When a listed company has cash and short term investments, making up at least 70% of its consolidated assets (this condition is referred to as “Cash Criterion”), it has to notify Bursa Malaysia immediately. Bursa will determine if this company is considered a “Cash Company”.
In most cases, the listed company will need to determine if it will trigger Cash Criterion when it disposes a major part of its group assets or core businesses.
While the definition of cash is easily understood, short term investments are those investments that are by their nature readily realizable and intended to be held for 12 months or less.
In general, Bursa will decide if the listed company’s level of operations is adequate to warrant continued trading or listing on the Exchange. If Bursa decides that the level of operations is inadequate, the listed company will be considered a Cash Company.
To determine if a listed company is having inadequate level of operations, possible circumstances are as follows:-
- As mentioned above, the combination of cash and short term investments making up at least 70% of consolidated assets; or
- The listed company has suspended or ceased all or major part of the business. Some examples include cancellation or non-renewal of licenses, concessions or any other rights, or a court judgment prohibiting the listed company to operate its major operations on grounds of copyright/patent etc.
Practice Note No. 16/2005 or PN16 in short, is issued by Bursa to address Cash Companies, deciding whether to maintain the company’s listing status or proceed with de-listing exercises. During this period as a Cash Company, the listed company is obliged regularize its condition by:-
- Submiting a proposal to regularize its condition; and
- Upon approval from relevant authorities, the listed company must implement its proposal within the timeframe approved by the relevant authorities.
A Cash Company that fails to regularize its condition or its proposal is rejected by the authority, will face the situation where its shares and securities will be suspended and subsequent de-listing procedures will commence.
