Issuing Securities for Unlisted Companies in Malaysia: Investors Must Know

In Malaysia, capital markets are regulated and developed by the Securities Commission (“SC”) under the Securities Commission Act 1993 (“SCA”). As outlined in the Capital Markets and Services Act 2007 (“CMSA”), ‘securities‘ encompass various forms such as debentures, stocks, bonds, shares, or unit trusts. These fall under the umbrella of ‘capital market products’ regulated by the SC under the CMSA. Companies often issue securities throughout their lifespan for diverse purposes, primarily to raise capital and support business operations, thereby enhancing their capital structure and improving liquidity and marketability. While some securities are publicly traded on Bursa Malaysia, Malaysia’s stock exchange, others are issued by unlisted companies and are not publicly traded.

At present, an unlisted public company (“UPC”), whose shares are not listed and is not intended to be listed on the stock market of the stock exchange, is not obligated to secure prior authorization from the SC under Section 212 of the CMSA for the offering of its shares.[1] However, investors must still be aware that securities that are offered by UPC is subject to certain requirements by the SC. As an example, there are specific guidelines if UPCs are offering shares to a person determined to be a Sophisticated Investor[2] or to those who acquire shares pursuant to a private placement above RM250,000. Under the Capital Markets and Services (Amendment of Schedules 5, 6 and 7) Order 2021 and Guideline on Categories of Sophisticated Investors (SC-GL/1-2024), a Sophisticated Investors can be categorised as Accredited Investors, High-Net Worth Entities or High-Net Worth Individuals.[3] Sophisticated Investor must take the responsibility to make self-declaration at the point of onboarding that he satisfies the relevant criteria of a Sophisticated Investor.[4]

Upon establishing that an individual qualifies as a Sophisticated Investor or acquires shares through a private placement exceeding RM250,000.00, the UPC has the option to issue an information memorandum (“IM”). While the CMSA does not enforce the issuance of an IM, UPCs opting to provide an IM for offering their shares to Sophisticated Investors must deposit it with the SC and Sophisticated Investors are encouraged to request for such IM.[5]

It is crucial for investors to be aware that when they receive an IM from a UPC, it must include a caution statement on the cover page. This statement explicitly states that although the IM is lodged with the SC, the SC’s approval is not required for the offering mentioned in the IM. Additionally, this statement serves as a reminder to sophisticated investors that they are responsible for conducting their own assessment regarding the share offerings, as the SC does not review the offering or the IM.

Investors should also be mindful that offerings promoted via phone calls, seminars, or videos on social media platforms, targeting both sophisticated and retail investors, can only proceed if the agent company appointed by the UPC holds a Capital Markets Services Licence to deal in securities. This licensing requirement ensures that investors are protected and that proper regulatory oversight is maintained throughout the offering process.[6] Finally, UPCs are also required to submit a post-issuance notification and post-issuance update report.[7] This report can be requested by the investor to ensure the UPC has fulfilled the reporting requirement imposed by the SC.

Investors should be cognizant that the aforementioned regulations apply specifically to investors qualifying as Sophisticated Investors. Under Schedule 6 of the CMSA, Sophisticated Investors forms a large part of persons who unlisted companies are allowed to exclude offer or invitation on the basis that these pool of investors are assumed to possess a higher level of financial knowledge and has greater access to resources like financial advisors to guide and assist their investment opportunities. Conversely, retail investors are subject to different requirements. Retail investors must ensure that the UPC has issued a prospectus for the securities and has duly registered it with the SC, as stipulated in Section 232 of the CMSA as it aims to ensure transparency and provide retail investors with necessary information for informed decision-making. However, there are exclusions for offers and invitations apart from Sophisticated Investors listed under Paragraph D, Part II, Schedule 6 of the CMSA, with significant ones being any private placement for an acquisition of not less than RM250,000.00, rights issue or offers of securities made to existing shareholders of a company and offers of securities made to a company’s employees as part of an incentive scheme e.g. Employee Share Option Schemes.

A prospectus serves as a comprehensive document containing essential information that potential investors require to make well-informed decisions regarding their investment in a security.[8] The SC has issued Prospectus Guidelines outlining the requisite contents and procedures for the registration of such prospectus.[9] It is imperative that these guidelines are adhered to and that the prospectus is registered with the SC prior to the offering of securities to investors, ensuring transparency and investor protection in the capital market.

The process for UPCs to offer securities to retail investors is intentionally challenging. However, the same cannot be said for Sophisticated Investors, as the SC has introduced updates to its guidelines. The updated Guideline on Categories of Sophisticated Investors, issued on 5 February 2024, redefines Sophisticated Investors. Previously, emphasis was primarily placed on quantitative measures such as an individual’s income or assets.

However, the new guideline introduces the ‘Knowledge and Experience’ category, which prioritizes an individual’s academic qualifications and professional experience over purely financial metrics. This progressive approach enables individuals without substantial financial assets to participate in market offerings if they possess a deep understanding of financial concepts and capital markets. Prospective investors under this category are evaluated based on their educational background, membership in recognized financial associations, and practical experience in relevant sectors like banking, capital markets, or insurance.

By acknowledging the significance of financial literacy and expertise, the SC has fostered a more inclusive investment environment, allowing a broader range of individuals to engage in market opportunities.


Authors: Aryn Rozali & Maryam Amilah Zaini

Published Date: 26 March 2024

[1] Guidelines on Offer of Shares by Unlisted Public Companies to Sophisticated Investors, Part 1.02

[2] Guidelines on categories of sophisticated Investors SC-GL/1-2021 (R2-2024)

[3] Categories of Sophisticated Investors can be viewed here:

[4] Guideline on Categories of Sophisticated Investors (SC-GL/1-2024), Part 7.02

[5] Guidelines on Offer of Shares by Unlisted Public Companies to Sophisticated Investors, Chapter 5.02

[6] Guidelines on Offer of Shares by Unlisted Public Companies to Sophisticated Investors, Chapter 6.01

[7] Guidelines on Offer of Shares by Unlisted Public Companies to Sophisticated Investors, Chapter 7.02

[8] Prospectus Guidelines, Part II

[9] Prospectus Guidelines, Part III