Stimulating Fund Raising
The Government recently announced an economic stimulus package to help Malaysia weather the current global economic crisis. Taking cognisance that more than half of the major world economies are in recession and experiencing possibly the worst crisis in 70 years, the Government unveiled a mini budget of RM60 billion, which accounts for almost 9% of Malaysia’s Gross Domestic Product.
Besides declaring fiscal as well as non fiscal policies, the Minister of Finance announced the liberalisation of regulatory policies and requirement. Primarily geared towards providing corporations with efficient and cost effective ways to raise funds in the capital market, dispensation from statutory and regulatory compliance was decreed. Rights issue by public companies listed on the stock exchange will no longer be subject to any prior approval from the Securities Commission (“SC”). Listed public companies are not free to raise capital from its existing shareholders once their proposed scheme is in place. Public companies not listed on the stock exchange and private companies received some cheer too. Previously, unlisted public companies were not spared from the requirement to obtain prior approval from SC before they offer any shares for subscription. Now, they are free to do so without SC’s prior approval. As for private limited companies, any proposed takeover is now free from the requirement enshrined in the Malaysian Code of Takeovers and Mergers 1998. Previously, mandatory or voluntary general offers must be made if the private limited company has a paid up share capital or shareholders’ fund of RM10 million or more and the consideration for the takeover is RM20 million or more. Issuers and intending issuers of bonds, Islamic and non Islamic ones, were also jumping with joy for 2 reasons. First, bondholders’ approved revision of terms and conditions governing the issuance of bonds and sukuk is no longer subject to any green light from SC. Instead, SC merely needs to be notified of such revision. Secondly, convertible and exchangeable bonds are no longer required to be rated by any rating house prior to issuance.
In the light of the uncertain future for capital markets globally, the recent liberalisation may not be the one and only this year. It may just be a matter of time that more liberalisation announcements are made, unless, of course, the global economy recovers swiftly.