Malaysia IPO Registration Guide for Employers: Step-by-Step Process

If you are running a business in Malaysia and considering an IPO, this guide is for you.

An Initial Public Offering (IPO) can open new growth opportunities for your company by raising capital and increasing your brand’s visibility.

However, it’s important to understand the full process before you start.

What is an IPO?

An IPO, or Initial Public Offering, is when a private company offers its shares to the public for the first time.

By listing on Bursa Malaysia, a company becomes publicly traded. This helps companies raise funds to expand operations, develop new products, or pay off debt.

For employers in Malaysia, an IPO is a strategic move that can boost the company’s growth and strengthen its market position.

• Capital Raising: IPOs provide businesses with access to significant funding.

• Market Exposure: A public listing increases the company’s visibility.

• Liquidity: Shareholders gain the ability to sell their shares in the open market.

Pros and Cons of Investing in an IPO

Pros:

• High Growth Potential: Early investors often benefit from significant price appreciation as the company grows.

• Transparency: Public companies are required to disclose financial and operational details, offering more security to investors.

• Liquidity: Investors can trade shares on the stock exchange after the IPO.

Cons:

• Market Volatility: Share prices can fluctuate significantly.

• Uncertain Returns: There is no guarantee of profit, especially in the early stages.

• Dilution of Ownership: Founders and early investors may lose some control over the company.

Eligibility and Requirements

Before applying for an IPO, employers must ensure their company meets specific criteria set by the regulatory authorities in Malaysia.

General Eligibility

1. Track Record

The company must have been in operation for at least 3-5 years. It should demonstrate consistent business performance during this period.

2. Profitability

The company must have achieved a cumulative consolidated pre-tax profit of at least RM 20 million over three to five years.

Alternatively, the company should have an annual pre-tax profit of at least RM 6 million in the most recent financial year.

3. Revenue Threshold 

Companies must show significant revenue, typically exceeding RM 50 million annually, depending on the industry and specific requirements of Bursa Malaysia.

4. Corporate Governance

Companies must implement strong governance practices, including an independent board of directors, risk management policies, and compliance with Bursa Malaysia’s listing requirements.

5. Size Requirements

For the Main Market, the company must have an issued and paid-up capital of at least RM 50 million upon listing.

For the ACE Market, smaller companies with high growth potential can list without strict profitability criteria but must meet other requirements.

Documents Required

• Audited Financial Statements: For the last three to five years.

• Prospectus: A detailed document outlining the company’s business model, financials, and risks.

• Legal and Compliance Documents: Including company incorporation details, tax compliance certificates, and regulatory approvals.

• Business Plans: A comprehensive plan demonstrating the company’s growth strategies and future potential.

• Due Diligence Reports: Prepared by independent auditors or advisors to verify the company’s claims.

How to Apply for an IPO in Malaysia

If you're interested in participating in an upcoming IPO in Malaysia, here's a simplified guide for employers:

1. Get a CDS Account

To apply for an IPO and own shares, you'll need a Central Depository System (CDS) account.

You can open this account through banks or stockbrokers. Your shares will be stored electronically in this account.

2. Choose Your Application Method

You can apply for an IPO in three ways:

Manual Application:

1. Get a White Application Form from issuing houses, stockbroking firms, or financial institutions.
2. Fill out your personal details and attach a banker’s order payment slip for the shares you're applying for.
3. Submit the completed form to the issuing house or mail it in.

Electronic Share Application (ESA) via ATM:

1. Use an ATM from a participating financial institution where you have an account.
2. Select the ESA option and follow the instructions.
3. You'll need your ATM card, PIN, CDS account number, and IPO stock code.
4. Keep the printed ATM slip for your records.

Online Application:

1. Log in to your bank’s online banking portal.
2. Find the IPO section, select the IPO, and enter your CDS account number.
3. Confirm the number of shares and complete the payment.
4. This is the easiest method as you can do it from home.
   (Note: Check with your bank for any specific instructions and fees.)

3. Read the IPO Prospectus

Before applying, research the company by reading the prospectus. It may be detailed, but it provides important information about the company's business, management, finances, risks, and more.

4. Submit Your Application and Wait for Results

Submit your application within the deadline. If the IPO is oversubscribed, a balloting process will decide how shares are allocated.

You'll be notified about the result, and any unallocated funds will be refunded.

Listing Fees in Malaysia

Listing fees vary based on the size and nature of the IPO. These typically include:

• Application Fee: Paid to Bursa Malaysia and the Securities Commission.

• Professional Fees: For advisors, accountants, and legal teams.

• Marketing Costs: Expenses related to promoting the IPO.

• Annual Listing Fee: Charged post-listing to maintain the public status.

Example: Application fees for smaller IPOs start from RM 50,000, while larger IPOs may cost upwards of RM 500,000.

Regulations For Company Going Listed

When listing on Bursa Malaysia, companies must comply with strict regulations. Here are the main requirements:

Financial Requirements

Your company must meet specific financial criteria, including:

• Minimum profit track record of RM20 million over three to five years

• Positive cash flow from operating activities

Corporate Governance

Bursa Malaysia requires companies to adopt good corporate governance practices. This includes:

• Establishing an independent board of directors

• Ensuring transparency in financial reporting

Prospectus Requirements

A prospectus is a document that provides detailed information about the company. It should include:

• Business overview

• Financial performance

• Risk factors

Compliance Issues & Challenges Companies Face

Compliance is one of the most critical aspects of an IPO. Companies must adhere to strict regulations to ensure transparency and protect investors.

1. Regulatory Compliance: Meeting all guidelines from the SC and Bursa Malaysia.

2. Financial Transparency: Ensuring all financial records are accurate and audited.

3. Market Conditions: External economic factors can impact the IPO’s success.

4. Corporate Governance: Maintaining high governance standards to build investor trust.

Historical Malaysian IPOs

Over the years, Malaysia has witnessed several major IPOs that have had a significant impact on the market and attracted considerable investor interest.

These IPOs, spanning across various industries, demonstrate the dynamic nature of Malaysia's capital market.

Below is a summary of some of the most notable IPOs leading up to the much-anticipated debut of 99 Speed Mart:

Recommended Websites for Organizing an IPO in Malaysia

Here are some trusted websites to help you organize your IPO:

1. Bursa Malaysia (www.bursamalaysia.com)

Official website for IPO guidelines and application process.

2. Securities Commission Malaysia (www.sc.com.my)

Provides regulatory information and resources for IPO preparation.

3. Corporate Finance Advisors (www.corporatefinanceadvisors.com.my)

Offers professional advisory services for IPO planning and execution.

4. Malaysia Investment Banks (Check individual bank websites such as Maybank, CIMB, or RHB for IPO services.)

Many investment banks in Malaysia provide comprehensive IPO advisory services.

Taking your company public in Malaysia is a big decision that requires careful planning. By understanding the IPO process, benefits, costs, and regulations, you can make an informed choice.

If you are considering an IPO, start by assessing your company’s readiness and engaging the right advisors. With proper preparation, your IPO journey can be a successful one.

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