Bursa’s New LEAP Market to Tap SMEs

On 15 June 2017, Bursa Malaysia announced the issuance of new listing requirements for the Leading Entrepreneur Accelerator Platform (LEAP) Market. The newly established LEAP Market hopes to address the funding gap faced by SMEs, now largely over-dependent on the banking sector, and aims to provide SMEs with a new avenue to raise funds and increase their profile through the capital market. The LEAP Market is designed to be an intermediary market for companies that complements the ACE or Main Markets, providing cost efficiency, balanced and proportionate regulation and a qualified market for sophisticated investors.

The new LEAP Market Listing Requirements and consequential amendments to Bursa Malaysia rules which govern the trading, clearing and depository framework for the LEAP Market took effect on 16 June 2017.

Here are a few key points relating to the new LEAP Market:

1. Companies that qualify for the LEAP Market

Public companies incorporated in Malaysia can apply for admission to the LEAP Market through an Approved Adviser, that is, an adviser authorised by Bursa Malaysia to carry out both the initial listing activities and post-listing activities.

No profit track record or operating history is required although the applicant must be suitable for listing as assessed by an Approved Advisor after making all reasonable due diligence enquiries and considering all relevant matters.

The company must have a clearly identifiable core business. It will not be considered as suitable for listing if it is (a) a subsidiary or holding company of an existing corporation listed on the Main Market or ACE Market of Bursa Malaysia and the listing of such company will result in the existing listed corporation within the group ceasing to have a separate autonomous business of its own and not be capable of sustaining its listing in the future; (b) an investment holding corporation with no immediate or prospective business operations; or (c) an incubator, including a technology incubator which may apply for admission to the Main Market only.

2. Manner of admission and public spread requirements

Admission of the company to the LEAP Market will be through an issue of new securities by way of an excluded issue or by way of an introduction.  An information memorandum rather than a prospectus is required for the purposes of submission. It is pertinent to note that prospectus liability under the Capital Markets and Services Act 2007 (“CMSA”) still applies.

The public spread of the shares must be equal to or more than 10% at listing. There is no requirement to maintain any minimal public spread post-listing but the listed corporation is encouraged to ensure that there is sufficient liquidity of its securities.

3. Who can trade on the LEAP Market

Trading on the LEAP Market is limited to qualified or sophisticated investors, that is, those who fall within Part 1 of Schedule 6 or 7 of the Capital Markets and Services Act 2007.

4. Approved Advisors

All the existing 14 principal advisers and sponsors who are eligible to act on the Main Market and ACE Market are automatically admitted to the Register of Advisers of the LEAP Market. Bursa Malaysia has also invited all suitably qualified corporate financial advisers licensed by the Securities Commission to apply to act as an Approved Adviser or Continuing Adviser on the Leap Market.

5. Other listing requirements

The LEAP Market Listing Requirements also:

• ensure commitment from promoters by applying a moratorium over their entire shareholdings for a period of 12 months from the date of admission and thereafter, the promoters’ aggregate shareholdings amounting to at least 45% of the total issued shares of the listed corporation must remain under moratorium for another period of 36 months

• facilitate the ease and efficiency of secondary fund raisings by allowing the following:

1. a higher general mandate for directors to issue new shares or convertible securities, that is, 100% of the total number of issued shares of a listed corporation in the case of an issuance on a pro rata basis and 50% in the case of an issuance on a non pro rata basis, as opposed to 10 per cent only for the Main Market and ACE Market; and
2. both renounceable and non-renounceable rights issue

• promote a transparent and proportionate disclosure regime by requiring immediate announcements of material information or transactions, semi-annual financial statements and annual audited financial statements.

If you have any questions or require any additional information, please contact Gilbert Gan or Tan Wooi Hong or the ZICO Law partner you usually deal with.

This alert is for general information only and is not a substitute for legal advice.