Professional Documents
Culture Documents
CONTENTS
Items
Page
INTRODUCTION
TYPES OF TRANSACTIONS
1SHARE VERSUS ASSET PURCHASE 1Simplicity 1Stamp duties and other factors
1FOREIGN VERSUS DOMESTIC INVESTMENT CONSIDERATIONS 2
TAXATION ISSUES
7JURISDICTION TAX 7Income tax 7Carrying forward net operating losses following a
change in ownership 8Capital gains tax 8Withholding Tax System 8TRANSACTIONAL
TAX 9Stamp duty 9
EMPLOYMENT ISSUES
CONCLUSION
Insider trading.
Documentation and Agreements
I n M a l a y s i a , i t i s c o m m o n f o r t h e p u rc h a s e r s l a w y e r s t o
p re p a re t h e fi r s t d r a ft o f t h e acquisition documentation and
agreements. In a takeover off er transaction, off eror / acquirer and the
target company would be obliged the prepare the necessary statutory
documents and other relevant documents to inform, amongst others, the
authorities and the shareholders of the offeree of the proposed takeover
offer. The offeror / acquirer are therefore required to prepare an offer
document and the target company an independent advice circular for its
shareholders. Both documents are required to contain information
which is true, not misleading and devoid of material omissions.
Representations and Warranties
Representations and warranties are commonly found in most
acquisition agreements in Malaysia. Assurances may be obtained that the
purchaser has been properly authorised according to the purchasers
internal rules. Also, the vendor is typically also required to warrant
that it has the authority to sell, for instance, its assets to the purchaser.
Further, the vendor is likely to warrant the condition of the business of the
target company in considerable detail. Warranties will include the
fi nancial position of the vendor, its commitments and contingencies,
records and returns, its title and insurance, etc.
Checklist for Provisions in an Acquisition Agreement
Checklist may vary on a case-by-case basis. A tailor-made checklist
can therefore be prepared for different transactions.
A c q u i re o r d i s p o s e o f , o r e n t e r i n t o a n a g re e m e n t f o r o r w i t h a
v i e w t o t h e acquisition or disposal of such securities; or
Any person acquires (taken together with shares held or acquired by its
concert parties) control in a company, i.e. more than 33 percent of
that companys voting shares; or
Any person, who, together with its concert parties, holds more than 33
percent but less than 50 percent of the voting shares of a company and,
acting alone or in concert, acquires more than 2 percent of the remaining
voting shares in the company in any 6 month period. The off er for such
shares must be not less than the highest price (excluding stamp
duty and commission) paid or agreed to be paid by the off eror (or its
concert parties) for the shares in the target company within the six
months prior to the offer period.
Timetable
An offer must initially be kept open for at least 21 days and a maximum of
60 days, starting from the date on which the offer document is posted. If the
offer is revised, it must be kept open for at least 14 days from the date of
posting of the revision to shareholders. No offer may be revised after the
46th day of its posting. After an offer has become unconditional, it must
remain open for acceptance for at least 14d a y s a ft e r t h e d e c l a r a t i o n ,
b u t n o t m o re t h a n 6 0 d a y s f ro m t h e p o s t i n g o f t h e
o ff e r document.
Generally, a takeover offer shall lapse if the offeror has not received
acceptances which would result in the off eror and all persons acting in
concert with the off eror holding, in a g g re g a t e , m o re t h a n 5 0
p e rc e n t o f t h e v o t i n g s h a re s o f t h e c o m p a n y t o w h i c h t h e
takeover off er relates, by 5:00 pm on the 60th day after the date on
which the off er is initially posted. If the securities or voting shares of the
offeror or offeree are listed on a stock exchange, the offeror shall announce
the level of acceptances on the next market day following the day on which
an offer is closed, becomes or is declared unconditional as to acceptances, or
is revised or extended.
S h a re h o l d i n g Re q u i re m e n t s f o r M a i n t a i n i n g o r Re g a i n i n g a
L i s t i n g o n B u r s a Securities Main Board Requirements
O Minimum paid up capital of RM60 million, comprising ordinary shares of at
leastRM0.10 each.
oAt l e a s t 2 5 p e rc e n t o f t h e i s s u e d a n d p a i d - u p c a p i t a l i s i n t h e
h a n d s o f a minimum of 1000 public shareholders each holding not less
than 100 shares each.
Second Board Requirements
o
Minimum paid-up capital of RM40 million, comprising ordinary shares of at
leastRM0.10 each.
o
A t l e a s t 2 5 p e rc e n t o f t h e i s s u e d a n d p a i d - u p c a p i t a l i s i n t h e
h a n d s o f a minimum of 1000 public shareholders, each holding not less
than 100 shares each. Under recent guidelines issued by the SC, issued and
paid-up capital of the company held by employees and up to 10 percent of
the issued capital held by Bumiputra investors (for the purposes of the NDP) are
allowed to make up the 25 percent public shareholding spread. Up to 15% of the
issued and paid-up capital of the company held by statutory institutions
managing funds belonging to the public can also make
u p t h e 2 5 p e r c e n t p u b l i c shareholding spread. A company which fails
to comply with the spread requirements is given six months, or such other
period as may be determined by Bursa Securities by notice, to rectify the
situation. In such event, the company must notify its shareholders within 15
market days of receipt of such notice. If the position is not rectified within the
period stated in the notice, action can be taken against the company. T h e
penalties for breach of any requirement under the Bursa
S e c u r i t i e s L i s t i n g Re q u i re m e n t s , i n c l u d i n g t h e s p re a d
re q u i re m e n t s d i s c u s s e d a b o v e , i n c l u d e a p u b l i c reprimand, the
delisting of the company, a fine not exceeding RM100,000, the suspension in t h e
trading of the securities for any period of time or the
re s t r i c t i o n o f d e a l i n g i n t h e securities of the errant company to
immediate or prompt bargains (i.e. the shares of the errant company
can only be traded if cash is paid upon the purchase of those shares). The SC
is also empowered to impose any other conditions or penalties as it may see
fit.
Initial Public Offerings by Foreign Corporations
In order to provide a broader variety of offerings on Bursa Malaysia, the SC
has adopted a new policy with respect to initial public offerings (IPO) of
foreign corporations. Under the new policy, foreign controlled corporations
may be listed on Bursa Malaysia, provided that they have substantial
operations in Malaysia.
19
It is also likely that the Malaysian Companies Act will impose conditions, such
as obtaining shareholder approval, where there are related party
transactions. The same requirements apply in cases of joint ventures,
business transactions or arrangements which involve the interests of
directors or substantial shareholders, past and present.
20
The amendments have clarified and expanded the scope of the powers of the
SC to take civil and administrative actions. In addition to the general
provision that the SC may take actions against any person who fails to
comply, observe, or enforce or give effect to the rules of the exchange,
clearing house, central depository or provisions in any of the securities laws,
the amendments list specific persons who are subject to the SC powers. They
include, among others, the directors, officers and advisers of listed
corporations. Further, the amendments enhance the ability of the SC to
require the person in breach to take any such steps as the SC may direct to
remedy the breach or mitigate the effect of such breach, including making
restitution to the person aggrieved by the breach. The amendments have
also expanded the range of situations where the SC may apply to the High
Court for certain orders.
CONCLUSION