Partnership and Company Law

Question 2

Explain what are the advantages or disadvantages of listing a company on the Bursa Malaysia. (800 words)

Advantages

(a) Access to equity capital

The principal advantages of a public flotation is access to additional equity capital. Funds raised from the initial issue of securities are available to launch or to expand operations, to increase working capital or reduce borrowings. The establishment of a market for the company’s securities and a broader shareholders base generally enhance its capacity for further equity capital raisings in order to satisfy its funding requirements without increasing its debts funding.

(b) Secondary market for shares.

The facility to resell shares on the secondary market is an attractive feature to shareholders who know they can readily sell their shares at a price determined by the market. The value of a listed company’s shares tends to be enhanced by their liquidity and marketability whereas the valuation and disposal of unlisted shares are more difficult.

(c) Heightened corporate image

A further advantage of public company listing is the improved corporate image that result from the prestige and public exposure of listing on the stock exchange. This can be important for consumer sales-orientated companies and generally for other companies as it will ultimately help to stimulate growth in the company and attract new business. In additional, a public listed company is generally regarded as having a higher standing than a private company and is in a better position to expand overseas as they have more recognition because of greater publicity of their activities.

(d) Attract key employee

A listed company may be in better position to attract and retain key personnel and other stuff by offering shares or options as part of their remuneration package. For many previously, family-owned companies, this may assist in recruiting a professional middle management structure, which may be...