Malaysia IPO process: How to list your company in Malaysia.

Going public through an Initial Public Offering (IPO) is a significant milestone for many companies. In Malaysia, the IPO process is governed by a regulatory framework designed to protect investors and ensure the integrity of the capital markets. Going through this process can be complex and challenging for businesses seeking to list on the Malaysian stock exchanges.

This article provides a detailed, step-by-step guide on the Malaysia IPO process, covering key requirements, regulatory bodies and best practices to help companies successfully list their shares. By understanding the intricacies of the Malaysian IPO landscape, business leaders can make informed decisions and maximise their chances of a successful public listing.

Overview of Malaysia’s IPO landscape

Malaysia has two main stock exchanges where companies can list their shares – Bursa Malaysia’s Main Market and ACE Market. The Main Market is designed for larger, more established companies, while the ACE Market caters to smaller, high-growth businesses.

In recent years, Malaysia has seen a steady stream of IPOs, with both local and foreign companies recognising the country’s attractive capital market opportunities.

Key factors driving the Malaysian IPO market include:

• Malaysia has implemented comprehensive laws, regulations and guidelines governing the IPO process, providing transparency and investor protection.
• Malaysia’s capital markets attract a mix of local and international investors, offering companies access to a wide pool of potential shareholders.
• The Malaysian government provides various tax incentives and support programs to encourage IPOs and facilitate access to public capital.
• As one of Southeast Asia’s largest economies, Malaysia’s stable economic growth and business-friendly environment make it an attractive destination for companies seeking to go public.

Regulatory bodies and legal framework

The primary regulatory bodies overseeing the IPO process in Malaysia are:

• The Securities Commission Malaysia (SC) is the main capital markets regulator responsible for approving IPO applications and ensuring compliance with securities laws.
• As the stock exchange operator, Bursa Malaysia sets the listing requirements and rules for companies seeking to list on its Main Market and ACE Market.
• The Companies Commission of Malaysia (SSM) regulates and incorporates companies in Malaysia, playing a role in the IPO process by ensuring compliance with the Companies Act 2016.

The key legislation governing the IPO process in Malaysia includes:

• Securities Commission Malaysia Act 1993
• Capital Markets and Services Act 2007
• Companies Act 2016
• Bursa Malaysia Listing Requirements

Together, these regulatory bodies and laws establish the framework for companies to successfully navigate the IPO process in Malaysia.

The IPO process: Step-by-step guide

The Malaysia IPO process typically involves the following key steps:

• Pre-IPO preparation
• Appointing the IPO team
• Obtaining regulatory approvals
• Structuring the IPO
• Executing the IPO
• Post-listing obligations

Let’s examine each step in detail:

Pre-IPO preparation

Prior to initiating the IPO process, companies should establish a solid foundation to ensure a successful listing.

Business and financial review

Companies should assess their operations, financial performance and growth prospects. This process helps identify areas that may require improvement, restructuring or strategic adjustment before an IPO.

Corporate governance review

It is essential to ensure the company has strong corporate governance practices. This includes maintaining a well-balanced and independent board of directors, implementing effective internal controls and promoting transparency through regular and accurate reporting.

Legal and regulatory compliance

A thorough review of the company’s compliance with applicable laws, regulations and industry standards is critical. Any outstanding legal or regulatory issues should be addressed proactively to facilitate a smooth IPO process and avoid potential delays.

Valuation assessment

Independent financial advisors should be engaged to perform a detailed company valuation. Their assessment will help determine a realistic and competitive price range for the IPO shares, ensuring the offering aligns with market expectations and investor interest.

Appointing the IPO team

Listing on the Bursa Malaysia requires appointing professional advisors to support the company throughout the listing process. The professional advisors will act as the due diligence working group (DDWG).

The professional advisors include:

Investment bank

The investment bank will act as the principal advisor, providing guidance on the listing structure, timing, pricing and regulatory requirements. In addition to offering strategic advice, the principal advisor will coordinate with other professionals, such as accountants, lawyers, market researchers and property valuers, to support the preparation of key documents, including the prospectus and oversee the due diligence process. The principal advisor is also responsible for submitting the application documents to the relevant regulators and lodging the prospectus with the appropriate authorities.

Lawyers

Lawyers provide advice on all legal matters related to the listing application and play a key role in the due diligence and verification of documents, including the prospectus. They are also responsible for drafting all necessary legal documents, such as the due diligence planning memorandum, due diligence report and minutes of meetings.

Reporting accountants

Reporting accountants are responsible for preparing the Accountant’s Report and conducting due diligence on the financial information in the application documents and prospectus. They may also assess the applicant’s internal control systems and analyse projections and reports on future financial performance.

Property valuer

If the listing exercise involves any property, plant, machinery or equipment that has been or will be revalued, an independent property valuer must be appointed. The valuer is required to provide a formal valuation report. Before submitting the listing application, this report must be submitted to Bursa Malaysia Securities Berhad or the SC.

Business and market researcher

An independent business or market researcher may be engaged to prepare a report outlining the company’s business prospects, market positioning, and potential risks. The market researcher is also tasked with reviewing the Management Discussion and Analysis section in the submission documents.

Issuing house and share registrar

The issuing house is responsible for managing the allotment, balloting and issuance of the company’s shares. The share registrar maintains the company’s Register of Members and acts as the liaison with Bursa Malaysia Depository Sdn Bhd on behalf of the company.

Public relations (PR) company

A PR company may be engaged to help build awareness, generate interest and enhance the company’s public image in preparation for its listing on the stock exchange.

Tax advisor

A tax advisor may be appointed to provide expert guidance on tax matters, particularly in group restructuring, property transfers or cross-border transactions that could impact the company’s tax position.

Company secretary

The company secretary supports the company in ensuring that all statutory information is accurate and up to date before submission. The company secretary also ensures that the company’s board structure, the composition and terms of reference of board committees, and the company’s constitution are fully compliant with the Listing Requirements, the Malaysian Code on Corporate Governance and all other applicable regulations.

Obtaining regulatory approvals

The IPO process in Malaysia requires several regulatory approvals:

Securities Commission Malaysia approval

The company must submit a listing application and prospectus to the SC for review and approval. The SC will assess the company’s suitability for listing, its compliance with regulations, and the adequacy of the prospectus disclosures.

Bursa Malaysia approval

Once the SC has approved the listing application, the company must submit the necessary documents to Bursa Malaysia for approval to list on the Main Market or ACE Market.

Companies Commission of Malaysia approval

The company must also obtain the SSM’s approval for specific corporate actions, such as issuing new shares and any changes to the company’s constitution.

The regulatory approval process can be time-consuming, often taking several months. Companies should ensure they provide all required information and respond promptly to any queries from the regulatory authorities.

Structuring the IPO

Careful planning and structuring of the IPO are crucial to ensure a successful offering:

• Determine the optimal offering size and price range based on the company’s valuation, market conditions, and investor demand
• Decide on the type of shares to be offered (e.g., ordinary shares, preference shares) and the allocation between institutional and retail investors
• Outline the company’s plans for the use of the IPO proceeds, such as funding expansion, reducing debt or investing in new projects
• Establish lock-up agreements with existing shareholders to restrict the sale of shares for a certain period after the IPO, typically 6 to 12 months
• Arrange for stabilisation activities, such as the appointment of a stabilising manager, to support the share price during the immediate post-IPO period

Executing the IPO

The execution phase involves the following key activities:

Prospectus preparation

The company must draft and finalise the IPO prospectus, which must include the following information:

• Timetable of the opening and closing dates of the issue and/or offer
• Corporate information on the directors, including names and addresses
• Key information about the offer/issue and corporation
• Details of the public offering, including the number and type of securities and rights attached
• Risk factors
• Business and industry description and details of a subsidiary or associated corporations
• Future plans, strategies and prospects of the corporation
• Related-party transactions or conflicts of interest
• Financial information

Marketing and roadshows

The company should conduct a comprehensive marketing campaign, including investor roadshows and presentations, to generate interest and demand for its IPO shares.

Allocation and pricing

The final offer price and the allocation of shares to institutional and retail investors should be determined based on the level of demand received during the marketing phase.

Listing and trading

Once the IPO process is complete, the company’s shares will be officially listed and commence trading on the selected stock exchange, either Bursa Malaysia’s Main Market or ACE Market.

Post-listing obligations

After the successful listing, the company must fulfil various ongoing responsibilities:

• Comply with Bursa Malaysia’s continuous disclosure requirements, including the timely reporting of material information and financial results
• Maintain high standards of corporate governance, including the composition and independence of the board of directors
• Establish and maintain effective investor relations practices to keep shareholders informed and engage with the investment community
• Adhere to the Bursa Malaysia Listing Requirements, which cover a wide range of operational, financial and regulatory obligations
• Ensure effective communication and engagement with shareholders, including holding annual general meetings and addressing their concerns.

Key considerations and challenges

Companies navigating the Malaysia IPO process should be aware of the following critical considerations and potential challenges:

Regulatory scrutiny

The IPO application and approval process in Malaysia is highly regulated, with the SC and Bursa Malaysia conducting extensive reviews. Companies must be prepared to provide comprehensive information and address any concerns raised by the regulators.

Timing and uncertainty

The IPO process can be lengthy, often taking 9 to 15 months or longer to complete. Market conditions and regulatory changes can introduce uncertainty, requiring companies to be flexible and responsive.

Pricing and valuation

The appropriate offer price and valuation for the IPO shares should be determined by taking into account investor demand, market conditions and the company’s long-term growth strategy.

Corporate governance and transparency

Strong corporate governance and high levels of transparency are essential for a successful IPO. Companies may need to implement structural and procedural changes to comply with regulatory requirements and meet investor expectations.

Post-listing obligations

The ongoing compliance and reporting requirements for listed companies in Malaysia can be demanding. Companies must allocate sufficient resources and establish effective systems to meet these obligations.

Competition for investor attention

Companies going public in Malaysia face competition from other IPO candidates and existing listed companies for investor attention and capital. Effective marketing and differentiation are crucial.

Shareholder diversification

Listing on a public exchange can lead to a more diverse shareholder base, which may require companies to adapt their management and communication strategies.

Manufacturing licence requirement

Companies in the manufacturing sector with a shareholders’ fund of RM 2.5 million and above or 75 or more employees must acquire a valid manufacturing licence. Failure to obtain the required manufacturing licence could delay the IPO listing process.

Business licencing and permits

The group of companies must ensure they have all the necessary valid licences and permits required by law to conduct their business activities. Before submitting the listing application, companies should review and renew any expired licences to avoid delays in the IPO process.

Tax compliance

Companies must ensure they do not have any ongoing tax issues or non-compliance with tax laws. Any tax-related problems must be resolved before the submission of the listing application. Non-compliance with tax laws can significantly delay the listing process or even lead to an unsuccessful listing.

Conclusion

Going public through an IPO is a significant milestone for companies in Malaysia, providing access to public capital, enhanced visibility and the opportunity for growth. However, the IPO process in Malaysia is complex, with various regulatory requirements and challenges that must be carefully navigated.

By understanding the step-by-step guide outlined in this article, companies can better prepare for the Malaysia IPO process and increase their chances of a successful listing. From the pre-IPO preparation to the post-listing obligations, companies must assemble a strong team of professionals, ensure robust corporate governance practices and maintain ongoing compliance with the relevant rules and regulations.

How Acclime can help businesses list on the Malaysian stock exchange

Acclime Malaysia offers comprehensive support for businesses planning to list on the Malaysian stock exchange. Our team provides end-to-end guidance throughout the IPO journey, from assessing IPO readiness and advising on the appointment of key professionals to coordinating due diligence and managing the entire listing process. We also offer strategic advice on capital structure, invitation approach, marketing themes, and timing to help maximise investor appeal and shareholder value. Contact us to learn more about how we can help.