On 15 August 2015 the Yangon Stock Exchange (“YSX”) Board of Directors published preliminary listing guidelines (“Listing Guidelines”) for public companies to list on the yet-to-be-launched YSX. The guidelines are stated as “minimum requirements” for listing and each listing applicant company will be assessed on a case by case basis to ensure the listing is “safe for the interests of the public”.
While these Listing Guidelines are a positive sign that the YSX is on track to open at the end of 2015 as scheduled, more details of the listing requirements and trading requirements will be needed to bring the YSX legal framework up to an international standard.
For example, international best practice requires a minimum float to be set for listed companies. Myanmar can look towards its ASEAN neighbors for examples of minimum floats:
- Cambodia, which launched the most recent stock exchange in Southeast Asia in 2011, set a minimum float requirement of 15%.
- Thailand’s well-established stock exchange has a minimum float requirement of between 10% and 25%.
The minimum requirements set by the Listing Guidelines state that the applicant company be a public company registered under the Myanmar Companies Act. This represents a stumbling block for foreign companies wishing to list on the YSX as foreign public companies are limited to establishing branch offices. For companies that are eligible, there are further standards that must be met to be listed on the stock exchange.
Companies must comply with the following:
- Must have been profit-generating during the past two years (although the threshold of acceptable profit is not stipulated);
- Have a minimum of 100 shareholders;
- Have paid-up capital of at least MMK 500 million (approximately USD 415,000 on the application date). There is no need to contribute to a YSX reserve account;
- Must have a “stable income”;
- Must establish a system to prevent insider trading;
- Must appoint a compliance officer to oversee the compliance of laws, rules and regulations and conduct book keeping and auditing in line with the standards of Myanmar.
The Listing Guidelines stipulate additional qualification criteria for the directors of a public company such as ethical principles that directors are required to adhere to; such as avoiding conflicts of interest. While these requirements are a step in the right direction, one of the major shortcomings of the guidelines is the lack of provisions detailing post-listing operational and trading requirements such as shareholders and stakeholders’ rights protection and reporting details. There is a vague requirement for public companies on disclosure of information, and no requirement on publishing quarterly accounts or major transactions. Additionally, there is nothing in the guidelines on shareholder voting or annual general meetings. While Myanmar has 105 public companies, only a handful of companies are eligible to be listed on the stock exchange.
Despite these challenges, there are already three companies that have committed to listing on the YSX when it launches: AGD Bank, First Myanmar Investment, and Myanmar Agri-Business Public Company (MAPCO).
According to Myanmar officials, the terms and conditions relating to the issue of new securities by the public companies will be announced at the end of August and applications beginning to be accepted in early September. Under section 35 (a) of the Security Exchange Law of 2013 the Securities Business Supervising Commission must make the relevant decision on an application within 60 days.
William D. Greenlee Jr.
* The information contained in this legal update is provided for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.