Part V Rights Issues
814(1) An issuer which intends to make a rights issue must announce (having regard to Rule 704(24)) the issue promptly. The announcement must include the following:(a) on the first page, to be presented in the following format:
Principal Terms of the Issue Description Price Discount (specifying benchmarks and periods) Allotment Ratio Use of Proceeds Purpose of Issue(b) terms of the issue;(c) the amount of proceeds proposed to be raised from the issue;(d) the intended use of such proceeds on a percentage allocation basis (which could be expressed as a range if the exact allocation has not been determined);(e) where the issue is proposed to be used mainly for general working capital purposes, the issuer must provide reasons for such use taking into account its working capital position;(f) whether the issuer's directors are of the opinion that, after taking into consideration:(i) the group's present bank facilities, the working capital available to the group is sufficient to meet its present requirements and if so, the directors must provide reasons for the issue; and(ii) the group's present bank facilities and the net proceeds of the issue, the working capital available to the group is sufficient to meet its present requirements, unless the directors have opined, pursuant to Rule 814(1)(f)(i) above, that, after taking into consideration the group's present bank facilities, the working capital available to the group is sufficient to meet its present requirements."Present requirements" in this Rule 814(1)(f) includes the transaction which will be funded (in whole or in part) by the net proceeds of the issue;(g) whether the issue will be underwritten;(h) the financial circumstances which call for the issue;(i) whether it has obtained a listing and quotation notice from the Exchange or will be seeking the listing and quotation of the new shares arising from the rights issue;(j) a statement from the issuer's directors on why the issue is in the interest of the issuer and their basis for forming such views including the factors taken into consideration in arriving at any discount; and(k) if the issuer undertakes the issue within 12 months from its previous equity fund raising, the following details of each fund raising exercise undertaken in the past 12 months:(i) description of equity funds raised;(ii) date of issue of new securities;(iii) amount raised (both gross and net);(iv) amount utilised and breakdown on use of proceeds; and(v) amount not utilised and how it is intended to be used.The issuer should make a negative statement if there is no such previous equity fund raising.In addition, an issuer must observe the disclosure requirements in Appendix 8A.(2) If a rights issue involves an issue of convertible securities, the issuer must also comply with Part VI of this Chapter.(3) In the allotment of any excess rights shares, a confirmation to the sponsor that preference will be given to the rounding of odd lots. Directors and substantial shareholders who have control or influence over the issuer in connection with the day-to-day affairs of the issuer or the terms of the rights issue, or have representation (direct or through a nominee) on the board of the issuer will rank last in priority for the rounding of odd lots and allotment of excess rights shares.
816(1) Subject to Rule 816(2), a rights issue must provide for the rights to subscribe for securities to be renounceable in part or in whole in favour of a third party at the option of the entitled shareholders.(2)(a) An issuer can undertake non-renounceable rights issues:—(i) subject to specific shareholders' approval; or(ii) in reliance on the general mandate to issue rights shares in a non-renounceable rights issue if the rights shares are priced at not more than 10% discount to the weighted average price for trades done on the Exchange for the full market day on which the rights issue is announced. If trading in the issuer's shares is not available for a full market day, the weighted average price must be based on the trades done on the preceding market day up to the time the rights issue is announced.(b) The non-renounceable rights issue must comply with Part V of Chapter 8 except Rule 816(1).
An issuer may make a rights issue with or without underwriting. Generally, it is for the issuer to decide whether its rights issue is to be underwritten.
In the case of a rights issue that is underwritten, any force majeure clause in the underwriting agreement cannot be invoked after the commencement of ex-rights trading.
819(1) An issuer must seek the Exchange's prior approval if it decides to proceed with a rights issue without underwriting because the force majeure clause in the underwriting agreement was invoked before commencement of ex-rights trading.(2) Upon receipt of the Exchange's approval, the issuer must announce immediately that the rights issue will proceed without underwriting.
The following requirements apply to a rights issue that is not underwritten:(1) The rights issue cannot be withdrawn after the commencement of ex-rights trading.(2) The Exchange may permit the issuer to scale down a shareholder's application to subscribe for the rights issue to avoid placing the shareholder in the position of incurring a mandatory bid obligation under the Takeover Code as a result of other shareholders not taking up their rights entitlement fully.
No record date must be fixed until the Exchange has issued a listing and quotation notice in respect of the rights issue.
An issuer must issue the following to persons entitled within 3 market days (within 5 market days in the case of a scrip counter), or such longer period as the Exchange may approve, after a record date:(1) Letter of Entitlement, if any;(2) Application Forms for rights shares and excess rights shares ("ARE"). In the case of a rights issue of warrants, warrant and excess warrants application form ("WAF" or "WEWAF");(3) Provisional Allotment Letters ("PALs") for shareholders whose names appear on the share register, incorporating item (2) as well as:(a) Form of Acceptance;(b) Request for Splits;(c) Form of Renunciation;(d) Form of Nomination;(e) Excess Shares Application Form; and(4) Such other documents as the Exchange may require.
823(1) An issuer making a rights issue must, having regard to Practice Note 8A, provide a proposed time-table to the Exchange showing the following dates:(a) record date to determine rights entitlement;(b) commencement of trading of nil-paid rights;(c) last day for exercise and payment of rights; and(d) last day for receipt and acceptance of SRAFs.(2) An issuer making a rights issue must observe any time-table published by the Exchange.