Changes To Malaysia Takeover Code

Posted by Kris | Sunday, December 19, 2010 | , | 0 comments »

These new rules should dampened insider trading and also protect minority shareholder interest if it is ENFORCED properly. Although there are some holes left from the takeover via asset and liabilities, something is better than nothing in BOLEHLAND.

Among the more notable changes to the Takeover Code are:
• The requirement to be more transparent in the announcement on potential takeover offers. Under the new rules, potential offerors or offerees are required to make an announcement on possible offers when there are unusual changes in the company’s share price. They cannot hide behind the excuse of being unaware of developments involving major shareholders. This applies particularly to independent directors who would be required to make themselves aware of developments. If the potential offeror or offeree denies a takeover, they cannot undertake such an exercise within a period of six months.
• If material changes occur after the dispatch of documents, such as circular to shareholders, the SC must be notified immediately. For instance, during a takeover or privatisation exercise, if the promoters are undertaking other negotiations pertaining to the asset that is to be privatised, they have to inform the SC. This is to ensure shareholders are well informed of developments. An exmaple of this is when Maxis was privatised in 2007, less than two months later the promoters entered into a deal with Saudi Telekom. Under the new rules the promoters must inform the SC if they are negotiations with external parties.
• The new rules allow a voluntary offer to take over a company to be carried out at a higher threshold as a condition. At the moment, in most cases, a voluntary takeover offer is normally conditional upon the offeror getting 50% of the shares.  Now the condition can be increased to 90%.  This effectively means that that promoters cannot use excuse of “uncertainty” as a reason to use the A&L route to take over companies, especially financial institutions.
• The conduct of all parties, namely offerors, advisers and the boards of offerees are codified. These parties, especially the independent directors of the board are required to give timely disclosure to shareholders and are prohibited from undertaking actions that could frustrate an offer. This effectively means that independent directors are required to ensure that any offer for the company should be put before shareholders to decide on.