Frequently encountered issues in IPO-Part 3

IPO

Does the Group require manufacturing licence for its activities?

Generally, pursuant to the Industrial Co-ordination Act 1975 and Industrial Co-ordination Exemption Order 1976, manufacturing companies with shareholders’ fund of RM2.5 million and above or employing 75 or more full time paid employees (“Threshold”) are required to have a manufacturing licence.

Contravention of this provision is an offence and on conviction, the offender is liable to a fine not exceeding RM2,000 or to imprisonment not exceeding six months and to a further fine not exceeding RM1,000 for every day during which such default continues.

The manufacturer must have a manufacturing licence in respect of all the products to be manufactured and for each place of manufacturing from the time it triggers the Threshold specified above. Any period of non-compliance of this requirement may need to be disclosed in the prospectus.

Compliance of major conditions of the manufacturing licence must be disclosed in the prospectus, which may include the manufacturer’s workforce to comprise a minimum percentage of Malaysians. This may pose a challenge to some companies and remedial actions for compliance may need to be disclosed in the prospectus.

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This post was first posted on LInkedin on 7 March 2021

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