The Securities Commission Malaysia (SC) is looking to introduce a streamlined automatic transfer mechanism that will enable qualifying ACE Market companies to transfer to the Main Market beginning next year in a bid to encourage more exit options in the public market space, said its chairman Awang Adek Hussin.
“Details of the proposed automatic transfer framework will be announced later this month. The introduction of a new simplified and accelerated transfer process will facilitate a seamless transfer of listings to promote sizeable and quality ACE Market companies to the Main Market,” he said in his keynote speech at the Malaysia Venture Forum 2023 on Wednesday.
By being in the Main Market, it will open up opportunities for foreign investors to participate. This in turn should encourage greater foreign participation in its capital market, he added.
SC and Bursa Malaysia will continue to facilitate exits for promising companies, especially in the tech sector, according to Awang Adek.
“Recent capital market initiatives aimed at supporting IPO-ready companies are expected to have a positive impact.
These include tax deductions for eligible tech-based companies on the Main and ACE Markets. Concessions on the soon-to-be-implemented capital gains tax will be made available to IPOs on Bursa Malaysia,” he said.
“These measures are designed to enhance fundraising efforts, sustain the vibrancy of the IPO market, and improve trading liquidity,” he added.
With IPOs being one of the more common exit routes for start-ups in the region, the SC, together with Bursa Malaysia is working to improve efficiency in the public markets to facilitate a start-up’s IPO, with measures such as expediting the IPO process and reducing time-to-market for companies seeking to list on its stock exchange.
Awang Adek also said that access to funding can also be obtained through a Special Purpose Acquisition Company (SPAC).
The SC revamped the SPAC Framework in Malaysia in 2022, allowing venture capital and private equity professionals with asset sourcing and deal making experience to steer SPACs.
Under the previous framework, SPACs could only acquire businesses in cash. The new SPAC rule also allows SPACs to acquire companies through the issuance of securities.
“We have also made it easier for SPAC acquisitions to be approved. Where before, a SPAC required a special resolution for the acquisition to be approved, now, it only needs to obtain a simple majority approval amongst shareholders,” Awang Adek said.
The revised SPAC framework as an exit strategy for VC and PE firms, has the potential to broaden the target asset universe and spur listings and deals in Malaysia. This should also encourage mergers and acquisitions and spur corporate transformation, he added.
Sustainability matters
Awang Adek also said it is worth noting that sustainability is an area of increasing importance in the minds of investors as we navigate through the current landscape with various climate challenges. As asset owners demand more sustainable portfolios and capital to finance energy transitions, he said firms must develop their capabilities to incorporate sustainability practices.
“In this regard, the SC has recently published the SRI Guide for Private Markets to help VC/PE firms and recognised market operators to embrace important considerations and best practices for incorporating sustainability into their investment operations,” he said.
In addition, VC/PE firms can also look into the SC’s principles-based SRI Taxonomy, which was developed to help asset managers and investors identify sustainable projects. Capital Markets Malaysia (CMM) has created a Simplified ESG Disclosure Guide to provide SMEs with practical guidance on ESG disclosures.