When a company listed in Bursa Malaysia has cash and short-term investments, representing at least 70% of its consolidated assets (this condition is known as the “Cash Criterion”), it must notify Bursa Malaysia immediately. Bursa will determine if this company is considered a “Cash Company”.
In most cases, the publicly traded company will need to determine whether to activate Cash criterion when you have a significant part of the assets of your group or core businesses.
While the definition of cash is easily understood, short-term investments are those investments that, by their nature, are readily achievable and are intended to be held for 12 months or less.
In general, Bursa will decide whether the company’s level of operations is adequate to ensure continued trading or listing on the Stock Exchange. If Bursa decides that the level of operations is inadequate, the listed company will be considered a cash company.
To determine if a publicly traded company has an inadequate level of operations, the possible circumstances are as follows:
- As mentioned above, the combination of cash and short-term investments that represent at least 70% of the consolidated assets; gold
- The company has suspended or ceased all or most of the business. Some examples include the cancellation or non-renewal of licenses, concessions or any other right, or a court ruling that prohibits the company from operating its main operations for copyright / patent reasons, etc.
Practical note No. 16/2005 or PN16 in short, it is issued by Bursa to address cash companies, deciding whether to maintain the company’s listing status or continue with the de-listing exercises. During this period as a Cash Company, the listed company is obliged to regularize its status by: –
- Submit a proposal to regularize your condition; Y
- Following approval by the relevant authorities, the listed company must implement its proposal within the timeframe approved by the relevant authorities.
A Cash Company that does not regularize its condition or its proposal is rejected by the authority, will face the situation in which its shares and securities will be suspended and subsequent cancellation procedures will begin.
