Eligibility criteria for getting your company listed in Malaysia.

Making a company public through listing on a stock exchange is a significant milestone in any organisation’s growth journey. In Malaysia, going public offers businesses access to capital markets, enhanced visibility and opportunities for expansion. However, the road to listing is paved with stringent requirements and complex procedures designed to maintain market integrity and protect investor interests.

This article examines the eligibility criteria for companies seeking to list on the Malaysian stock market. It will explore the various listing boards available, delve into the specific requirements for each and offer insights into the regulatory landscape governing Malaysia’s listing process.

Overview of the Malaysian stock market

Before diving into the eligibility criteria, it is crucial to understand the structure of the Malaysian stock market. The main stock exchange in Malaysia is Bursa Malaysia, formerly known as the Kuala Lumpur Stock Exchange (KLSE). Bursa Malaysia offers several markets for listing, each catering to companies at different stages of growth and with varying characteristics:

• The Main Market is designed for established companies with a strong track record.
• The ACE Market caters to emerging companies from various sectors.
• The LEAP Market targets small and medium-sized enterprises (SMEs) and start-ups.

Main Market listing criteria

The Main Market is the premier board of Bursa Malaysia, reserved for larger and more established companies. The eligibility criteria for listing on the Main Market are the most stringent among all the boards. The key requirements are outlined below.

Quantitative criteria

Companies seeking to list on the Main Market must meet one of the following profit tests:

Profit test

This test requires the company to demonstrate an uninterrupted profit record for three to five full financial years. The aggregate after-tax profit must be at least RM 20 million over this period. This criterion ensures that the company has a consistent track record of profitability, indicating business stability and financial health.

The company must show an after-tax profit of at least RM 6 million for the most recent financial year. This requirement ensures that the company’s profitability is historical and current, indicating ongoing business success and potential for future growth.

Market capitalisation test

The market capitalisation test offers an alternative route to listing for companies that may not meet the profit test but have significant scale. The company must have a total market capitalisation of at least RM 500 million upon listing. This substantial valuation requirement ensures that only companies of significant size and market interest can list via this route.

In addition to the market cap requirement, the company must have operated in the same core business for at least one full financial year. This operational history requirement helps ensure the company has a proven business model and is not just a speculative venture.

Infrastructure project corporation test

This test is specifically designed for companies involved in large-scale infrastructure projects. The company must have the right to build and operate an infrastructure project in or outside Malaysia, with project costs of not less than RM 500 million.

The concession or licence for the infrastructure project must remain at least 15 years from the date of submission to Bursa Malaysia. This long-term requirement assures investors of the project’s longevity and potential for sustained returns.

Qualitative criteria

In addition to meeting the quantitative benchmarks, companies must also satisfy several qualitative requirements:

Core business

The applicant must have an identifiable core business that forms the primary focus of its operations. This requirement ensures investors understand the company’s main activities and revenue drivers.

The core business should not be holding investments in other listed companies. This restriction is in place to ensure that Main Market companies are operational entities rather than investment holding companies.

Management continuity and capability

The company must have had substantially the same management for at least three full financial years prior to submitting the listing application. This continuity demonstrates stability in leadership and strategy execution.

Management should have the necessary experience and expertise to manage the company’s business effectively. This includes industry-specific knowledge, strategic planning capabilities and a track record of successful business management.

Corporate governance and internal controls

The company must have a good corporate governance framework in place. This includes having an effective board structure with independent directors, a clear separation of ownership and management and robust policies for managing conflicts of interest.

No conflict of interest

The applicant, its directors and substantial shareholders must have no conflict of interest with the company’s business. This requirement ensures that the interests of the company and its public shareholders are protected.

Healthy financial position

The company must demonstrate a strong financial position, including sufficient working capital to support its operations for at least the next 12 months. This ensures it has the necessary resources to carry out its business plans after listing without requiring immediate additional funding.

In addition, the company should show positive cash flow from operating activities, indicating that its core business is generating adequate cash. This is a key measure of financial health and long-term sustainability.

Public spread and shareholding distribution

To ensure sufficient liquidity in the market, listed companies must maintain a minimum public spread:

• At least 25% of the company’s share capital must be held by a minimum of 1,000 public shareholders holding not less than 100 shares each.
• For companies with a market capitalisation of RM1 billion or more, the public spread may be lower than 25% but not less than 15% if Bursa Malaysia is satisfied that such lower spread is sufficient for a liquid market.

Sponsorship and moratorium requirements

The applicant is required to appoint a Principal Adviser to sponsor the listing application.

A moratorium will apply to the disposal of shares held by promoters:

• During the first six months after listing, promoters are not allowed to sell any of their shares.
• In the following six months, they may sell up to 50% of their original shareholdings.

ACE Market listing criteria

The Access, Certainty, Efficiency (ACE) Market is designed for companies of all sizes and from all economic sectors. The eligibility criteria are less stringent than the Main Market, making it more accessible to growing companies.

Key requirements include:

Suitability assessment by a sponsor

Unlike the Main Market, the ACE Market has no minimum operating track record or profit requirement. Instead, the applicant must undergo a comprehensive suitability assessment by a qualified Sponsor. This assessment evaluates various aspects of the company, including its business model, growth potential, financial health and management capabilities.

Core business

The applicant must have an identifiable core business that forms the primary focus of its operations. This requirement ensures that investors can easily understand the company’s main activities and revenue streams. The core business should not be holding investments in other listed companies, as this would make the applicant essentially an investment holding company rather than an operating entity.

Management continuity and capability

The ACE Market places significant emphasis on the quality and stability of the company’s leadership. Key management and technical personnel should have appropriate experience and expertise relevant to the company’s industry and operations. This expertise should be demonstrable through past achievements and industry recognition.

Additionally, the company must show continuity in its key management for at least three full financial years before submitting the listing application. This requirement helps ensure the management team has a proven track record of working together effectively and steering the company through various business cycles.

Working capital

Financial stability is crucial for newly listed companies. The applicant must demonstrate sufficient working capital to cover operational needs for at least 12 months from the prospectus date. This ensures that the company can focus on growth and meet its business objectives post-listing rather than struggling with short-term liquidity issues.

Public spread and shareholding distribution

To ensure sufficient liquidity and a diverse shareholder base, at least 25% of the company’s share capital must be held by a minimum of 200 public shareholders, each holding not less than 100 shares.

Sponsorship and moratorium requirements

The ACE Market mandates that companies secure and maintain a Sponsor for at least three full financial years after listing. The Sponsor’s role extends beyond the initial listing process; they provide ongoing guidance and support to ensure the company complies with listing requirements and maintains good corporate governance practices.

A moratorium will be imposed on the disposal of shares held by promoters:

• For the first six months after listing, promoters cannot sell any of their shareholdings
• For the subsequent six months, they can sell up to a maximum of 50% of their original shareholdings

LEAP Market listing criteria

The Leading Entrepreneur Accelerator Platform (LEAP) Market is tailored for SMEs and start-ups, offering a more flexible avenue for raising capital. The eligibility criteria are the least stringent among all the boards:

Incorporation and place of business

A company must be incorporated in Malaysia under the Companies Act 2016 to be eligible for listing on the LEAP Market. This requirement ensures that the company is subject to Malaysian corporate law and governance standards.

The majority of the company’s business operations should be conducted in Malaysia. This focus on local businesses aims to promote the growth of the Malaysian economy and provide investors with opportunities to support domestic enterprises. However, companies with significant overseas operations may still be considered if they can demonstrate strong ties to the Malaysian market and economy.

Core business

Like other markets, LEAP Market applicants must have an identifiable core business. This core business should be the primary driver of the company’s revenue and growth prospects.

The core business should not be holding investments in other listed corporations. This ensures that LEAP Market companies are operational entities rather than investment vehicles.

Operating history

Unlike the Main Market, the LEAP Market does not impose a minimum operating track record requirement regarding years of operation or profitability. However, the company must have operated in the same core business for at least 12 months before submitting the listing application. This requirement allows relatively young companies to access public funding but still ensures that the business has some established operations and a basic track record.

Financial position

The LEAP Market does not set minimum profit or market capitalisation requirements, making it accessible to early-stage companies that may not yet be profitable. However, financial stability is still important. The applicant must have sufficient working capital to cover its needs for at least 12 months from the listing date.

Public spread

To ensure some level of liquidity and public participation, at least 10% of the total number of ordinary shares for which listing is sought must be held by public shareholders.

Adviser requirement

LEAP Market applicants must engage an Approved Adviser for the listing application process and maintain this relationship for at least three full financial years after listing. The Approved Adviser is crucial in guiding the company through the listing process and helping it meet ongoing compliance requirements.

Moratorium on promoter’s shares

To align the interests of promoters with those of public investors and demonstrate commitment to the company’s long-term success, a moratorium is imposed on all the promoters’ shareholdings for 12 months from the date of listing. During this period, promoters cannot sell any of their shares.

Regulatory framework and compliance

The listing process in Malaysia is governed by a robust regulatory framework to ensure market integrity and investor protection. Key regulatory bodies and regulations include:

• The Securities Commission Malaysia is the primary regulator of the Malaysian capital market, responsible for administering the Capital Markets and Services Act 2007 and issuing guidelines and practice notes related to listings.
• Bursa Malaysia is the stock exchange operator that sets listing requirements and rules for listed companies and monitors compliance.
• The Companies Act 2016 provides the legal framework for corporate governance and reporting.
• The Malaysian Code on Corporate Governance sets out best practices for corporate governance.
• The Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 ensures companies comply with anti-money laundering regulations.

Compliance with these regulations is ongoing and doesn’t end with the initial listing. Listed companies must adhere to continuous disclosure requirements, maintain proper corporate governance practices and meet financial reporting standards.

Challenges and considerations

While listing offers numerous benefits, companies should be aware of the challenges:

• The listing process involves significant costs, including adviser fees, regulatory charges, and ongoing compliance expenses.
• Public companies face stringent disclosure requirements, which can be challenging for companies that are used to operating privately.
• Listed companies face constant scrutiny from shareholders and analysts, which can create pressure to deliver short-term results.
• Going public often means diluting ownership and potentially losing some control over decision-making.
• Maintaining compliance with various regulations can be complex and resource-intensive.

Conclusion

Listing a company on Bursa Malaysia can be a transformative step, offering access to capital, enhanced visibility and opportunities for growth. However, the journey to becoming a public company is complex and demanding. The eligibility criteria set by Bursa Malaysia across its various markets aim to ensure that only companies with sound fundamentals and good governance practices enter the public market.

Companies considering listing should carefully assess their readiness, not just in terms of meeting the quantitative criteria but also in their ability to operate as a public entity. Engaging experienced advisers early in the process can help navigate the complexities of the listing journey.

How Acclime can help your company successfully enter the stock market

Navigating the stringent eligibility criteria for listing a company on the Malaysian stock market can be a daunting task, but Acclime is well-equipped to guide businesses through this intricate process. Acclime offers comprehensive support, ensuring that companies meet both the quantitative and qualitative requirements for listing on the Main Market, ACE Market or LEAP Market of Bursa Malaysia.

From conducting a thorough assessment of your company’s financial health and governance practices to assisting with regulatory compliance and public shareholding distribution, Acclime’s expert team works closely with your business to enhance its readiness for listing. By leveraging Acclime’s deep understanding of the Malaysian regulatory landscape, companies can confidently navigate the complexities of the listing process, positioning themselves for successful entry into the public market