KUALA LUMPUR: The Securities Commission of Malaysia (SC) has abolished the minimum threshold of a 50% equity stake requirement for takeovers initiated by way of a scheme of arrangement.

A scheme of arrangement is essentially a court-approved agreement between a company and its shareholders or creditors. Such schemes of arrangement are used to execute arbitrary changes in the structure of a business, and may be used for purposes like debt rescheduling, takeovers and returns of capital.

Following the amendment, a party with less than 50% shareholding in a company can now embark on a scheme of arrangement takeover.

The new regulation is contained in a new rule book the SC launched yesterday on the revised Takeovers and Mergers Framework. The revision is to facilitate market activities “in a fast-changing market environment, while ensuring appropriate shareholder protection”, it said in a statement.

The rule book, titled “Rules on Takeovers, Mergers and Compulsory Acquisitions 2016”, is now in force, together with the revised Malaysian Code on Takeovers and Mergers 2016. The documents are to provide clearer guidance on required conduct during a takeover offer.

In announcing the new rule book, the SC also said “sizeable unlisted public companies” will be subject to the code, that is companies with over 50 shareholders and net assets of at least RM15 million.

“We are no longer looking at small transactions. Prior to the enhancement, every deal is subject to our approval,” a spokesperson from the SC told The Edge Financial Daily over the phone. “The enhancement will also facilitate corporate privatisation,” the spokesperson added.

The SC said these revisions were in line with its efforts to move towards a proportionate regulatory regime.

“These amendments were sought to ensure that the takeover framework will be facilitative to commercial realities, while providing protection to shareholders where required,” the securities regulatory body said.

The SC added that it worked with market practitioners and investors to ensure the incorporation of the markets’ view in the formulation of the enhanced framework. The rule book is issued as an SC guideline under section 377 of the Capital Markets and Services Act 2007.

This was the second “liberalisation” move initiated by the SC. Last month, the regulator released a consultation paper seeking public feedback on its proposed enhancements to the real estate investment trusts (REIT) guidelines, as part of its efforts to facilitate growth of the market, while promoting stronger governance and efficiency.

Should the enhancements be passed, local REITs will be able to buy vacant land and engage in property development activities.