By Pyae Phyo Aung (Ministry of Planning, Finance and Industry)
A listing on a stock exchange refers to the company’s shares being admitted on the board of stock exchange that are officially traded by a large number of investors including individuals and institutional investors in the market. Once a company’s shares are listed, the shares will be available for investment to general public. An applicant company is required to know listing criteria, a set of basic requirements or standards for a public company for listing on YSX. Listing criteria differ among stock exchanges in the world, however, it serves the same purpose which is to ensure qualify shares for the investors. An applicant company must follow 17 criteria issued by YSX to list on YSX.
Whether or not a public company lists on YSX, understanding criteria enables not only to improve the company, but it also to be well prepared for listing on the stock market in the future.
Preparing for listing on the stock exchange is not easy as expected. To be able to meet the criteria in a short time is not possible, but it has to take time for at least one year. It can be known by learning six listed companies.
Emergence of 17 criteria
YSX issued the criteria, a set of basic requirements or standards for a public company for listing on YSX when YSX started operation in December in 2015. 16 criteria came from Japanese advisers who provided technical assistance. Officials concerned made minimal amendments to some criteria and supplemented a new criterion to be appropriate for the country. At that time these criteria were criticized for being lessened too much when they were compared with those from neighbouring countries. Now 17 criteria corresponding with the current status of stock exchange have become official basic standards.
The companies listed on YSX are six in total and these companies had to make preparations to be in line with the official criteria. They received permissions only after they were scrutinized.
The first criterion states that an applicant company must be a public company formed in accord with Myanmar Companies Act. The public companies formed with the 1950 Special Companies Act are also entitled to the first criterion. One out of the six listed companies is a public company constituted with the 1950 Special Companies Act.
The second criterion describes number of shareholders that the applicant company shall have at least 100 shareholders and above. It means that the number of shareholders must be according to the said number by the date of the official listing.
This is because the applicant companies can do initial public offering and they can issue and sell out shares to their employees. The initial founders of the six listed companies had to begin applying for the YSX listing with the lesser number of shareholders and they had to perform these measures said above until the date of official listing.
The third criterion states that paid-up capital shall be the minimum of 500 million kyats on the date of application. This benchmark is a small amount for some companies, but it is aimed at improving small-and- medium enterprises having competitiveness and development potential.
The fourth criterion says that it shall have the profit at least two years during the period of before the date of application. The profit means that a sum of money exceeding zero coming from the addition of loss and profit. The fifth criterion describes that the business shall have the stable basic income and conduct in accordance with the existing laws.
The sixth criterion mentions that the Board of Directors and the heads of the company shall be in good character and not have been punished by a court, in addition, have not been facing any lawsuits. They shall perform their duties and responsibilities with well-prepared, in good-faith and fairly in line with the laws.
The seventh criterion expresses that the Board of Directors and the heads of the company shall not act any deceptive manners by the public for the interest of the company and self-interest. It is required to be a company performing the tasks in accordance with rules and regulations, orders and directives. The eighth criterion says that each Director of the public company shall not do any business which has the same interest carrying out by the public company, except with the approval of Shareholder meeting.
The ninth criterion describes that the company, the Board of Directors and the heads of such company shall not be included in the black list of any public and government organizations. The tenth criterion states that book-keeping of accounts and auditing of the company shall be undertaken in accordance with the Myanmar Financial Reporting Standards (MFRS) and International Financial Reporting Standards (IFRS). The accounts must be kept in accordance with the directives of Myanmar Accountancy Council. When the accounts are submitted to the Yangon Stock Exchange, any budget report must be Unqualified Opinion or Qualified Opinion of the external auditor.
The eleventh criterion points out that the company shall fulfill tax duties in accordance with existing tax laws of Myanmar.
The twelfth criterion mentions that the disclosure of relevant corporate information and the facts that the public should be known, shall be disclosed and submitted to the Securities Exchange Commission of Myanmar and Yangon Stock Exchange, besides it shall be disclosed and announced to the public by means of easy understandable and best suitable ways in timely manner. For disclosure of corporate information, it shall prescribe especially and precisely on the matters which have a considerable impact on investment decisions of the investors, such as the risk factors for the potential loss and the basic potential business activities.
The thirteenth criterion indicates that it shall set up an effective system to comply with laws, rules and regulations by appointing the compliance officer. The fourteenth criterion shows that it shall have business plan containing business design, business process environment and the risk factors. It is required to draft the business plan from the year of submitting application until next five years. It must be reviewed year on year.
The fifteenth criterion describes that it shall set up a system to prevent the insider trading as the stock share market plays a major role. The awareness of laws, rules and regulations as to the share trading shall be raised among all the staffs including members of board of directors and managers.
The sixteenth criterion says that it shall continuously operate and manage stably without any influence by keeping soundness of good corporate governance, internal management and internal control system. The seventeenth criterion states that it shall have rational expectation to get a profit based upon stable revenue.
Other trustworthy fixed criteria
In addition to the criteria mentioned above, an applicant company must know other trustworthy fixed criteria. The first one is that it must have at least 5,000 floating shares in the stock market. The second one is that the market value of these 5,000 floating shares must be 500 million kyats. Normally these two criteria are aimed at many investors being able to perform trading in the stock exchange market. The number of shares can be said quite little, but it is suitable for the primary market.
The third one is that the operation service of the company must be at least two years before the date of submitting application. The fourth one says that the applicant company mustn’t have limitation on share transfer except for the observance of the provisions prescribed in the existing laws. This point is aimed at transferring shares in a convenient manner when the shareholders trade in shares every day.
The fifth one describes that the services of shareholders must be undoubtedly entrusted to the stock exchange for ensuring that the shares issued by the company shall be transferred in an easy manner. The sixth one says that the shares and the accounts of shareholders between the stock exchange and securities companies must be recorded in the computer by means of electronic method.
It is easy to understand some criteria that are interrelated each other. It is an undeniable fact that a public company takes up a huge responsibility for shareholders who make investment. Moreover, a company listed on the stock exchange must take responsibility and accountability for shareholders, investors and relevant persons and organizations. It is specially required to be model companies in the financial market in Myanmar.
According to the criteria, minimum standards issued by Yangon Stock Exchange, the matters relating to whether the company’s income increases or not and whether the company is able to protect interest of the general public or not and whether the company is able to carry out good corporate governance, internal management and internal control system or not have been scrutinized. The main objective of scrutinizing the matters is to protect the interest of the investors and the general public. In doing so, the company will be able to be regarded as the one capable of competing in the stock market community in a transparent manner. Some criteria that contained in the newly-enacted Myanmar Companies Law (2017) were partially amended in 2018 in order to correspond with Notification No 18/2018 issued by Myanmar Accountancy Council.
The 17 criteria mentioned above and other six trustworthy fixed ones are prescribed in rules and regulations of securities which is work procedure of Yangon Stock Exchange (YSX). One can check out Yangon Stock Exchange website written in Myanmar and English languages.
In the past the rules and regulations of Yangon Stock Exchange could be observed by English language only. But during 2019 they were translated into Myanmar language by a securities company and a law organization.
Translated by Htut Htut (Twantay)