Students Online Tutorial Cl c4 1
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Transcript of Students Online Tutorial Cl c4 1
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Learning Outcome
To understand the regulatory framework and structure of public offerings of securities
To understand the process involved in the public offering
To understand the responsibilities and liabilities of persons involved in the proposal for issue and offer of securities
To know the regulatory framework in respect of public offerings
To know understand the liability for misstatements in the prospectus
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Meaning of Flotation
Companies need money, funds for expansion, major projects and working capital
Apart from lending from the banks, companies can obtain this through flotation
Public companies are allowed to go public i.e. to invite or to make available the offer for subscription or purchase of securities and shares in the company. (Note – inapplicable for private companies – Sec 15 CA)
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Meaning of Flotation
Flotation means going public obtaining funding or financing through public issue of shares and also to have the shares listed and traded on a stock exchange such as the Bursa Malaysia Stock Exchange
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Bursa Malaysia Stock Exchange
Bursa Malaysia Stock Exchange www.bursamalaysia.com
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Advantages of Flotation
The main advantages for going public, inviting the public to purchase shares and listing on the stock exchange
Access to unlimited amounts of financing Shares are liquid, easily sold, ready
market and if listed on the stock exchange, easily bought and sold
Easier to purchase other companies, using its shares as purchase price
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Advantages of Flotation
Higher public image because of stringent requirements to be fulfilled for listing
Shares easily sold, thus easily realizing investment
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Disadvantages of Going Public
More stricter compliance, higher compliance cost and regular disclosures
All public issue of shares need to comply with the Capital Market and Services Act 2007 and guidelines issued by the Securities Commission
Public listed companies need to comply with the reporting requirements and Corporate Governance rules under the Bursa Malaysia Listing Requirements
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Disadvantages of Going Public
Subjected to constant monitoring by the regulatory authorities such as SC, the Bursa Malaysia, investors and the public
Need to have regular meetings and table financial accounts
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Persons involved in the flotation process
The process of going public is onerous and may take up to a few months of procedures and involves the following persons
Directors and senior management of company Advisers, company secretaries, Accountants, auditors Lawyers Sponsors Investment Banks Bursa Malaysia Securities Commission – the regulatory authority in
respect of the capital market in Malaysia Issuing House
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Securities Commission The Securities Commission is the capital
market regulator in Malaysia For the Capital Market and Services Act
2007 and the other SC Guidelines please refer to
www.sc.com.my
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Regulatory Framework – Public Issue / Offer of Securities
Shares / securities may be listed on the Bursa Malaysia Stock Exchange www.bursamalaysia.com
Main Market of Bursa Malaysia ACE Market – the alternative market
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Issue / Offer of Shares
Shares may be offered by a company to the public by a variety of methods depending on the purpose and scale of the issue
The main methods of issue by a company are:
1. a public issue : where a company invites members of the public to subscribe for its shares directly
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Issue / Offer of Shares
2. An offer for sale, where an issuing house agrees to subscribe for the whole issue of shares and will in turn publish an invitation to the public offering them the shares for sale normally at a higher price.
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Issue / Offer of Shares
3. A placement : when shares are placed to an issuing house which will in turn sell and transfer them to its clients and associates, usually in fairly substantial blocks
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Issue / Offer of Shares
4 A tender: in this case, a minimum price of the shares to be offered is fixed by a company and bids are invited at this or a higher price.
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Issue / Offer of Shares
5. A rights issue: this is a form of secondary issue of shares where the existing members of a company are given the right to subscribe for new shares usually in proportion to the existing number of shares held by them
E.g. 1 share for every 5 shares they currently hold
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Regulations in relation to Issue and Offer of Securities in Malaysia
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PART VI OF THE CMSA 2007 – Sec 212
(2) This section applies to a person who proposes to :
(a) make available, offer for subscription or purchase, or issue an invitation to subscribe for or purchase securities in Malaysia;
(b) make available, offer for subscription or purchase, or issue an invitation to subscribe for or purchase, outside Malaysia, securities of a public company, or to list such securities on a securities exchange outside Malaysia;
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PART VI OF THE CMSA 2007 – Sec 212
(c) by way of issue of securities, effect– (i) a compromise or arrangement
…… ; or (ii) an acquisition of securities or
assets;
(d) apply for the listing of a corporation, or for the quotation of securities, on a stock market of a stock exchange;
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PART VI OF THE CMSA 2007 – Sec 212
The issuer / company must submit a proposal to the SC and the SC has the right to approve with or without conditions or to reject (Sec 212(4), (5) CMSA)
The company, officer, associates, financial advisor or any person must not make any false or misleading statements, conduct, omissions in relation to the proposal (Sec 214 CMSA)
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Requirement to register prospectus in relation to securities – Sec 232(1)
232. (1) A person shall not issue, offer for subscription or purchase, make an invitation to
subscribe for or purchase or in the case of an initial listing of securities, make an application for the quotation of the securities on a stock market of a stock exchange
unless– (a) a prospectus in relation to the securities
has been registered by the Commission under section 233; and
(b) the prospectus complies with the requirements or provisions of this Act.
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Prospectus Requirements
Sec 226 - “prospectus” means a notice, circular, advertisement or document inviting applications or offers to subscribe for or purchase securities, or offering any securities for subscription or purchase
Sec 235 – Content of Prospectus
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Prospectus Requirements
General duty of disclosure in prospectus
236. (1) the prospectus must contain all such information that investors and their professional advisers would need for the purpose of making an informed assessment in relation to the assets and liabilities, financial position, profits and losses and prospects of the issuer
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Liability for Prospectus
Persons set out in section 236 of the CMSA, e.g. directors, promoters, and advisers have the primary obligation for the content of prospectuses. They must ensure that all information necessary for an assessment of the securities offered by the prospectus is disclosed in a full and true manner (Prospectus Guidelines)
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Section 246 CMSA 2007
Section 246 of the CMSA imposes criminal liability for false or misleading statements or material omissions in the prospectus.
Duty on promoters or directors of the corporation or any other person who is a party to the preparation of the prospectus or any of its relevant portions.
Promoter means include controlling shareholders, persons connected to controlling shareholders and executive directors who are substantial shareholders of the issuer. (Prospectus Guidelines)
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End ofChapter 4 [File 1)
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www.maicsa.org.my