Overview of regulatory requirements finance essay

Listing on the Main Market of Bursa Malaysia (” Main Market”) is for established companies with a track record.

1. 0 Regulatory Background

1. 1 Overview of Regulatory Requirements

The main requirements for listing on the Main Market are found in the Capital Markets and Services Act 2007 (” CMSA”) and the Main Market Listing Requirements.

1. 2 Regulatory Entities

The Securities Commission (” SC”) and Bursa Malaysia are the regulatory bodies for companies wishing to list on the Main Market.

1. 3 Required Approvals

Companies seeking to list on the Main Market, must be approved by the (I) and SC (II) of Bursa Malaysia. In a review of SC proposals for listing on the main board in accordance with section 212 members of the CMEA. In connection with this announcement SC considers proposals to ensure compliance with the guidelines of capital and other factors, such as corporate governance and the potential conflict of interest. If the applicant is operating a manufacturing company in Malaysia, the approval of the Ministry of International Trade and Industry is also required.

2. Listing Criteria

2. 1 Suitability/Eligibility of Listing Applicant

Any company seeking to list on the Main Market must comply with the relevant admission procedures and requirements established by the SC and Bursa Malaysia. A person whose main business is not the infrastructure project must meet the test of either profits or test market capitalization. The applicant, whose main activity is the fact that the infrastructure of the project, the applicant must meet the corporate infrastructure project of the test.

2. 2 Track Record Requirement

Profit TestThe applicant (or at the level of a corporation or group) must have a continuous profit 4: 57 fiscal year based on the audited financial statements before submission SC, with an aggregate after-tax profit of at least RM20 million and profit after tax of at least RM6 million . The last financial year. Where the list of the corporation sought is based on the strength of the group, at least one corporation (which is a qualifying Corporation) within the group should be able to fulfil the requirements of profit. If no corporation is unable to fulfil the requirements of profit, the list is based on the strength of pre-formed group accounts may be considered provided that the corporation within the group, which jointly provide income requirements are involved in the same core business and have the general management of the shareholders for the period track record profits. The applicant or qualifying corporation must be turned on and operating in the same core business for the period track record profit before submitting SC. Where ad is sought based on the strength of pre-bills, the corporation that is the largest contributor to the profit after tax by the weighted average of the last three completed financial years shall meet the requirements of the operating history. Market Capitalisation TestOrdinary shares of the applicant shall be the total market capitalization of at least RM500 million based on the issue or offer price as stated in the listing prospectus and enlarged issued and paid-up share capital in the listing. Where a group of corporations seeking the list based on the strength of the group corporation within the group must have common controlling shareholders, at least one full fiscal year prior to the submission of SC. The applicant or corporation within the group, which represents the core business, must have been turned on and has been generating operating income for at least one full fiscal year prior to the submission SC. Infrastructure Project Corporation TestThe applicant, either directly or through its subsidiary company shall have the right to build and operate the infrastructure project, whether it is in Malaysia or outside Malaysia with a project cost of at least RM500 million and for which the concession or license was awarded a government or public body or outside Malaysia, with the remaining concession or license term of 15 years from the date of receipt in SC. SC may consider listing proposal of the applicant with a shorter remaining period of the concession or license from the date of submission to the SC if the applicant meets the requirements of profit under the profit test.

2. 3 Sufficiency of Working Capital

The applicant must not have a healthy financial position, with sufficient working capital for at least 12 months from the date of the prospectus, a positive cash flow from operations (If the list is searched by the test of profit and market capitalization of the test), and no accumulated losses on its recent audited balance sheet at the time of the SC (If the list is sought under the profit test).

3. Overseas Companies

Foreign joint stock companies can be listed on Bursa Malaysia by (I) a primary listing or (II), a secondary listing on the main market. The applicant must establish a share transfer or share registration office in Malaysia. If the operations of a foreign corporation are wholly or predominantly Malaysian-based, it must have a majority of the directors, the principal or only place of residence is in Malaysia. If its activities are entirely or predominantly foreign-based, it must have at least one director, principal or only place of residence is in Malaysia. Foreign corporations with a primary listing must immediately declare Bursa Malaysia any change in the interest or the interests of the majority shareholder’s voting shares after notice from the main shareholder. Foreign corporations should be given the name of the shareholder and full particulars of the changes, including the date of the change, the number of shares involved and causes the change occurred. The foreign company must appoint an agent or representative in Malaysia, in charge of relations with Bursa Malaysia on behalf of the company. All information and documents submitted, presented or disclosed in accordance with the basic requirements of the market, a list should be in English. Secondary offering may only major market. Foreign companies must have a primary listing on the main market of a foreign stock exchange, which is a member of the World Federation of Exchanges.


The main advantage of small businesses will benefit through an initial public offering is access to capital. In addition, the capital does not have to be repaid and does not involve the accrual of interest. The only reward that IPO investors are looking for is an appreciation of their investment and possibly dividends. In addition to direct capital injections provided by IPO, a small business that is also the public can more easily obtain capital for future needs through new stock offerings or public offerings of debt. A related advantage of the IPO, which it provides small business founders and venture capitalists with the ability to cash in their early investment. Those equity shares may be sold as part of the IPO, special, or on the open market sometime after the IPO. However, it is important to avoid the suspicion that the owners want to help out a sinking ship, or IPO is unlikely to be successful. Another advantage to hold IPO, for a small business is to increase public awareness, which can lead to new opportunities and new customers. As part of the IPO, the company information is printed in newspapers across the country. Excitement around the IPO can also generate increased attention in the business press. There are a number of laws concerning disclosure of information during the process of IPO, so small business owners should be careful not to get involved in advertising. A related advantage is that a public company can have increased confidence in their suppliers, customers and creditors, which could lead to better credit conditions. Another advantage of the publicity includes the ability to use photos for creative stimulus packages for management and employees. Offering of shares and share options as part of compensation may allow a small business to attract better talent management, as well as provide them with an incentive to perform well. Employees who were co-owners through a stock plan may be motivated to share in the success of the company. Finally, the initial public offering provides a public assessment of small businesses. This means that it will be easier for the company to enter into mergers and acquisitions, because it can offer shares rather than cash.


The biggest disadvantages of participating in public is going to cost and time. Experts point out that the company is likely to be occupied almost nothing during the entire process IPO, which can last up to two years. The small business owner and other top managers should prepare the registration documents for the Securities Commission, consult with investment bankers, lawyers and accountants, and take part in various marketing campaigns. Many people believe that this is an exhaustive process and would prefer to just run their company. Another disadvantage is that the IPO is very expensive. In fact, it is not unusual for a small business to pay between $ 50, 000 and $ 250, 000 to prepare and publish a proposal. In his article for the portable MBA in finance and accounting, Paul G. Joubert said that the small business owner should not be surprised if the cost of IPO claims between 15 and 20 percent of the revenues from the sale of shares. Some of the major costs include commissions of the lead underwriter, out-of-pocket expenses for legal services, accounting services, printing costs, and personal marketing ” road show” managers, 0. 02 per cent increase from giving sec; tariffs for communal relationships to support image of the company, plus the current legal, accounting, filing and postage costs. In spite of such an account, it is always possible that an unforeseen problem will derail IPO shares before the sale takes place. Even when the sale takes place, most IPO underwriters offer shares at a discounted price in order to ensure the upward movement in the stock during the period immediately following the Offering. The effect of this reduction for the transfer of wealth from the entry of new shares to investors. Other disadvantages associated with the loss of public privacy, flexibility and manageability. SEC rules require public companies to release all transaction details to the public, including sensitive information about their markets, profits and future plans. Countless problems and conflicts may occur when all of the competitors, so that all employees are aware of the inner workings of the company. By diluting the holdings of the original owners of the company, going public administration also gives less control over the day-to-day operations. Large shareholders may seek representation on the board and how it is managed. If a sufficient number of shareholders was dissatisfied with the company’s stock price or future plans, they can arrange for the absorption and displacement control. Dilution of ownership also reduces the flexibility of management. It is not possible to make decisions quickly and effectively when the board must approve all decisions. In addition, SEC regulations restrict the ability of management of a public company to sell its shares and companies to discuss business with outsiders. Organization of public officials also added pressure to show strong short-term performance. The income on a quarterly basis, and the shareholders and the financial markets always want to see good results. Unfortunately, long-term strategic investment decisions may tend to have a lower priority than the switch-on current figures look good. Additional reporting requirements for public companies also add expense, as a small business, chances are, it is necessary to improve the system of accounting and add staff . Organizing public also face added costs associated with the processing of interaction with shareholders.


For most small businesses, the decision to go public is made gradually over time, as changes in the company’s operations and capital needs to make IPO seems more desirable and necessary. But many companies are still not able to bring their plans to sell the shares before the end due to lack of planning. In an article for entrepreneurs, David R. Evanson outlined a number of steps small business owners can take to improve the prospects of IPO long before the company officially considers them public. One step involves assessment and taking measures to improve the image of the company, which will be scrutinized by investors when it comes time to IPO. In addition, it is necessary to reorganize as a corporation and start saving detailed financial reports. Another step small business owners can take advantage of advance to prepare their companies to the stock exchange is to complement the management with experienced professionals. Investors would like to see a management team that generates trust and respect in the industry, and that can be a source of innovative ideas for future growth. Formation of such a management team may require the owner of a small business to hire an outside their own local area network business partners. It may also include the creation of lucrative defined benefit plans to help attract and retain the best talent. In addition, a small business owner should start building a strong board of directors, which will help the company to maximize shareholder value, as soon as he became the public face. It is also useful for the small business owner to start making contacts with investment banks, lawyers and accountants, advance planning IPO. Evanson is recommended to use the Big Six accounting firms, as they have earned the trust of investors across the country. In shortly, it is recommended Evanson that small businesses are interested in the end the public will begin to act like large corporations in their dealings with customers, suppliers, employees, and government. Although many transactions involving small businesses are sealed with an informal handshake, investors would like to see a formal, professional contracts with customers, suppliers and independent contractors. They also speak in favour of a formal human resource programs, including procedures for hiring, performance reviews, and pension plans. It is also important for small businesses to protect their unique products and ideas by applying for patents and trademarks as needed. All of these steps are taken in advance, can help smooth the transition of small business to become a public entity. The rate of IPO, reached a new peak in 1999, when a record 509 companies went public, raising an unprecedented $ 66 billion. IPO fever was caused by ” dot-com” or a new Internet-based companies, which accounted for 290 initial public offerings that year. These young company went public to take advantage of the unique climate in the stock market, as investors dizzy trying to catch the next Internet fad does not require much in terms of profitability. New Internet companies with limited track records were able to use the public markets as a form of venture capital. In fact, the new issues of shares in dotcom jumped by an average of 70 percent on the first day of trading in 1999. By mid-2000, however, falls into the high-tech Nasdaq has made investors more cautious and dramatically changed the situation for Internet-IPO. Studies have shown that 40 percent of high-tech IPO, were trading below their initial offering price at the time. As a result, 52 companies have decided to cancel or postpone the IPO, in the first six months of 2000. The collapse of the Internet IPO, demonstrates the need for small business owners to keep a close eye on market conditions, and to make sure their companies are well placed and show high chances of long-term viability, before engaging in any IPO.