Currently, the financing sources for approximately 19,000 SMEs are made up of 96 per cent of the banking sector and only 4 per cent of the financial market. The introduction of the LEAP Market, therefore, serves as a new fundraising avenue for SMEs. LEAP Market is a qualified market that is designed for Sophisticated Investors The LEAP Market Listing Requirements (“the LEAP LR”), issued by Bursa Malaysia Securities Berhad (“Exchange”), came into effect on 16 June 2017.
ADVISERS The LEAP
Market is an adviser driven framework. Qualified individuals may apply to the Exchange to be an adviser. An adviser is required to comply with the requirements and obligations stipulated under the LEAP LR at all times. The Exchange may authorise an adviser to act as either an Approved Adviser or a Continuing Adviser. An Approved Adviser may undertake work concerning both initial listing and post-listing activities, while a Continuing Adviser may undertake post-listing activities only.
A corporation applying to admit to the LEAP Market (“the Applicant”) must be a public company incorporated in Malaysia with an identifiable core business. However, the Applicant is deemed unsuitable if it is (i) a subsidiary or holding company of a corporation currently listed on the Main or ACE Markets; (ii) an investment holding corporation with no immediate or prospective business operations within its group; or (iii) a business incubator, including a technology incubator that may apply for admission to the Main Market only. The Applicant must ensure that at least 10 per cent of the total number of ordinary shares for which listing is sought are in the hands of public shareholders at admission. Directors of the Applicant are also required to furnish an undertaking to comply with the LEAP LR to the Exchange. Although the approval of the Securities Commission Malaysia (“SC”) is no longer required, the Applicant is still required to deposit the information memorandum with the SC. An admission application to LEAP Market has to be done through an Approved Adviser, who must continue to act as the Applicant’s Adviser for at least 1 full financial year, following the admission.
METHOD OF OFFERINGS
The Applicant may issue and list its ordinary shares, preference shares, and convertible shares on the LEAP Market, subject to the requirements of the LEAP LR. The Applicant may issue new securities by excluded issue through public offer, placement, book
building, or a combination of any of these methods. The Applicant may also list its existing securities by way of introduction.
The LEAP LR states that any transaction involving percentage ratios of 10 per cent or more must be announced by the listed corporation to the Exchange, unless the consideration value is less than MYR250,000. Similar announcement is also required to be made to the Exchange for any transaction involving percentage ratios of 25 per cent or more. In addition, the listed corporation must issue a circular to its shareholders and convene a general meeting to
obtain the shareholders’ approval for such transaction.
For related party transactions involving percentage ratios of 5 per cent or more, the listed corporation is required to inform the Exchange, unless the consideration value is below MYR250,000. However, when the percentage ratios exceed 10 per cent, the listed corporation has
to issue a circular to its shareholders and convene a general meeting to obtain the shareholders’ approval.
Announcement to the Exchange is also necessary when a transaction would result in a significant change in the business direction or policy of the listed corporation.
CONTINUING LISTING OBLIGATIONS
A listed corporation must engage a Continuing Adviser in accordance with the LEAP LR. If such requirement is not acceded to, the Exchange will suspend the trading in the securities of a listed corporation and may delist the listed corporation. A listed corporation must also disclose to the public, any material information that may affect (i) the price, value or market activity of any of its securities, or (ii) the decision of a securities holder or investor in determining his choice of action. These material information include information which (i) concerns the listed corporation’s assets and liabilities, business, financial condition or prospects, (ii) relates to dealings with employees, suppliers, customers and others; or (iii) relates to any event affecting the present or potential dilution of the rights or interests of the listed corporation’s securities.
Besides that, a listed corporation must announce its semi-annual financial statements, annual audited financial statements, together with other necessary information, within the stipulated period. Any non-compliance may render the listed corporation to be delisted.
“It is designed to address the funding gap for SMEs and make it easier for them to take their businesses to the next level through raising funds in the capital market. It also provides investors with a new investable asset class. The availability of such a platform would further aid the development of SMEs and support broader economic activities.” – Datuk Seri Tajuddin Atan (Bursa Malaysia Bhd CEO
The World Bank observed that SMEs could energise and propel the Malaysian economy to new heights. The LEAP Market has enabled the SMEs to have greater access to the capital market. Some key players noted that the LEAP Market serves as an intermediary market where a corporation can be provided with all the necessary capital access before a corporation can be listed in the Main Market and ACE Market.
For further insight in this area of law, please contact our Partners:
Jerry Ong Kok Wah
Cathryn F L Chay
David Lee Lai Huat