Malaysia legislation guide
By Munir Abdul Aziz
Wong & Partners
Tel: +603 2298 7854 Fax: +603 2282 2669 Website: www.wongpartners.com
Like most export driven economies, the Malaysian economy was adversely affected by the global financial crisis (GFC). However, as we approach 2012, it appears that Malaysia has weathered the GFC relatively well, and the economy is now growing strongly again. Substantial government stimulus, low interest rates and rising trade with emerging economies have driven the economic rebound. And a number of progressive developments have recently been made to the laws and regulations in various areas.
Mergers and acquisitions
The Securities Commission (SC) recently promulgated a new Code on Takeovers and Mergers (Code) governing mergers and acquisitions of public listed companies in Malaysia. In brief, the Code facilitates overall transparency, protects minority investors, and enhances the administrative workings of the Malaysian capital market framework.
The Code heralds a number of changes that enhance transparency including the requirement that potential offerors and offerees are to make an announcement on possible takeover offers when unusual changes in the volume of share turnover of a company occur. Malaysia also has its version of the ‘put up or shut up’ rule. A potential offeror who announces that he does not intend to make a takeover offer is prohibited from announcing a takeover offer for six months after making such an announcement.
The Code now expressly allows offerors to make their takeover conditional upon achieving 90% acceptances. This will facilitate ‘take private transactions’ as achieving the threshold of 90% of shares not already owned means that the offeror can exercise compulsory purchase provisions.
Asset and liability transfers
There has been a major change to a key mode of undertaking ‘take private’ transactions involving public listed companies in Malaysia. The SC and Bursa Malaysia recently announced that the shareholder approval threshold required for asset and liability transfers has increased from 50%-plus-one share to 75%. The SC has also made it compulsory for companies undertaking an asset disposal to hire an independent adviser to provide shareholders with advice and detailed disclosure on the utilisation of proceeds of the asset disposal. In effect, although this enhances the protection of minority shareholders, it is now more difficult for an acquirer to acquire the asset and liabilities of listed public companies.
Banking and finance
Malaysia continues to focus on its aspiration of becoming a global Islamic financing hub, and its regulatory framework is a key reason for this. Continued improvements have been evidenced by the SC’s revision of the Islamic securities guidelines in conjunction with the revised trust deed guidelines and the private debt securities guidelines. Such revisions, which took effect in August 2011, have been aimed at enhancing the Malaysian regulatory framework for fundraising in the sukuk market. The revised guidelines facilitate several important areas in the sukuk issuance process. For example, the approval process and the time for the issuance of sukuk have been streamlined, and the application of Shariah rulings and principles endorsed by the SC’s Shariah Advisory Council in relation to sukuk transactions has been clarified. In addition, disclosure standards and protection for sukuk holders have been improved.
The proposed 2011 amendments to the Capital Markets and Services Act 2007 introduces the most significant changes to the financial regulation regime in Malaysia since the overhaul that was introduced by the 2007 Act itself. The amendments propose to clarify and extend the regulatory functions of the SC and to ensure that the licensing framework under securities laws remains effective and efficient. More significantly, it introduces a new definition of derivatives, which will capture over-the-counter derivatives as well as exchange-traded derivatives. Furthermore, the lacuna, which had previously existed in the definition of ‘securities’, has now been closed. The effect is that all forms of derivatives will now be caught, whether cash-settled or physically deliverable, and whatever the underlying instrument may be.
The SC has also taken steps to raise the standards of corporate governance in Malaysia. This is evidenced by the recent launching of its Corporate Governance Blueprint. It is envisioned that the majority of the recommendations in the Blueprint will be implemented over a five year period through a corporate governance code and changes to the listing requirements. Two key recommendations are to separate the position of the chairman and the CEO for all public listed companies and secondly to require all such companies to have mandatory poll voting in general meetings.