The LR should be kept current and applicable thus Bursa Securities believe that the said Amendments are timely. This will directly enhance the capital market and securities industry said Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia.
The new framework provides that listed companies with unsatisfactory financial condition and level of operations (other than Cash Companies) will have 8 months to submit their regularisation plans to the relevant authorities for approval. If they fail to do so, their securities will automatically be suspended on the 5th market day after expiry of the 8-month period and de-listing procedures undertaken against such companies.
Cash Companies under the new framework are subjected to requirements similar to that provided under PN10. Under the new framework, however, Cash Companies are given 12 months to submit their regularisation plans to the relevant authorities for approval. If they fail to do so, they may be suspended and de-listed.
The new framework will apply for listed companies that trigger the prescribed criteria after the effective date of the said Amendments. The existing PN4 and PN10 companies, however, will continue to comply with their obligations under paragraph 8.14 of the LR and PN4 or paragraph 8.16 of the LR and PN10 respectively.
THE SAID AMENDMENTS
The key changes in the LR under the new framework are as follows:-
- Paragraphs 8.14 and 8.16 of the LR, PN 4 and PN 10 are repealed.
- New paragraph 8.14C and Practice Note No 17/2005 (“PN
17”) have been issued to provide for obligations of listed
companies with unsatisfactory financial condition and level of
operations (excluding Cash Companies).
- New paragraph 8.14B and Practice No 16/2005 (“PN 16”)
have been issued to provide for obligations of Cash Companies.
- New paragraph 8.14A has been included as a saving and transitional provision to provide for the obligation of existing PN4 and PN10 companies.
Details of the background and the main differences between the existing framework and the new framework are enclosed as Appendix 1.
IMPLEMENTATION
The said Amendments shall take effect from 3 January 2005. The new framework shall only apply to listed companies that trigger the Revised Criteria (as referred to in Appendix 1) after the effective date.
As stated above existing listed companies that fall under PN 4 or PN 10 shall continue to be bound by paragraph 8.14 and PN 4 or paragraph 8.16 and PN 10 respectively.
In line with the enhancements, Bursa Securities will also be adopting a stricter stance when considering any application for extension of time from existing PN4 or PN10 companies. When making an application for extension of time, these listed companies must demonstrate that significant progress has been made by them in their endeavours for regularisation and that completion of the relevant obligation for which they require more time is imminent. These listed companies will also be required to keep the market informed of their regularisation efforts through announcements upon compliance or non-compliance with the prescribed obligations.
In conjunction with the said Amendments, the PN4 Condition sector classification will be removed with effect from 3 January 2005. The existing PN4 companies will be placed into their respective sectors prior to them triggering the PN4 requirements. The flagging of listed companies which triggered PN4 previously will continue on the MASA screen. In addition, listed companies which trigger the new PN17 will also be similarly flagged on the MASA screen.
Bursa Securities also intends to seek the co-operation of the media which carry a list of the listed companies to flag such listed companies accordingly in their publications.
AVAILABILITY OF THE SAID AMENDMENTS
Please take note that the said Amendments and Q&As are available for reference on the Bursa Malaysia’s website at www.bursamalaysia.com
By way of background, the existing PN4 and PN10 requirements were introduced in 2001.
| Requirements | Description |
| Paragraph 8.14 and PN4 |
Provide a comprehensive plan for listed companies with financial condition that does not justify continued trading and/or listing. |
| Paragraph 8.16 and PN10 | Provide a comprehensive plan for listed companies with level of operations that does not warrant continued trading and/or listing on the Official List. |
The requirements were introduced to ensure that sufficient disclosure was made about listed companies that were financially distressed or had inadequate level of operations and further that they took steps to expeditiously restructure to address their unsatisfactory condition.
When PN4 was first introduced in February 2001, there were a total of 89 listed companies which were subjected to PN4. As at 29 November 2004, a total of 72 listed companies have successfully regularised their financial condition whilst 40 listed companies are still categorised under PN4. A total of 16 companies had been de-listed since the introduction of PN4. As at 29 November 2004, a total of 8 listed issuers still trigger the PN10 requirements, whilst 14 listed issuers have successfully regularised their level of operations. A total of 4 companies with inadequate level of operations had been de-listed since the introduction of PN10.
The existing PN4 and PN10 framework had served its objectives well but given the improvements in the economic conditions and the intention of Bursa Securities to continuously enhance the quality of companies listed on the exchange, the enhancements made by way of the said Amendments are timely and necessary.
The main differences between the existing PN4 and PN10 framework
and the new framework are highlighted below.
| Requirements under PN4 and PN10 Framework | Requirements under the new framework |
| Triggering Criteria • 4 criteria for financial condition (under PN4) • 3 criteria for level of operations (including criterion for Cash Companies) (under PN10) |
Triggering Criteria • Combination of existing 3 criteria for financial condition and existing 2 criteria for level of operations (“Revised Criteria”)(under PN17) • Criterion for Cash Companies attracts different obligations (under PN16) |
| Obligation to regularize Financial condition (PN4) • 6 months to make announcement of plans • 2 months to submit plans for approval • 4 months to obtain approvals Level of operations (PN10) |
Obligation to regularize Financial condition and level of operations (PN 17) • 8 months to submit plans for approval
|
| Disclosure obligations • Make an announcement within 7 days of triggering criteria • Make monthly announcements • Make announcement of compliance or non-compliance with obligations • Submit monthly reports |
Disclosure obligations • Make an announcement within 7 days of triggering criteria • Make monthly announcements including a statement on the number of months to the end of the time given for compliance with obligations • Make announcement of compliance or non-compliance with obligations |
| No automatic suspension of securities upon failure to comply with obligations within given timeframes | Suspension of securities on 5th market day after expiry of 8 months |
| Appointment of monitoring accountant | Nil |
| Imposition of trade restrictions | Nil |
| PN4 and PN10 requirements apply to all listed companies | PN4 and PN10 requirements apply only to listed companies that triggered the PN4 and PN10 requirements respectively prior to the effective date of new requirements. |
