehicle ‘housing’ C Sdn Bhd and its subsidiaries upon completion of the internal restructuring and then seek for listing on the London Stock Exchange. C Sdn Bhd has domestic ringgit borrowings. Both A Sdn Bhd and B Sdn Bhd do not have domestic ringgit borrowings. C Sdn Bhd and its group of entities are together valued at RM100 million.

• D Ltd intends to, as part of the listing exercise, offers its shares for placement to high net-worth entities in Malaysia.

CONTACT DETAILS

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Ang Siak Keng

Partner

Zaid Ibrahim & Co

(a member of ZICO Law)

51-22-B&C Menara BHL

Jalan Sultan Ahmad Shah

10050 Penang

Tel: +604 227 0888

Fax: +604 228 6755

Email:

siak.keng.ang@zicolaw.com

Thank You

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