SC revises SPAC rules, simplifies ACE-Main Market listing transfer

SC revises SPAC rules, simplifies ACE-Main Market listing transfer
Business & Markets 2013
Written by Jeffrey Tan of theedgemalaysia.com
Wednesday, 18 December 2013 19:55

KUALA LUMPUR (Dec 18): The Securities Commission (SC) has revised its regulations for special purpose acquisition companies (SPAC). The regulator has also simplified the transfer process for ACE Market companies to list on the Main Market of Bursa Malaysia.

In a statement, the SC said changes in the revised SPAC regulations include additional investor safeguards and a new practice note.

"The changes are part of the SC’s on-going efforts to ensure that regulations and guidelines remain relevant and effective with balanced regulation to ensure the risk associated are proportionately addressed," the SC said.

The SC said the new practice note is intended to ensure that SPACs' proposals must be viewed holistically. The revised guidelines also aim to ensure the management team’s experience and track record ties in with SPACs business objectives and strategies.

"The new practice note also clarifies that the management team’s compensation and reward structure must be commensurate with the potential returns to shareholders," the SC said.

According to the SC, the additional safeguards are to ensure SPACs' management teams have more meaningful financial participation, and strengthen alignment of interest with the SPACs public shareholders.

"The new safeguards, among other revisions, include prohibiting the use of initial public offering (IPO) proceeds for payment of management team remuneration prior to the completion of a qualifying acquisition by the SPAC, restricting the management team’s ability to sell securities held in the SPAC before the assets acquired are income generating and requiring a minimum capital contribution from the management team.

"The practice note issued by the SC has taken into consideration feedback received through industry consultations involving a cross section of stakeholders, as well as developments and market practices in other jurisdictions," the SC said.

The regulator has also simplified the transfer process for ACE Market counters to the Main Market. According to the SC, it has removed the requirement for an introductory document for companies seeking to transfer their listing.

It said this is eligible only for companies based on the strength of their current business and not through an acquisition which constitutes a reverse takeover or back-door listing of the assets acquired.

This takes into account a healthy financial position, positive operating cash flow, sufficient levels of working capital and no accumulated losses.

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