While globally an initial public offering usually means throwing the doors to your company wide open and letting investors poke around, industry observers say the Yangon bourse has not gone far enough on provisions for transparency.
According to listing criteria published in state media last August, companies that wish to go public on Yangon’s stock exchange need to submit “relevant corporate information” and facts the public should know to the Securities and Exchange Commission of Myanmar and the Yangon Stock Exchange.
“For disclosure of corporate information, it [the company] shall prescribe especially and precisely on the matters which have a considerable impact on investment decisions” such as risk factors and basic potential business activities, said the criteria.
YSX-listed companies need to file “one or more” reports of the annual, semi-annual and special variety, said Cheah Swee Gim, Yangon director of law firm Kelvin Chia. The first two must include a balance sheet, audit report and profit and loss statement, and the annual must come with a prospectus update and the semi-annual with a director’s report, she said.
Meanwhile, the listed firms must “disclose corporate information and earning information in the forms prescribed by the Exchange”, she added.
But some say the stock exchange rules are inadequate.
One industry expert called the rules on disclosure “basic and unclear in certain areas” and said they needed bolstering with guidelines on running companies.
“When you look at YSX listing rules in terms of disclosure requirements, they refer to company information,” said the expert. “It’s not clear what company information is, so it’s very vague … and in my opinion the big issue here is that the listing rules are not supported by any corporate governance code.”
Myanmar Centre for Responsible Business director Vicky Bowman – who spoke at a workshop on sustainability reporting on January 20 – said the bourse’s rules were “very poor” on the subject of disclosure.
“We’re starting to see within the Myanmar legal context more requirements for disclosure. It’s not coming from the stock exchange, disappointingly,” she told the audience, adding the low bar could be a “reflection [of the fact] that Japan has one of the lowest requirements for disclosure in the world”.
Myanmar’s new bourse, which launched in December, is owned by Myanma Economic Bank, Japan Exchange Group and Daiwa Institute of Research, according to a joint venture compact from 2014. The Japanese side has had a large role in its development, offering training and expertise.
A recent report from KPMG and accounting group ACCA entitled “Balancing rules and flexibility: A study of corporate governance requirements across 25 markets”, ranked Japan fifth from the bottom – placing it below the average score for developing markets.
Though stock exchanges often make companies hoping to list jump through hoops over disclosure, the industry expert said transparency requirements for the stock exchange did not go above and beyond Myanmar companies legislation.
An expert in Myanmar’s banking industry said that though in many markets going public requires a “significant reinvention process” for company transparency, in Myanmar that transformation is not currently required.
The antique Companies Act first came out more than a century ago. The Directorate of Investment and Company Administration (DICA) has worked with the Asian Development Bank on changing the law, with its contents available for public comment.
Ms Bowman said further standards for disclosure could come from the new Companies Law rather than the YSX.
“One of the proposals they are making [for the new law] is that there should be much clearer directors’ reporting requirements, beyond just submitting your financial accounts into a black hole in DICA, or not submitting them at all,” she said.
“Assuming this law goes through parliament in future there will be a requirement to submit a report on your company’s business: What you do, what business you’re in, an analysis of your performance … and an analysis of the risks and uncertainties that face your company.”
The revised draft of the Myanmar Companies Law includes a section on directors’ reports covering “a fair review of the company’s business”.
It also dictates firms must send in to DICA information including their annual return, membership, and financial statements – which encompass yearly balance sheets, profit and loss statements, and audit reports, said Ms Cheah Swee Gim.
“The reporting requirements for YSX-listed companies are not necessarily more stringent than those prescribed in the proposed Myanmar Companies Law in terms of financial reporting,” she added. “However, the selection and application process that the listed companies have to undergo before the listing expose these companies to rigorous scrutiny and establishes a starting point for comprehensive disclosure.”
Ms Cheah Swee Gim added it appears that YSX-listed companies will have to disclose more comprehensive corporate information than the non-listed companies on an ongoing basis, since they are required to regularly update their prospectus and disclose major changes affecting the company through the Exchange website.
Myanmar Investment Commission secretary U Aung Naing Oo has expressed hope that the Companies Law would pass in the first half of 2016.
Myanmar Securities and Exchange Commission chair U Maung Maung Thein was unavailable for comment by press time.
Source: Myanmar Times
