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New Malaysian Code on Take-Overs and Mergers 2010
The Malaysian Securities Commission (“SC”) has on 15 December 2010 published its revised takeover code.
The Malaysian Code on Take-Overs and Mergers 2010 (2010 Code), which is to be read together with the Practice Notes, replaces the Malaysian Code on Take-Overs and Mergers 1998 (1998 Code), and contains the following key revisions:
1. A significant amendment deals with a current issue where potential purchasers prefer to acquire assets and liabilities of target companies instead of shares as the outcome is more certain, compared with the 1998 Code which does not permit higher levels of acceptances of a take-over offer as a condition of the take-over, and as such while the potential purchaser may attain the 50% condition, the potential purchaser may not be able to meet the 90% threshold (of acceptances on shares not already held by the offeror) in order to utilise the compulsory acquisition provision under the Capital Markets and Services Act 2007. The new code now permits, in the case of voluntary offers, for the potential purchaser to seek approval from the SC to set a higher acceptance threshold in the offer document.
2. Another issue with the 1998 Code pertains to market speculation of a potential take-over bid, which may create false market price for the target company's shares, and at times the offeror's shares. Now, the 2010 Code requires a potential offeror to make an announcement on possible offers where there are untoward movements in the price of shares of the latter. The potential offeror is now required to announce its intention to make a takeover offer or otherwise. If the potential offeror denies it is making an offer for the offeree, it is then prohibited from making a takeover offer for the same target company, for a period of six months after announcing the denial.
3. The categories of persons acting in concert have also been expanded to include, firstly, the directors of a company and shareholders of the company, where there is an arrangement between them which restricts the said director or the shareholder from making or accepting a takeover offer, or altering his shareholdings in the company. Secondly, it includes persons who are partners of a partnership.
4. The 2010 Code also expands its jurisdiction to cover foreign incorporated companies and real estate investment trusts (REITs) that are listed on Bursa Malaysia and which hitherto are not regulated by the 1998 Code.
There is no change to the 33% threshold for triggering a mandatory general offer. Another related issue pertaining to raising the majority threshold for shareholder approval in instances of sale and purchase of assets and liabilities (seen as getting around the code) is also not addressed in this revision but more likely under the Bursa Malaysia Listing Requirements.
The SC in its press release expects the revised code to provide protection to a wider group of investors, enhances transparency and improves efficiency in line with capital market developments, locally and abroad. Investors are advised to get familiar with and seek advice on the 2010 Code for current take-over bids as the 2010 Code comes into force with immediate effect.
by Jeff Leong Poon & Wong In Association with Deacons - email@example.com