On 15 October, The Malaysian Securities Commission (SC) issued a public consultation paper on the admission of mineral or oil and gas (O&G) exploration or extraction (MOG) corporations or assets on the Main Market of Bursa Malaysia, inviting feedback from the public on the proposals to introduce additional eligibility and disclosure requirements for MOG corporations seeking listing on the Main Market.
Under the current regime, there are no specific requirements for the listing of MOG corporations. The proposal is introduced as a result of increased interest on the listing of MOG companies in Malaysia, particularly through the listing of special purpose acquisition companies in the O&G space.
The SC is proposing to customize the eligibility requirements for corporations whose primary activity is MOG – i.e. its MOG activities represent 50% or more of the corporation’s enlarged group total assets, revenue, operating expenses or after tax profit. This would include, among others, the requirement to demonstrate that the corporation has obtained the legal rights for exploration or extraction activities in respect of the mineral or the O&G assets, to demonstrate that it has control over the majority of these assets, and to demonstrate sufficient level of working capital for at least 18 months (in contrast to the current requirement of 12 months) from the date of the disclosure document.
The SC also proposes that corporations with significant operations in MOG businesses (i.e. where the MOG activities represent 25% or more of the group total assets, revenue or operating expenses) to include in its disclosure document a technical report prepared by an independent competent person. In the case of a reverse takeover or a backdoor listing, a valuation report on the resources to be acquired must be prepared by an independent valuer. The proposals also prescribe the minimum content of the competent person’s and valuer’s report to ensure that there is a certain minimum standard for reports provided to investors and the SC.
In addition, the SC is also considering allowing corporations whose primary activity is MOG and are involved in late stage or early stage exploration to apply for a waiver from the current financial requirements of the market capitalization or profit test, provided that the corporation is able to demonstrate that it has a clear plan to advance its mineral or O&G assets to commercial production within 2 years and that the directors and managers have sufficient MOG industry experience.
This proposal provides corporations in either late or early stage exploration access and an avenue to raise capital and funding through listing, which would not have been possible under the current regime as the heavy capital expenditure involved means that MOG corporations involved in late stage or early stage exploration would struggle to meet the market capitalization or profit test requirements.
The proposals would see Malaysia follow the footsteps of other regional markets such as Singapore and Hong Kong in recognizing the unique features of MOG businesses, and that the current listing requirements must be refined for this asset class. In tandem with a customized approach for the MOG businesses, the SC is also seeking to implement a robust regulatory framework aimed at increasing investor protection. It is hoped that these changes will stimulate the equity capital markets in Malaysia when MOG businesses recover from the current depressed oil prices.