The Guidelines on Offer of Shares by Unlisted Public Companies to Sophisticated Investors ("UPC Guidelines") comes into effect today, on the 1st of August 2021. The UPC Guidelines imposes further compliance requirements on unlisted public companies ("UPC") who seek to attract investment by way of offering of shares.
Prior to the coming into effect of the UPC Guidelines, the Securities Commission Malaysia ("SC") had on 26 January 2021 issued a media release reminding UPCs of compliance with the Capital Markets and Services Act 2007 ("CMSA"), especially where an offer of shares is made to retail investors ("SC’s Media Release"). Whilst the SC’s Media Release relates predominantly to retail investors, SC has also highlighted that it has "received an increasing number of queries and complaints pertaining to UPCs offering their shares, including preference shares, to both retail and sophisticated investors". Therefore, it does not come entirely as a surprise that the SC is introducing a framework to create greater regulatory oversight over investments sought by UPCs from sophisticated investors.
Obligations imposed on UPCs in relation to an offering of shares to sophisticated investors
UPCs who are seeking to offer its shares to sophisticated investors in Malaysia must comply, inter alia, with the following:-
Ensuring that marketing agents possess CMSL Licence
The UPC Guidelines dictates not only that agents appointed by UPCs for the purposes of promoting or marketing shares must hold a Capital Markets Services Licence for the regulated activity of dealing in securities ("CMSL Licence") but also that UPCs have to ensure that their agents possess the CMSL Licence.
Verification of the sophisticated investor
Prior to the approaching of the investor for the offering of its shares, UPCs must take reasonable steps to verify that the investor that it is dealing with is an investor who:
(a) falls under the categories of investors set out in Part I of Schedules 6 and 7 of the CMSA; or
(b) acquires shares pursuant to a private placement where the consideration for the acquisition is not less than RM250,000 or its equivalent in foreign currencies for each transaction whether such amount is paid for in cash or otherwise.
Depending on which category the investor falls under, UPCs should consider requesting for relevant documents for purposes of meeting the standard imposed by the SC under the UPC Guidelines in addition to representations and warranties given by the investor in the definitive agreements that the investor is indeed a sophisticated investor.
UPCs are required to submit:-
(a) a post-issuance notification in a prescribed form no later than seven days after the commencement of the offering ("Post-Issuance Notification"); and
(b) a quarterly report in a prescribed form no later than seven days after the end of each quarter of its financial year, as long as the offering is ongoing ("Post-Issuance Update Report").
UPCs must ensure that all statements and information submitted to the SC are true, not misleading and do not contain material omission. In the event UPCs become aware of any change or likelihood of a change that may render any information submitted to SC be false, misleading or contain any material omission, UPCs must immediately make a revision to the Post-Issuance Notification or the Post-Issuance Update Report, as the case may be.
Whilst SC has stepped in to impose additional obligations in relation to the offering of shares by UPCs to sophisticated investors, there is no change to the position that no approval from SC is required for the offering of shares by UPCs to members of the public as long as they are sophisticated investors.
This article is authored by Alden Yeoh Shuen Chun and Benjamin Chia Lin Fung, the co-founders and partners of Messrs. Kuruvilla, Yeoh & Benjamin.
Alden Yeoh leads the Corporate & Commercial practice group whereas Benjamin Chia leads Projects & Real Estate practice group.
For more information, please visit www.kyblegal.com or please feel free to contact Alden Yeoh at email@example.com and/or Benjamin Chia at firstname.lastname@example.org.
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