Mei Ling runs a young farming-technology business. She wants to raise money from a small group of experienced investors, without the cost and effort of a full public offering. She needs funds to build her first commercial vertical farm and to develop her crop-monitoring technology, and a listing would also give her business more credibility with customers and future investors. The LEAP Market was designed for companies like hers. This guide explains how it works and what she will need to do, using Mei Ling’s business as an example along the way.
Bursa Malaysia’s LEAP Market is an adviser-driven market built for emerging companies, with a simpler and lower-cost route to listing than the Main Market or ACE Market. It is a “qualified market”, open only to Sophisticated Investors (such as high-net-worth individuals and institutional investors). A company can list either by issuing new securities without a prospectus (an “excluded issue”) or by listing its existing shares without raising new money (an “introduction”).
Listing Requirements
A. Listing Factors
Mei Ling’s first step is to appoint an Approved Adviser, who will guide her through the process and decide whether her business is ready.
For a LEAP Market listing, the company must be assessed by an Approved Adviser. The Approved Adviser must decide whether the company is suitable for listing, taking into account its business, operations, industry, future plans, past financial information, corporate governance record and conflicts of interest, and whether the listing would go against the public interest.
Clearly identifiable core business
For Mei Ling, this would be growing and selling produce using her farming technology.
The company should have a clearly identifiable core business.
No unresolved conflicts of interest
For example, if Mei Ling’s family owns the land the farm operates on and leases it to the company, the arrangement would need to be reviewed and dealt with properly.
Any actual or potential conflict of interest should be properly resolved, eliminated or reduced before listing.
Good corporate governance
The Approved Adviser will look not only at Mei Ling’s company but also at her own track record and that of her major shareholders.
The company, its substantial shareholders, directors and key management should have a satisfactory corporate governance record.
Public interest
Admitting the company to the LEAP Market should not go against the public interest.
Adequate disclosure
This is one of the main attractions for Mei Ling: she does not need to prepare a full prospectus.
The company discloses its prospects and other relevant information in an information memorandum, rather than a prospectus. The information memorandum should contain key information on the company’s business, future plans, risks, financial information, conflicts of interest, related party transactions, promoters, directors, key management, how the money raised will be used and moratorium (lock-up) arrangements.
B. Admission Requirements
On top of the listing factors above, the company must meet the formal admission requirements for the LEAP Market. These are mainly found in the LEAP Market Listing Requirements issued by Bursa Malaysia Securities Berhad.
Approving authority and Approved Adviser
If Mei Ling’s business is currently a private limited company (Sdn Bhd), it will first need to convert into a public company (Berhad).
Bursa Malaysia Securities Berhad approves admission to the LEAP Market. The company must be a public company incorporated in Malaysia and must apply through an Approved Adviser, who must also assess it as suitable for listing.
Qualified market for Sophisticated Investors
This fits Mei Ling’s plan to raise money from a small group of experienced investors rather than the general public.
The LEAP Market is a qualified market open only to Sophisticated Investors. All securities offered or issued as part of the listing must go only to the company’s existing securities holders or to Sophisticated Investors, in line with Schedule 6 or Schedule 7 of the Capital Markets and Services Act 2007.
No SC approval required
For Mei Ling, this means dealing with one approving authority instead of two.
Listing on the LEAP Market does not need approval from the Securities Commission Malaysia (“SC”). Bursa Malaysia Securities Berhad is the only approving authority for a first-time listing application on the LEAP Market. However, the company must still deposit (file) a copy of its information memorandum with the SC.
No minimum operating track record or profit requirement
Mei Ling’s business is young and not yet profitable, but that does not stop her from listing here.
The LEAP Market has no minimum requirement on how long the company has been operating or how much profit it has made. However, its Approved Adviser must still assess it as suitable for listing.
Core business
Mei Ling runs her own farming operations, so her business should not be treated as an investment holding company or an incubator.
The company must have a clearly identifiable core business. It will not be considered suitable for listing if it is an investment holding company with no current or planned business operations within its group, or if it is an incubator (including a technology incubator). Further restrictions apply if the company is a subsidiary or holding company of a company listed on the Main Market or ACE Market.
Public spread
For example, if Mei Ling’s company lists 100 million shares, at least 10 million must be held by public shareholders. This is a much lower threshold than the 25% generally needed on the Main Market and ACE Market.
At least 10% of the ordinary shares being listed must be held by public shareholders at the time of admission.
Securities that may be listed
The company can issue and list ordinary shares, preference shares and convertible securities (securities that can be converted into shares) on the LEAP Market. If it issues convertible securities, it must comply with Part F of Chapter 5 of the LEAP Market Listing Requirements.
Mode of listing
Because Mei Ling wants to raise new money, she would most likely list through an excluded issue.
A company that only wants its existing shares listed, without raising funds, could choose an introduction instead. A company can list on the LEAP Market by issuing new securities through an excluded issue, or by listing its existing securities through an introduction. In an excluded issue, the company may distribute its securities by public offer, placement, book building or a combination of these methods.
Placement of securities
Where securities are placed with investors, the Approved Adviser must avoid any conflict of interest. It must not allow securities to be placed with nominee companies unless the names of the ultimate beneficiaries are disclosed.
Moratorium on promoters’ shares
As the founder, Mei Ling is likely to be treated as a promoter, so this lock-up would apply to her. In total, it could last 4 years or longer.
A moratorium is a lock-up period during which certain shareholders cannot sell their shares. On the LEAP Market, it applies to promoters. Generally, promoters cannot sell, transfer or assign any of their shares for 12 months from admission. After that, shares equal to at least 45% of the company’s total issued shares must stay under moratorium for another 36 months. This restriction may continue for longer if the company has not generated one full financial year of operating revenue.
Prior approval before collecting subscription monies
Even if investors are keen to commit early, Mei Ling must wait for Bursa Malaysia’s approval-in-principle before collecting their money.
The company must not collect money from investors for its securities, or allot new securities to any investor, until Bursa Malaysia has given its approval-in-principle (in-principle approval) for admission to the LEAP Market.
Information memorandum and admission procedures
The company must issue its information memorandum and deposit it with the SC, and submit its listing application, information memorandum and supporting documents to Bursa Malaysia.
Trust account for subscription monies
This means Mei Ling cannot spend the money raised on her new farm until the company is listed, except as allowed under the LEAP Market Listing Requirements.
All money received from investors for their securities must be kept in a trust account with a licensed financial institution, jointly operated by the company and a custodian. The money cannot be withdrawn until the listing date, except in the circumstances set out in the LEAP Market Listing Requirements.
Continuing Adviser
Mei Ling will continue to have an adviser by her side after listing.
The company must keep a Continuing Adviser for at least 3 full financial years after admission to the LEAP Market, or for at least 1 full financial year after it starts generating operating revenue, whichever is later. The Approved Adviser that submitted the admission application must also act as Continuing Adviser for at least 1 full financial year after admission.
Conclusion
For Mei Ling, the LEAP Market offers a way to raise money from experienced investors and build her company’s profile without the cost of a full public offering. In return, she will need an Approved Adviser before listing and a Continuing Adviser after it, a properly prepared information memorandum, and a long lock-up on her own shares. Companies considering a LEAP Market listing should speak to an Approved Adviser early and work with their advisers to confirm which requirements apply to them.
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