CRG520-MEMORANDUM AND ARTICLE OF ASSOCIATION

MEMORANDUM AND ARTICLES OF ASSOCIATION

THE CONSTITUTION OF THE COMPANY

• Must be lodged with CCM (ROC) upon incorporation

• Shall bind company & its members to the same extent as if signed & sealed by each member respectively.

• Constitute a contract: – Between co & its members– Among members – Between co & outsiders

Deemed to contain covenants – each member to observe all provisions of M& A

RULES OF CONSTRUCTION OF THE MEMORANDUM OF ASSOCIATION

I. Contents– S 18 provides that MOA must contain the following basic

clauses:a) Name of the companyb) The registered office clausec) Object claused) Capital clausee) Limited liability clausef) Subscribers’ clause

RULES OF CONSTRUCTION OF THE

MEMORANDUM OF ASSOCIATION

I. Form– S.18(1) provides that the MOA shall be printed and

divided into numbered paragraphs and dated– S.18(2) provides that the document must be signed by the

first subscribers in the presence if another person

II. Adopting the Third Schedule– S.19 (1) provides that,unless expressly excluded or

modified,the powers of the company shall include the power set forth in the Third Schedule

RULES OF CONSTRUCTION OF THE ARTICLES OF ASSOCIATION

I. General ContentsII. Specific Contents for Private CompaniesIII. Specific Contents for Companies Limited by

GuaranteeIV. Specific Contents for Listed CompaniesV. FormVI.Adopting Table A of the Fourth Schedule

I. General Contents

• The Act does not prescribe the contents of the Articles of Association of the company

• It may be contructed to include all articles deemed fit by company• For example :

– Share capital and variation of rights– Liens– Call on shres– Transmission of shares– Forfeiture of shares– Coversion of shares into stock– Capitalization of profits– Notices– Winding Up

I. General Contents

• For example :

– Alteration of capital– General Meeting– Proceeding at general meetings– Directors : appointments– Power and duties of directors– Proceedings of directors– Managing director– Associate director– Secretary– Seal– Accounts– Dividends and reserves– Indemnity

II. Specific Contents for Private Companies

• S. 15 requires a private company to state in either its Memorandum or Articles of Association that :– The right to transfer shares is restricted– The number of member is restricted to not more than

50– The prohibiton of any invitation to the public to subcribe

shares/debenture/deposit money with the company

III. Specific Contents for Companies Limited by Guarantee

• S.24 - The Memorandum & Articles of Association of a company limited by guarantee

• Power of such a company limited as follow :– The provision of the Third Schedule shall not apply – Receive any gift,donations or grants through personal appeals only– Not invest in or incorporate any subsidiary company– The income and property of the co derived shall be applied solely

towar the promotion of the object of the co– No salary and no remuneration of the benefit in money given to

the member of the board

III. Specific Contents for Companies Limited by Guarantee

• Power of such a company limited as follow :– No addition,alteration or amendment in MoA & AoA unless

approved by Minister charged with the responsibilty for companies– No person shall be appointed as a member of the board unless

approved by Minister charged with the responsibilty for companies– Ensure that the co and the fund of co is not used for any form of

political activity/unlawful purpose – Any property left after the satisfaction of all its debts and liabilities

upon winding up shall not be distributed among the members of the company but shall be given to some other institution company (approved by Director-Genral of Inland Revenue)

IV. Specific Contents for Listed Companies

• Chapter 7 of the Listing Requirement specifies the provisions which a listed co must ensure are contained in its AoA.

• The rule and regulations governing the following matters are either restricted and/or further prescribed by C7 of the Listing Requirement:– With regards to shares– Directors' borrowing power to be stated– Meeting, voting rights and proxies– Records of 'Depositors'– With the regards to the directors– Deadline for accounts to be sumitted– Winding up and Liquidator's commision rules

V. Form

• S.29 (4) provides that the AoA shall be printed and divided into numbered paragraphs be signed by the subscribers to the Memorandum in the presence of another person

VI. Adopting Table A of the Fourth Schedule.

• S. 30 provides that the co may adopt all or any of the regulations contained in Table A of the Fourth Schedule

RULES OF INTERPRETATION OF THE M&A

• The following are the rules of interpretation of the M&A– The M&A is kept at the registered office and filed at the CCM and thus

considered as a 'public' document– The M&A is a 'contract' that binds the co anf the members to the

same extent as if they respectively had been signed and sealed by each members(S33(1)

– Members are required to observe all the provisions of the M&A ( S.33(1))

– In the event of the conflict between the Companies Act and M&A, the former shall prevail

– In the event of conflict between the Memorandum and the Articles, the former shall prevail

ALTERATION TO MOA & AOA

Section 23: change of name of the company

Section 28: change to the object clause

Section 25: change of limited liability clause

Section 62: change in capital

ALTERATION TO MOA

STEP 1: • decide the

desired name and instruct the secretary to file a name search using FORM 13A .

STEP 2:• when the

proposed name have been approved, the company have to conduct an EGM or AGM to pass the special resolution.

STEP 3: • after passing

the resolution, the required documents must be lodge to CCM within 14 days.

STEP 4:• CCM will

issue FORM 13 to the company and upon receipt, they should fulfil some requirements.

SECTION 23: CHANGE OF NAME

SECTION 28: CHANGES TO THE OBJECT CLAUSE

STEP 1: instruct the secretary to conduct

general meeting to consider the proposed object clause.

STEP 2: notice of 21 days should be given to the members, trustee for debenture holder.

STEP 3: a special resolution altering the company’s

objects must be passed at the general meeting.

STEP 4: If the cancellation of alteration is made to the

court, it shall not have effect except if it is confirm by the

court.

STEP 5: on the application, the court shall consider

certain things regarding the members of the company

and also the creditors.

STEP 6: a copy of resolution altering the objects of the

company shall not be lodge with the CCM before the

expiration date.

STEP 7: company shall lodge FORM 11 to CCM within 14 days after the

expiration of 21 days period.

STEP 8: attach a copy of FORM 11 to every

copy of the company’s M&A.

SECTION 62: CHANGE IN CAPITAL

•Increase in shares capital by create of new shares.1

•Consolidate and divide all or any shares capital into shares of larger amount than existing shares.2•Convert all or any of its paid up shares into stock and vice versa.3•Subdivide the share or any of them into smaller amount of shares.4•Cancel shares not taken up or agreed to be taken.5

PROCEDURE TO EFFECT AN INCREASE IN SHARES:

STEP 1: check the article to ensure

the company

is empower

ed to increase its shares capital.

STEP 2: board shall

conduct general meeting to pass

the resolution

to alter the capital

clause.

STEP 3: company

shall lodge

FORM 11 to CCM

within 14 days after

passing the

resolution.

SUMMARYCLAUSE SECTION RESOLUTION FORMS TO BE

FILED WITH CCM

TIME FRAME

Name clause 23 Special resolution FORM 13A, FORM 11

14 days

Object clause 28 Special resolution FORM 11 Within 14 days after the

expiration of 21-day grace

periodLimited liability 25 Special resolution FORM 11 14 days

Capital clause 62 Depend on the articles; ordinary

or special resolution

FORM 11, FORM 28

14 days

ALTERATION TO THE AOA

ALTERATION

Director should instruct the

secretary to conduct general meeting to

consider the proposed

amendments.

Notice of general meeting is issued to all members at lease 21 days before the date of meeting.

After passing the special resolution, company should

lodge FORM 11 to CCM within 1 month

of the date of general meeting.

Attach a copy of the FORM 11 to every

copy of the company M&A.

CONVERTING STATUS OF A COMPANY

A company may move from one type of company to another.Eg : A company may be

incorporated as private company and may change its status to a public

company and vice versa.

REASONS CONVERT FROM PRIVATE COMPANY TO PUBLIC COMPANY

To disable the restriction on the right

to freely transfer shares in the company.

To have a bigger capital base, instead of

being limited to only fifty shareholders.

To enable the company to invite the public to subscribe for any shares in, or debentures of, the company (require compliance with certain procedures of the securities law & regulations)

To enable the company to invite the public to deposit

money in the company (require special license

from Bank Negara Malaysia

• Law & regulation applicable to a public company is more onerous compared to private company.– Eg: public co has to issue prospectus when issuing

shares & it has to comply with higher standards of accounting

• Convert a public co to private co may reduce such onerous obligations.

EFFECTS OF CONVERSION OF STATUS OF A COMPANY

Approval of application for

conversion of status of a company is issue in

Form 20 (Certificate of Incorporation on

Conversion to a Public Company)

Change is status did not give birth to a new company – it merely converts a

status

The obligations of the company to third parties

& vice versa remains status

quo

PROCEDURE FOR CONVERTING FROM UNLIMITED TO LIMITED COMPANY

•Section 25 of Companies Act 1965: an unlimited company may convert to a limited company by a passing special

resolution

PROCEDURE FOR CONVERTING FROM PRIVATE TO PUBLIC COMPANY

PROCEDURE FOR CONVERTING FROM PUBLIC TO PRIVATE COMPANY

GOING PUBLIC

• Process where public company becomes a listed public company.• Private company MUST first convert to a public company before

applying for listing status.• Effect of listing:

– Securities of the company are listed for quotation on a stock market conducted by Bursa Malaysia Berhad

– It provides the avenue for the securities to be freely marketable as between investors.

– Company can raise finance for its operations or for expension.• To be listed on Bursa Malaysia, company required Securities

Commision’s (SC) approval, under Section 212 of Capital Market and Services Act 2007

2 TYPES OF LISTING:

Direct listing

Public company will be listed directly either; or

Indirect listing

Public company will be listed either by way of:

-reverse take-over: situation whereby

public listed company acquires

other assets/businesses/intere

sts and there is a change in control in the public

listed company

through the introduction

of a new major

shareholder/group of

shareholders

-back-door listing:

situation whereby a

public listed company acquires

other assets/businesses/interests of non-

listed company either by cash or issue of

securities which result

in a very significant change in

the direction of the public

listed company & non-listed company indirectly get listed

REASONS COMPANIES GET LISTED ON BURSA MALAYSIA

•Getting listed is an efficient & cost effective way to raise funds (which are interest-free) for expansion of business operations as an alternative to borrowing from bank.

Raise capital

•Publicity generated by stockbroking companies which will disseminate information on public listed companies through the mass media featuring daily stock market reports•This will help to stimulate growth in the company & attract new business

Higher profile

•Investors tend to have greater confidence in public listed companies.•Once listed, the reputation & credibility of a company is enhanced as the company would have to fulfill the stringent listing requirements of Bursa Malaysia

Confident

•Provide liquidity for investors and an efficient valuation system.•Investors able to sell their shares anytime on the market & there will be a market value for the shares.•If listed company well managed & display strong responsibility towards its shareholders has potential to raise fund via right issues & dent securities for example, loan stocks.

Additional funds

•Listed companies will be in a better position to expand their operations overseas.•Listed companies have greater recognition as there is more publicity on their activities.

Expansion

DISADVANTAGES OF GOING PUBLIC

Tedious and expensive listing costs

Substantial cost will have to be incurred for the application for listing. i.e.: fees to be paid for

advice and consultation by merchant bankers and issuing house, cost for printing of prospectus and listing fees to be paid to the Bursa Malaysia, CCM

& SC

Loss of privacy

Public listed company required to make available to the public information

necessary to make in formed investment decisions. Listed company required to

take reasonable steps to ensure that all who invest in its securities enjoy equal

access to such information

Risk of eventual dilution of

control

-Directors have to share control of the company with shareholders.

-The once entrepreneurial or family concern will have to be

shared with the shareholders at large.

DISADVANTAGES OF GOING PUBLIC

Accountability to public

•The company has a greater responsibility in promoting share performance & ensuring better return on investment by way of dividend.

Disclosure requirements

•The investors will have to be informed of the company’s performance through continuous press release on the company’s performance or annual reports, annual general meetings & extraordinary general meeting.

volatility•When market is volatile the share prices could fluctuate considerably and this will affect the company’s value or net worth.

BURSA MALAYSIA PRE REQUISITE FOR LISTING

SOME OF THE FACTORS TO BE CONSIDERED WHEN GOING PUBLIC INCLUDE :

Whether the company has achieved the requisite profit track record

Does the company have a foreseeable good future in profit performance

Whether the company considers itself and its related business to have good future prospects

Whether market condition is favorable

PRIMARY LISTING OF LOCAL AND FOREIGN COMPANIES – (QUANTITATIVE CRITERIA)

ASPECTS MAIN MARKET ACEPROFIT TEST Uninterrupted PAT of 3-5 full

financial years with aggregate of at least RM20 million and

PAT of at least RM6 million for the most recent full FY

No minimum operating track record or profit requirement

MARKET CAPITALISATION TEST A total market capitalization of at least RM500 million upon listing, and

Incorporated and generated operating revenue for at least 1 full FY prior to submission.

ASPECTS MAIN MARKET ACEPUBLIC SPREAD At least 25% of the Company’s share

capital and Minimum of 1000 public shareholders

holding not less than 100 shares each

At least 25% of the Company’s share capital and

Minimum of 200 public shareholders holding not less than 100 shares each.

BUMIPUTERA EQUITY REQUIREMENT

Allocation of 50% of the public spread requirement to Bumiputera investors on best effort basis.

No requirement upon initial listing. Allocation on best effort basis of 1.25% of their enlarged issued and paid-up share capital to Bumiputera investors: Within 1 year after achieving

Main Market profit track record or

5 years after being listed on ACE Market, whichever is the earlier.

SPONSORSHIP Not applicable Engage a sponsor to assess the suitability for listing

Sponsors need to remain with the company for at least 3 years post listing.

ASPECTS MAIN MARKET ACE

INFRASTRUCTURE PROJECT CORPORATION TEST

1. Must have the right to build and operate an infrastructure project in or outside Malaysia :

With project cost of not less than RM500 million, and

For which a concession or licence has been awarded by a government or a state agency, in or outside Malaysia, with remaining concession of licence period at least 15 years.

Applicant with shorter remaining concession or licence period may be considered if the applicant fulfils the profit requirements under profit test.

IPO PRICE Minimum RM0.50 each No minimum


CORE BUSINESS An identifiable core business which it has majority ownership and management control

Core business should not be holding of investment in other listed companies.

Core business should not be holding of investment in other listed companies.

MANAGEMENT CONTINUITY AND CAPABILITY

Continuity of substantially the same management for at least 3 full financial years prior to submission.

For market capitalization test, since the commencement of operation (if less than 3 full financial years)

Continuity of substantially the same management for at least 3 full financial years prior to submission or since its incorporation (if less than 3 full financial years)


FINANCIAL POSITION & LIQUIDITY

Sufficient level of working capital for at least 12 months;

Positive cash flow from the operating activities; and

No accumulated losses based on its latest audited balance sheet as at the date od submission.

Sufficient level of working capital for at least 12 months.

LOCK-UP PERIOD Promoters’ entire shareholdings for six (6) months from the date of admission.

Subsequent selling down with conditions for companies listed under Infrastructure Project Corporation test.

Promoters’ entire shareholdings for 6 months from the date of admission, subsequent selling down with conditions.


FINANCIAL POSITION & LIQUIDITY

Sufficient level of working capital for at least 12 months;

Positive cash flow from the operating activities; and

No accumulated losses based on its latest audited balance sheet as at the date od submission.

Sufficient level of working capital for at least 12 months.

LOCK-UP PERIOD Promoters’ entire shareholdings for six (6) months from the date of admission.

Subsequent selling down with conditions for companies listed under Infrastructure Project Corporation test.

Promoters’ entire shareholdings for 6 months from the date of admission, subsequent selling down with conditions.


TRANSACTIONS WITH RELATED PARTIES

Must be based on terms and conditions which are not unfavourable to the company.

All trade debts exceeding the normal credit period and all non-trade debts, owning by the interested persons to the company or its subsidiary companies must be fully settled prior to listing.

Must be satisfactorily addressed before submitting any listing application to the Exchange.

Sponsor must ensure all trade debts exceeding normal credit period and all non-trade debts, owning by the interested persons to the company or its subsidiary companies must be fully settled prior to listing.

PLACE OF INCORPORATION

• Equivalent standards of laws and regulations

• Company making variations to its constituent documents to provide those standards.

APPROVAL OF REGULATORY AUTHOROTIES OF FOREIGN

JURISDICTION

• Prior approval of all relevant regulatory authorities at the jurisdiction(s) in which it is incorporated or carries out its core business operations before issuing its listing prospectus

REGISTRATION

• Must have been registered with the Registrar of Companies under the Companies Act 1965.

PRIMARY LISTING OF FOREIGN COMPANIES – (ADDITIONAL CRITERIA)

ACCOUNTING STANDARDS

• Standards under Financial Reporting Act 1997

AUDITING STANDARDS

• Standards applied in Malaysia or International standards in Auditing

TRANSLATION OF DOCUMENTS

• All documents to be submitted to the authorities, which are in a language other than English, must be accompanied by a certified English translation.

VALUATION OF ASSETS

• Standards applied in Malaysia or International Standards Valuation Standards

CURRENCY DENOMINATION

• Multi- currency quotation is allowed and applicant is required to obtain approval of the Controller of Foreign Exchange.

RESIDENT DIRECTORS

• Companies which have predominantly Malaysian-based operations must have majority of directors whose principal or only place of Residence is in Malaysia.

• .Companies which have predominantly foreign-based operations must have at least 1 director whose principal or only place of residence is in Malaysia

DECEMBER 2013 QUESTION 2(b)

The five (5) primary quantitative criteria that would be considered by the Securities Commission in evaluating the company’s suitability for listing on the Main Market of Bursa Malaysia.

ANSWERSASPECTS MAIN MARKET

PROFIT TEST Uninterrupted PAT of 3-5 full financial years with aggregate of at least RM20 million and

PAT of at least RM6 million for the most recent full FY

MARKET CAPITALISATION TEST

A total market capitalization of at least RM500 million upon listing, and Incorporated and generated operating revenue for at least 1 full FY prior to

submission.

IPO PRICE Minimum RM0.50 each

BUMIPUTERA EQUITY REQUIREMENT

Allocation of 50% of the public spread requirement to Bumiputera investors on best effort basis.

PUBLIC SPREAD At least 25% of the Company’s share capital and Minimum of 1000 public shareholders holding not less than 100 shares each

Auditing Standards• Standards

applied in M’sia or International Standards

Accounting Standards

• Standards under Financial Reporting Act 1997

• Eg: International Accounting Standards Board.

Registration• Must

registered with ROC under CA 1965

Approval of Regulatory

Authorities of FJ

• Prior approval before the issuing of listing prospectus in which it is incorporated

Valuation of Assets

• Standards applied in M’sia or in International Valuation Standards

Translation of documents

• Documents in language other than BM & English must be enclosed with BM or English translation.

Currency Denomination• Multi-currency

quotation is allowed

• Applicant has to get approval from Controller of Foreign Exchange

Listing Board

• Secondary Listing is allowed on Main Market only

MAIN MARKET

S e c o n d a r y L i s ti n g o f F o r e i g n C o m p a n i e s – Q u a l i t a ti v e C r i t e r i a

Additional Listing Criteria

Comply with criteria:• Primary listing on

MM of foreign stock exchange.

• Comply with listing rules of home exchange.

• Home exchange must have standards of disclosure rules.

Resident Directors

Predominantly Malaysian-based operations:• Majority of directors

whose principal/only place of residence is in Malaysia.

Predominantly foreign-based operations:• Have at least 1

director whose principal.

Place of

Incorporation

Equivalent standard of laws & regulations:• Corporate

governance• Shareholders &

minority interest protection

• Regulation of take-overs & mergers

Or,The company make variations to its constituent documents.

S e c o n d a r y L i s ti n g o f F o r e i g n C o m p a n i e s – Q u a l i t a ti v e C r i t e r i a

Listing Board• Allowed

on Main Market only.

L i s ti n g o f S p e c i a l P u r p o s e s A c q u i s i ti o n C o m p a n i e s

– K e y L i s ti n g C o m p a n i e s

IPO Price• Minimum

is RM0.50 each.

Minimum Fund Raised• RM 150

Million.

Qualifying Acquisition

• Must complete within 36 months from the listing date.

Management Team Ownership• Own in

aggregate, at least 10% in SPAC on the listing date.

Lock-up Period• Management

’s team interest from date of listing --> completion of qualifying acquisition.

MAIN MARKET

Place of Incorporation• Incorporate

d in Malaysia under CA 1965

• May be incorporated in jurisdiction outside Malaysia but must complied with all Additional Criteria for Primary Listing of Foreign Companies.

Management Team CredibilityHave experience, qualification and competence to:

• Achieve the SPAC’s business strategy

• Performs the individual roles & understand the nature of their obligations and SPAC.

Management of Proceeds

• Place at least 90% of gross proceeds raised in trust account

--> may only be released by custodian upon termination of trust acc.

• At least 80% of trust acc. amount to be used for qualifying acquisition.

L i s ti n g o f S p e c i a l P u r p o s e s A c q u i s i ti o n C o m p a n i e s

– K e y L i s ti n g C o m p a n i e s

A p p l i c a ti o n f o r P r o c e d u r e a n d A d m i s s i o n P r o c e s s

COMPANY

Initial Listing Applica

tion

BURSA MALAYSI

A

SECURITIES

COMMISSION

Approval

CCM

• M&A• Initial

Listing Application Form

• ProspectusProspectus

Public

Shares issued to the public

Shares admitted to Official List

P r o s p e c t u s

• An applicant seeking a listing must publish in full its prospectus and application forms in widely circulated local newspaper.

• Defines prospectus as: a notice, circular, advertisement/document inviting applications or offers to subscribe for or purchase securities/offering any securities for subscription/purchase.

• Every company shall lodge…. a copy of prospectus + any supplementary prospectus + a copy of form of application….to CCM on or before the issuance date.

Security Commission Act 1993

Section 36A (4)

M a tt e r s i n P r o s p e c t u s – 5 t h S c h e d u l e o f t h e A c t

PART 1 PART 2 PART 3

• Number of founders shareholders

• Number of qualification shares

• Names, descriptions & addresses of directors

• Particulars of shares• Nature of company’s

business• Time of the opening of

subscription lists• Amount payable on

application & allotment• Particulars of option• Numbers & amount of

shares & debentures issued within 2 preceding years

• Particulars of property transactions

• Amount of commissions payable

• Amount of preliminary expenses

• Rights of voting at meeting classes of shares respectively

• Dates, parties & general nature of every material contract.

• A report by an approved company auditor with respect to the profits & losses, assets & liabilities, & rates of dividends for each of the 5 FYs preceding the issue of the prospectus.

• A report by directors whether after due inquiry by them in relation to the interval between the last accounts date have been made up & date not later 14 days before the issue of the prospectus

i) The business & its subsidiaries has in their opinion been satisfactorily maintained

ii) In their opinion there are no circumstances arisen that will adversely affect the assets value

iii) The current assets of the corporation/ subsidiaries appear in the books at values which are believed to be realizable

iv) There are contingent liabilities by reason of any guarantees given by the corporation/its subsidiaries.

• A statement to the effect that the repayment of all moneys is secured by a first charge given to the trustee for the debentures holder to be issued in relation to the deposit/loan over land-vested corporation.

• A copy of a written valuation of the corporation’s interest in the land so mortgaged showing the nature and extent of the corporation’s interest.

• In every prospectus relates to debentures, there shall be included:

i) Particulars of the limitations on the amount that the corporation may borrow

ii) A statement as to the amount of subscription that are being sought

iii) A statement as to whether or not the corp reserves the right to accept/retain over-subscription & the limit on the right

iv) A statement as to whether or not the corporation has rights to create add. charges over assets charged to secure the repayment of deposits/loans which will rank in priority to pari passu with that charge.