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Partnership And Company Law Essay

716 words - 3 pages

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 ...view middle of the document...

Disadvantages

(a) Dilution of control.

Dilution of control of existing ownersis an obvious disadvantage flowing from flotation. Depending on the extent of the dilution, there is the possibility of an increased risk of take over.

(b) Increased responsibility of directors.

Directors of a public company assume additional responsibilities and are legally obliged to act in the best interests of all shareholders. The company is no longer the private vehicle of the original owners and all transactions between the two must be an arm’s-length basis.

(c) Disclosures requirements

An importance consequence of listing is the greater demand for disclosure of information and its wider distribution. Disclosure requirements for public companies have increase in recent years and this trend will no doubt continue. Financial information may place them at a competitive disadvantage; however, the available evidence shows that such fears are generally ill-founded.

(d) Cost

There are explicit costs associated with a flotation, both in terms of time and money. These include the initial costs of conversion to a public limited company, the cost of issuing a prospectus, underwriting fees and brokerage professional advisor fees, accounting and legal fees,...

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