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Due diligence requirements
What due diligence is necessary for buyers?
Legal, financial and tax due diligence is carried out for most transactions. Business due diligence may be carried out to determine the viability and business prospects of the target.
What information is available to buyers?
The following information is in the public domain and available to buyers:
- documents lodged with the Companies Commission of Malaysia, including:
- memorandum and articles of association;
- annual returns;
- audited financial statements;
- certificates of incorporation;
- returns on allotment of shares;
- returns giving particulars in register of directors, managers, secretaries and changes of particulars; and
- notices of situation of registered offices and office hours and particulars of changes;
- where the target is listed on the Malaysia stock exchange, documents and information lodged pursuant to the Bursa Malaysia Listing Requirements, including:
- audited accounts; and
- prospectuses; and
- documents filed with the courts for purposes of litigation (eg, statements of claim and defence), provided that the suit number is known.
Information not in the public domain can be made available only by the target.
What information can and cannot be disclosed when dealing with a public company?
The offer must be put forward to the board of the offeree before the offer is announced to the public.
If the offer or an approach with a view to an offer being made is not made by the ultimate offeror or potential offeror, as the case may be, the identity of the ultimate or potential offeror must be disclosed at the outset to the board of the offeree.
The board of the offeree is entitled, in good faith, to make enquiries to satisfy themselves that the offeror will be able to implement the offer.
Before the announcement of an offer or possible offer, all persons privy to any confidential information relating to a takeover offer or proposed takeover offer, particularly price-sensitive information, must treat the information as secret and may pass it to another person only if it is necessary to do so and if that person is made aware of the need to maintain the confidentiality of the information.
The contents of the offer document must comply with the Rules on Takeovers, Mergers and Compulsory Acquisitions.
How is stakebuilding regulated?
Stakebuilding for public companies is regulated by the Code on Takeovers and Mergers 2016, Rules on Takeovers, Mergers and Compulsory Acquisitions and the Companies Act.
A mandatory offer is triggered where the acquirer:
- has obtained control of the target; or
- holds more than more than 33% but no more than 50% of the voting shares or voting rights of the company and acquires more than 2% of the voting shares or voting rights of the target in any six-month period.
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