The key changes are made to paragraphs 8.14B and 8.14C of the LR and Practice Notes No 16/2005 and No 17/2005 (“Amended PN16” and “Amended PN17” respectively).
Bursa Malaysia Berhad’s Chief Legal Officer, Selvarany Rasiah said the amendments were made as part of Bursa Securities’ continuous efforts to enhance the attractiveness of Bursa Securities and further promote the integrity and credibility of the market. “The key objectives of the amendments are to enhance the quality of listed issuers and to further strengthen investor protection and promote investor confidence.”
With these amendments, the criteria for classification as a PN17 company (i.e. a listed issuer that is subjected to the obligations under Amended PN17) have been made more stringent. Several new criteria have been introduced. Accordingly, the stricter triggering criteria are expected to result in several additional listed issuers being classified as PN17 companies. These listed issuers are required to make announcements that they are PN17 companies by Monday, 8 May 2006 following the implementation of the Amended PN17. The classification as a PN17 company means that they will have to submit a restructuring plan to the Securities Commission (“SC”) within a period of 8 months and implement their restructuring plans within the timeframe stipulated by the relevant authority. In addition, to ensure quality of the restructuring, the Amended PN17 and Amended PN16 now require all restructuring plans undertaken by the PN17 companies and the cash companies (i.e. those who fall within the ambit of Amended PN16) to fall within section 32 of the Securities Commission Act 1993 which requires SC approval to be procured.
Selvarany added, “These amendments are aimed at expediting the restructuring efforts of financially distressed listed issuers and those with inadequate level of operations. By these amendments, we are requiring these companies to commence restructuring early before their condition worsens and undertake more meaningful restructuring in an expeditious manner that will result in sustainable financial health.”
To ensure that there is adequate disclosure to the market, these
PN17 and cash companies will be subjected to the same disclosure
requirements as previously stipulated under PN17 and PN16 respectively,
which include –
• First announcement, i.e. of the triggering of the specified
criteria;
• Monthly status announcements;
• Announcements of compliance or non-compliance with obligations;
and
• Announcement of the detailed restructuring plans.
The key amendments to the LR are as follows:
- Enhancement to the existing PN17 criteria and details are illustrated in Appendix 1 attached;
- Requiring a PN17 company or cash company to undertake a restructuring plan that is substantive and this is subject to Securities Commission’s approval under section 32 of the Securities Commission Act 1993;
- Shortening of the initial announcement timeframe from 7 market days to immediate;
- Requiring PN17 company or cash company to make an announcement on the regularisation plan that fulfils certain prescribed conditions;
- Requiring these listed issuers to confirm the completion of their regularisation plans by submitting an application and relevant documents to Bursa Securities;
- Requiring these listed Issuers who wish to apply for an extension of time to do so not later than 15 days prior to the expiry of the relevant timeframe; and
- Clarification that the Amended PN 16 and PN17 do not apply to exchange traded funds.
The new framework does not apply to PN4 and PN10 companies and listed issuers which are subject to the existing PN16 and PN17 framework.
The amendments take effect immediately.
As a transitional provision, Bursa Securities will not classify a listed issuer whose shareholders’ equity is 25% or less of its minimum issued and paid-up capital and whose shareholders’ equity is less than the requisite minimum issued and paid-up capital within 3 months from the effective date, if such listed issuer fulfils certain conditions prescribed by Bursa Securities. The details of the transitional provision are as shown in the Appendix 2.
The complete text of the amendments is also available for reference along with a set of frequently asked questions and answers on Bursa Malaysia’s website at www.bursamalaysia.com
Appendix 1
| EXISTING PN 17 CRITERIA | ENHANCED PN 17 CRITERIA |
| (a) deficit in the adjusted shareholders’ equity of the listed issuer on a consolidated basis | (a) shareholders equity of the listed issuer on a consolidated basis is equal to or less than 25% of the issued and paid up capital of the listed issuer and such shareholders equity is less than the minimum issued and paid up capital as required under paragraph 8.16A(1) of the Listing Requirements. |
| (b) appointment of receivers and/or managers over the property of the listed issuer or its major subsidiary or major associated company which property accounts for at least 70% of the total assets employed of the listed issuer on a consolidated basis |
(a) appointment of receivers and/or managers over the asset of the listed issuer, its subsidiary or associated company which asset accounts for at least 50% of the total assets employed of the listed issuer on a consolidated basis |
| None |
(c) a winding up order of a listed issuer’s subsidiary or associated company which accounts for at least 50% of the total assets employed of the listed issuer on a consolidated basis |
| (c) auditors have expressed adverse or disclaimer opinion in respect of the listed issuer’s going concern, in its latest audited accounts |
(d) auditors have expressed an adverse or disclaimer opinion in the listed issuer’s latest audited accounts |
| None |
(e) the auditors have expressed a modified opinion with emphasis on the listed issuer’s going concern in the listed issuer’s latest audited accounts and the shareholders’ equity of the listed issuer on a consolidated basis is equal to or less than 50% of the issued and paid up capital of the listed issuer |
| None | (f) a default in payment by a listed issuer, its major subsidiary or major associated company, as the case may be and the listed issuer is unable to provide a solvency declaration |
| (d) listed issuer has suspended or ceased all of its business or its major business or its entire or major operations for any reasons whatsoever |
(g) [No change] |
| (e) listed issuer has an insignificant business or operations | (h) [No change] |
Appendix 2
Transitional Provision
As a transitional provision, Bursa Securities will not classify a listed issuer that has triggered paragraph (a) of the Amended PN 17 criteria, which states that where shareholders’ equity of the listed issuer on a consolidated basis is equal to or less than 25% of the issued and paid up capital of the listed issuer and such shareholders’ equity is less than the minimum issued and paid up capital as required under the LR (“Enhanced PN 17 Criterion (a)“) within 3 months from the Effective Date (“Affected Listed Issuer(s) Under 2.1 (a)”) as a PN 17 Company, provided that the Affected Listed Issuer Under 2.1(a) falls within either one of the following categories (“Transitional Provision”):-
Category A
An Affected Listed Issuer Under 2.1(a) that is able to fulfil all the following conditions:-
- Its shareholders’ equity on a consolidated basis is not
in deficit;
- It is making a net profit without taking into consideration
unusual items in the current quarter;
- It is making a net profit without taking into consideration
unusual items in a cumulative period of 12 months; and
- It is able to furnish a forecast that it is able to raise its
shareholders’ equity to above the minimum issued and paid-up
capital requirement within a period of 6 months from the date
it triggered the Enhanced PN 17 Criterion (a), through an increase
in its retained earnings and without taking into consideration
unusual items. The Affected Listed Issuer Under 2.1(a) must undertake
to announce the forecast to Bursa Securities within 1 month from
the date it triggered the Enhanced PN 17 Criterion (a), which
forecast must comply with the requirements of paragraph 9.16(1)(c)(v)
of the LR.
For this purpose, unusual items shall include, but not be limited to the following:-
- Gain or loss on sale of non-operating asset which sale is non-recurrent in nature;
- Expense incurred arising from a voluntary separation scheme;
- Expense incurred to formulate and implement a restructuring scheme;
- Income or expense arising from an insurance claim;
- Income or expense arising from settlement of a legal claim;
- Dividend already proposed and to be paid during the forecast period; and
- Such other relevant items as may be determined by Bursa Securities.
Category B
An Affected Listed Issuer Under 2.1(a) that is in implementation stage of its regularisation plans and whose proforma figures upon completion of the relevant stage of implementation show that it will not trigger any of the Enhanced PN17 Criteria. In this regard, Bursa Securities will consider a listed issuer as being eligible for this condition if the books closing date for determining entitlement to participate in the regularisation plans has been fixed or the approval-in-principle by Bursa Securities for the quotation of its new shares has been obtained, or in such other circumstances as may be determined by Bursa Securities, in its absolute discretion.
The determination as to whether an Affected Listed Issuer Under 2.1(a) fulfils all the conditions set out either under Category A or Category B above shall be at the absolute discretion of Bursa Securities. Relevant Announcements must be made from time to time by these companies to ensure greater transparency and clarity.
For the avoidance of doubt, the Transitional Provision shall not apply to listed issuers that trigger the Enhanced PN 17 Criterion (a) after 7 August 2006 (i.e. after expiry of 3 months from the Effective Date) or listed issuers that fulfill the other criteria under the Enhanced PN17 Criteria. These listed issuers must comply with the Amended 8.14C and Amended PN17 strictly.
