30 August, 2016
Malaysia’s Securities Commission (SC) has announced significant changes to the take-overs and mergers regulatory framework.
In a statement, the SC explained that the new Rules on Take-overs, Mergers and Compulsory Acquisitions 2016 (Rules) “stipulates operational and conduct requirements in relation to take-overs”. The SC also clarified that the Rules, which came into force immediately, were issued as an SC guideline under Section 377 of the Capital Markets and Services Act 2007 (CMSA).
Together with the Rules, the SC also introduced a vastly revised Malaysian Code on Take-overs and Mergers 2016 (Code).
The SC stated that the new Rules and revised Code are intended “to facilitate market activities in a fast changing environment, whilst ensuring appropriate shareholder protection” and “seek to ensure that the take-over framework will be facilitative to commercial realities while providing protection to shareholders where required.”
Some key elements highlighted by the SC include “specifying that sizeable unlisted public companies are subject to the Code, removing the limitation that take-over schemes can only be initiated by parties holding over 50% equity interest and providing clear guidance on required conduct during a take-over offer.”
The Code sets out the following 12 general principles to be observed and complied with by all persons engaged in any take-over or merger transaction:
All offeree shareholders of the same class must be treated equally in relation to a take-over offer and have equal opportunities to participate in benefits from the take-over offer.
The acquirer or offeror and the offeree’s board of directors must act in good faith in observing the general principles in the Code and any SC guidelines, directions, practice notes and rulings. All shareholders must not be oppressed or disadvantaged by the treatment and conduct of the acquirer or offeror or of the offeree’s board of directors.
Any person who (a) is an acquirer who proposes to make an acquisition which may lead to a take-over offer obligation; or (b) is an offeror, must ensure that he is able to implement the offer in full, that person’s financial advisors must be satisfied of such ability.
An offeree which receives an offer or is approached with a view to a take-over offer being made must appoint a competent independent adviser to provide comments, opinions, information and recommendation on the offer.
All parties involved in a take-over or merger transaction must make full and prompt disclosure of all relevant information.
The shareholders and the board of directors of an offeree and the market for the shares that are the subject of a take-over offer must be provided with — (a) relevant and sufficient information to reach an informed decision; and (b) reasonable time to consider the offer.
Any document or advertisement addressed to the shareholders containing information, opinions or recommendations from the offeror, the board of directors of an offeror, the board of directors of an offeree or their respective advisers must be prepared with the same standard of care as if the document or advertisement was a prospectus within the meaning of the CMSA.
An offeror, the offeror’s board of directors, the offeree’s board of directors and their respective advisers are prohibited from making selective disclosure to the shareholders in the course of a take-over or merger transaction, or when such transaction is in contemplation, except where such information is provided in confidence by the offeree’s board of directors to a genuine potential offeror or by a genuine potential offeror to offeree’s board of directors.
While the boards of directors of an offeror and offeree and their respective advisers and associates have a primary duty to act in the best interests of their respective shareholders, any SC guidelines and rulings may restrict the board and persons involved in a take-over or merger transaction from undertaking certain actions.
A take-over offer must be made to all shareholders within the same class in an offeree for all the voting shares or voting rights in the offeree. The offeror must, in the case of an approved partial offer, accept such voting shares or voting rights in the same proportion from each shareholder of an offeree in order to achieve the specified percentage of holding.
The offeree’s board of directors must act in the interests of the shareholders as a whole and shall not deny the shareholders the opportunity to decide on the take-over offer.
The period in which an offeree is subject to a take-over or merger must not be longer than what is reasonable.
The Rules and revised Code should be viewed positively, and brings the Malaysian take-overs and mergers regulatory framework up to international standards and in line with recent changes in business and transaction structures.
Complete information is available on the SC’s website:
Press release on 15 August 2016: SC Introduces Rule Book in Revised Framework on Takeovers and Mergers.
The Malaysian Code on Take-overs and Mergers 2016.
The Rules on Take-overs, Mergers and Compulsory Acquisitions.
