Imagine this.

You are introduced to an investment opportunity known as preference shares (which may be redeemable, convertible or both). It sounds simple enough. You are told that you only need to invest a certain sum of money, receive shares in return, enjoy attractive dividends, and later reclaim your full investment when the shares mature.

Tempted by the promise of high returns, you proceed to invest. For a time, everything seems perfect. Dividends, often exceptionally high, are paid on time.

But then reality strikes. As the maturity date approaches, you discover that the company cannot repay your investment sum. In some cases, companies do not even survive until maturity. Dividends stop without warning, and the promised returns vanish. What once appeared to be a secure and lucrative investment quickly turns into a painful financial lesson.

Unfortunately, the story above is not just a folklore, but a reality faced by many investors. Recently, we have seen a trend where unlisted public companies (‘UPC’) offer preference shares to the public but are unable to hold up their end of the bargain, especially when it comes to redemption or payment of dividends.

Key concerns include the accuracy and completeness of the Information Memorandum prepared by UPC, compliance with Shariah principles, unauthorised promotion and marketing by individuals or agents, and the overall compliance of the UPC in offering and promoting preference shares to the public.

Recently, the Securities Commission Malaysia issued the new Guidelines on Offer of Shares by Unlisted Public Companies (SC-GL/1-2025). This update is a much welcomed move to ensure that UPCs, their directors, agents, and advisers comply with the relevant legislation and guidelines. In a nutshell:

a. The Guidelines require a UPC that intends to offer preference shares to appoint a corporate finance adviser ('CFA');

b. The UPC must also consult the Securities Commission before commencing the offering of preference shares unless exempted;

c.If the UPC wishes to offer Shariah-compliant shares, it must appoint a Shariah adviser who is registered with the SC; and

d. The Guidelines impose obligations on all parties involved with the offering, including the UPC’s board of directors, the CFA, the agents appointed to market and promote the shares, and the Shariah adviser.

With these new guidelines in place, we anticipate a more transparent and secure investment environment.

However, it remains crucial for investors to perform thorough due diligence before making any investment decisions.

You may download ‘Guidelines on Offer of Shares by Unlisted Public Companies - SC-GL/1-2025’ via this link: