Shareholders’ protection through the enhanced independent advice circular

Shareholders of a target company must be well informed of the merits of a takeover bid for their shares. The takeovers law requires the board of the bidder to provide all information necessary to enable the shareholders of the target to arrive at an informed decision. In addition, the board of the target company is also required to appoint an independent adviser to assist the shareholders in making their decision. The Securities Commission Malaysia (SC) has published a consultation paper in March 2010 with the aim of improving the quality of independent advice circulars. The SC suggests that when arriving at its opinion, an independent adviser should see that the takeover bid is “fair” and “reasonable”. The SC chooses to adopt the Australian approach which decouples the terms “fair and reasonable”. This article examines the criteria which are laid down by the SC for an offer to be “fair” and “reasonable”. It also examines the contents of independent advice circulars in Malaysia and their usefulness to the shareholders when assessing the merits of the bid

Unacceptable circumstances in takeovers

The board of the target should not apply defences that protect management at the expense of shareholders. Due to this reason, takeovers law does not only regulate takeover activities but it also focuses on the aspect of governance to ensure that the board of the target does not abuse its power. This will in turn ensure that the interest of shareholders, especially the minority, in circumstances where the control of a company is likely to change, is protected. This will indirectly protect the integrity of the securities markets with a view to maintaining investor confidence in the capital market. Section 217(5) of the Capital Market Services Act 2007 lays down the foundation of the Malaysian takeovers law. As a general rule, directors are tied up with the fiduciary duties they owe to a company. In addition to the fiduciary duties provided for in the Companies Act 1965, the Malaysian Code on Take-Overs and Mergers 1998 (‘the Code’) prevents the board of the target company from taking action which would have the effect of frustrating a takeover bid. It prohibits the board of the target from taking suchactions, whether during the course of an offer or even before the date of the offer if they have reason to believe that a bona fide offer might be imminent, unless they have obtained their shareholders’ approval. This paper seeks to examine in detail the conduct of the board of the target which may amount to frustration of a takeover bid in Malaysia. Further, this paper will examine the various conducts which may constitute unacceptable circumstances in takeovers. In order to shed some light upon the discussion, the Australian experience on frustration and unacceptable circumstances will be referred to. This paper will also discuss the emerging devices in takeovers and mergers deal which are currently gaining popularity in Malaysia and examine on whether such devices will amount to a frustrating action. The discussion thus will focus on deal protection measures which will include lock-up devices and break fees agreement

An analysis on the legal framework for disclosure in prospectus and the standard of disclosure in determining takeovers and mergers activities post IPO

Initial public offering (IPO) is the maiden issue of shares by a public company. The decision to go public is motivated by several motives and justifications including a motive to pursue a takeover or merger. It is crucial for the investors to predict the possibility of takeovers and mergers after IPO, so that they could make an informed decision in placing their investment. The material and relevant information contained in a prospectus relating to the IPO company could assist the investors to predict the likelihood of takeovers and mergers post IPO. Hence, this paper investigates the relevant and material information that are needed by the investors to predict the likelihood of a takeover or merger post IPO. This paper also analyse the standard of disclosure required in prospectus for initial public offering in order to determine whether the information compelled for disclosure can be used by investors to predict the likelihood of takeovers and mergers post IPO. For this purpose, the laws and regulations on capital market and securities industries as contained in the Capital Markets and Services Act 2007 and Prospectus Guidelines is analysed. The guidelines for the offering of electronic prospectus are also discussed in order to shed light on the duties of the host of e-prospectus and the safeguards for investors. The result of the study shows that the standard of disclosure in prospectus allow the investors to predict and anticipate the likelihood of takeovers and mergers post initial public offering

Competition law in Malaysia: issues and challenges in regulating market behaviour

The fundamental objective of competition law is to protect the process of rivalry between firms in the market. It prohibits any anti-competitive behaviour such as cartel, abuse of dominant position and mergers that have the effect of lessening competition. However, in practice regulating firms' behaviours in the market is not an easy task. It requires both legal and economic analysis to determine which conducts are or are not allowed under the competition law regime. This paper seeks to identify and analyse the important provisions of "anti-competitive agreements" and "abuse of dominant position" under the Malaysian Competition Act 2010 (CA). It is observed that the CA has been heavily influenced by the UK and EU competition law. Despite the similar concepts applied, the actual implementation of the law may differ. This paper seeks to explore the issues and challenges that the Malaysian competition authority might be facing in enforcing competition rules which are largely drawn from foreign ideas

E-hailing services: antitrust implications of uber and grab`s merger in Southeast Asia

Uber-Grab’s merger had attracted antitrust scrutiny by competition authorities in Southeast-Asia. The merger between the two had created a large giant company that provides various services through a platform such as ridesharing and food delivery services. According to the deal, Grab will take over Uber’s assets (ridesharing and food delivery service), and in return, Uber will take a 27.5 percent stake in Grab. Although Grab claimed that the merger would create a cost-efficient platform in Southeast Asia and put it in a better position to serve consumers, there was a genuine concern that the merger will reduce competition in the market and provide incentives to Grab to engage in anti-competitive behaviour such as increasing the price of its services. This article aims to analyse how different countries in Southeast Asia responded to the Uber-Grab’s merger and measures taken to address competitive concerns ex-ante and ex-post-merger. Unlike other competition jurisdictions in Southeast-Asia, the Malaysia Competition Act 2010 contains no merger control provision, which empowers the Malaysian competition authority to block any merger that has the effect of substantially lessening competition. The studies on how other countries evaluated the Uber-Grab merger could assist Malaysia’s competition authority to regulate the future behaviour of the big digital platform in the Malaysian market. This article was written based on research that relies on both primary and secondary sources. Primary sources include statutory provisions on competition, decision, proposed decision, interim measures, and others. while secondary sources include journal articles, news, internet resources, and others. The article also adopts a comparative approach in order to analyse the approaches and measures taken by the various merger control regimes in Southeast Asia in dealing with the Uber-Grab’s merger