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What is a Special Purpose Acquisition Company ("SPAC")?

SPAC is a company which has no operations or income generating business at the point of Initial Public Offering ("IPO") but undertakes an IPO with the intention of acquiring operating companies/businesses with the proceeds raised form the IPO.

What are the key criteria of a SPAC?

Key Criteria Requirement
Minimum funds raised A SPAC must raise at least RM150,000,000 through its IPO
Interest of management team Members of the management team of the SPAC must, in aggregate, own at least 10% of the SPAC upon IPO
Management of IPO proceeds A SPAC must place at least 90% of the gross proceeds from its IPO in a Trust Account immediately upon receipt of all proceeds. The monies in the Trust Account may only be released by the Custodian upon termination of the Trust Account.
The Proceeds in the Trust Account may be invested in Permitted Investments. Any interest generated by the funds held in the Trust Account including interest/dividend income derived from the Permitted Investments, must accrue to the Trust Account.
The balance of the proceeds from the IPO, being 10% of the proceeds, may be utilised to defray expenses related to the IPO and for working capital purposes including but not limited to operating costs, fund the search for a target company or asset and completing the Qualifying Acquisition.
Qualifying Acquisition An initial acquisition of target company or asset which has an aggregate fair market value of at least 80% of the aggregate amount in the Trust Account (net of any taxes payable).
Timeframe for completion of a Qualifying Acquisition Within three years from the date of listing of the SPAC. In the event the SPAC fails to complete the Qualifying Acquisition within the Permitted Timeframe, it will be delisted from the Main Market of Bursa Securities.
Shareholders' approval for a Qualifying Acquisition The resolution on the Qualifying Acquisition must be approved by a majority in number of shareholders representing at least 75% of the total value of shares held by all shareholders present and voting either in person or by proxy at an EGM. Where the Qualifying Acquisition comprises more than one acquisition, each acquisition must be approved by the shareholders of the SPAC in the same manner.
The management team and persons connected to the management team must abstain from voting.
Refund to dissenting shareholders Shareholders (other than the management team and persons connected to them) who vote against a Qualifying Acquisition at the EGM will be entitled to receive, in exchange for their shares, a sum equivalent to a pro rata portion of the amount then held in the Trust Account (net of any taxes payable and expenses related to the facilities of the exchange), provided that such Qualifying Acquisition is completed within the Permitted Timeframe. The Share tendered in exchange for cash must be cancelled.
Custodian The SPAC will secure and maintain custodial arrangements at all times over the monies in the Trust Account until the termination of the Trust Account.
The roles and responsibilities of the Custodian are as follow:
(i) The Custodian must hold in trust, the proceeds from an issuance of securities by the SPAC, in accordance with the Custodian Agreement, the SC Guidelines and applicable laws;
(ii) the Custodian must take appropriate measures to ensure the safekeeping of the monies held in the Trust Account. In particular, the Custodian must ensure that:
  • Proper accounting records and other records as are necessary are kept in relation to the Trust Account; and
  • Custody and control of monies held in the Trust Account is in accordance with the Provisions of Custodian Agreement;
(iii) the Custodian may be provided a mandate by the management team to invest the amounts held in the Trust Account in Permitted Investments; and
(iv) the Custodian may only distribute and/or liquidate the funds held in the Trust Account in accordance with the provisions in the Custodian Agreement.
Liquidation In the event the SPAC fails to complete a Qualifying Acquisition within the Permitted Timeframe, it must be liquidated. The amount then held in the Trust Account (net of any taxes payable and direct expenses related to the Liquidation Distribution), must be distributed to the respective shareholders on a pro rata basis as soon as practicable, as permissible by the relevant laws and regulations. Any interest earned from the Permitted Investments accruing to the Trust Account will form part of the Liquidation Distribution. The management team and persons connected to them may not participate in the Liquidation Distribution, except for securities purchased by them after the date of listing of the SPAC on the Main Market of Bursa Securities.