Equity capital markets in Singapore: regulatory overview

A Q&A guide to equity capital markets law in Singapore.

The Q&A gives an overview of main equity markets/exchanges, regulators and legislation, listing requirements, offering structures, advisers, prospectus/offer document, marketing, bookbuilding, underwriting, timetables, stabilisation, tax, continuing obligations and de-listing.

To compare answers across multiple jurisdictions visit the Equity capital markets country Q&A tool.

This Q&A is part of the global guide to equity capital markets law. For a full list of jurisdictional Q&As visit www.practicallaw.com/equitycapitalmarkets-guide.

Tan Tze Gay, Alvin Zhuang and Wu Zhaoqi, Allen & Gledhill LLP
Contents

Main equity markets/exchanges

1. What are the main equity markets/exchanges in your jurisdiction? Outline the main market activity and deals in the past year.

Main equity markets/exchanges

The Singapore Exchange Limited (SGX) (www.sgx.com) is Asia's most international exchange with approximately 40% of the over 760 issuers listed on the SGX originating from jurisdictions outside of Singapore, including Malaysia (IHH Healthcare Berhad), Thailand (Thai Beverage Public Company Limited), China (China Everbright Water Limited) and Australia (AusNet Services Ltd).

The Singapore Exchange Securities Trading Limited (SGX-ST), a wholly-owned subsidiary of the SGX, is currently the only approved securities exchange in Singapore. Securities that can be listed on the SGX-ST include shares of a company and, in the case of mainboard listings, units of a business trust, shares/units of an investment fund and units of a real estate investment trust.

An issuer (whether foreign or local) can opt to list on the mainboard or Catalist of the SGX-ST:

  • The mainboard caters to the needs of more established issuers, with higher entry and listing requirements (such as minimum profit and market capitalisation levels). A mainboard listing can be a primary or secondary listing, and a foreign issuer seeking dual primary listings in Singapore and on its home exchange must ensure full compliance with the listing rules of both the SGX-ST and its home exchange. The SGX-ST reviews applications for admission to the mainboard.

  • Catalist caters to the needs of smaller or fast-growing issuers, and has a different model where approved sponsors decide if an issuer is suitable for listing. A listing on Catalist must be a primary listing, and there are no minimum quantitative entry criteria for a listing on Catalist.

Market activity and deals

In 2015, there were 13 initial public offerings (IPOs) listed on the SGX-ST:

  • One on the mainboard.

  • 12 on Catalist.

These raised a total of about SGD630 million.

In 2014, there were 30 IPOs listed on the SGX-ST:

  • 12 on the mainboard.

  • 18 on Catalist.

These raised a total of about SGD3.5 billion.

The Singapore IPO market has shown positive improvements in 2016. As at the end of August 2016, there were 17 IPOs listed on the SGX-ST for the year, of which five were listed on the mainboard (EC World REIT, Procurri Corporation Limited, Frasers Logistics & Industrial Trust, Manulife US REIT and China Jinjiang Environment Holding Company Limited). The total market capitalisation of listed issuers on the SGX-ST stood at SGD 909.7 billion as at the end of August 2016.

 
2. What are the main regulators and legislation that applies to the equity markets/exchanges in your jurisdiction?

Regulatory bodies

The Monetary Authority of Singapore (MAS) is the primary regulatory authority for the offering of shares/units to the public in Singapore.

The Singapore Exchange Securities Trading Limited (SGX-ST) undertakes the day-to-day regulation of the securities market and administers a number of rulebooks that, among others, govern the listing of securities on the SGX-ST.

Legislative framework

The Securities and Futures Act, Chapter 289 of Singapore (SFA) regulates the offering of shares and units, as the case may be, in Singapore, together with the following regulations (which are collectively defined as the SFR):

  • Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005.

  • Securities and Futures (Offers of Investments) (Business Trusts) (No 2) Regulations 2005.

  • Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2005.

The SFA and the SFR are administered by the MAS.

For issuers seeking a listing on the mainboard or Catalist, the listing rules set out in the SGX-ST listing manual or the listing rules set out in the Catalist listing manual, as the case may be, will apply.

 

Equity offerings

3. What are the main requirements for a primary listing on the main markets/exchanges?

Main requirements

An issuer seeking a mainboard listing must appoint an accredited issue manager, who is responsible for preparing the issuer for listing and must be satisfied that the issuer:

  • Is suitable to be listed.

  • Meets the admission requirements.

  • Is sufficiently set up to comply with the continuing listing requirements.

  • Has directors that appreciate the nature of their responsibilities and can be expected to honour their obligations under the listing rules.

For more information on the role of an issue manager, see Question 9, Issue manager.

An issuer seeking a Catalist listing must do so through an approved full sponsor. While the full sponsor takes on a similar role to the issue manager in a mainboard listing, the full sponsor is also responsible for assessing and determining whether the issuer is suitable to be listed on Catalist.

Minimum size requirements

For mainboard listings, there are certain market capitalisation thresholds related to the admission criteria (see below). For Catalist listings, there is no minimum market capitalisation requirement.

Track record

Issuers seeking a mainboard listing must have a minimum one-year track record to satisfy one of the following requirements:

  • Profitability test A. Minimum consolidated pre-tax profit (based on full year consolidated audited accounts) of at least SGD30 million for the latest financial year and operating track record of at least three years.

  • Profitability test B. Profitable in the latest financial year (pre-tax profit based on the latest full year consolidated audited accounts), operating track record of at least three years and market capitalisation at listing of at least SGD150 million.

  • Market capitalisation test. Operating revenue (actual or pro forma) in the latest completed financial year and market capitalisation at listing of at least SGD300 million. Real estate investment trusts and business trusts which can meet the SGD300 million market capitalisation test but do not have historical financial information can apply under this test if they can demonstrate that they will generate operating revenue immediately upon listing.

In seeking a listing under profitability test A or B, the issuer must have been engaged in substantially the same business, and have been under substantially the same management, throughout the period for which the three-year operating track record applies. In addition, the issuer and its subsidiaries (group) must be in a healthy financial position having regard to whether it has a positive cash flow from operating activities.

In contrast, issuers seeking a Catalist listing are not required to satisfy any minimum operating track record, profit or share capital requirement.

Repayment of debts

For both mainboard and Catalist listings, all debts owing to the group by its directors, substantial shareholders/unitholders and companies controlled by the directors and substantial shareholders/unitholders must be settled prior to listing.

Accounts

The prospectus to be issued for the purposes of a public offer of shares/units in Singapore must include the annual audited financial statements of the group for the three most recent completed financial years. Such financial statements must be prepared/restated and audited in accordance with the accepted accounting and auditing standards prescribed by the following regulations, as applicable:

  • Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005.

  • Securities and Futures (Offers of Investments) (Business Trusts) (No 2) Regulations 2005.

  • Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2005.

Generally, interim financial information is required if the date of lodgement of the preliminary prospectus with the Monetary Authority of Singapore is more than six months after the end of the most recent completed financial year.

Accounting standards and auditors

For primary listings, the financial statements submitted to the Singapore Exchange Securities Trading Limited (SGX-ST) with the listing application and included in the prospectus, as well as future periodic financial reports, must be prepared in accordance with Singapore Financial Reporting Standards (SFRS), International Financial Reporting Standards (IFRS) or US Generally Accepted Accounting Principles (US GAAP). For secondary listings, if these financial statements are prepared in accordance with other financial standards, they need only be reconciled to the SFRS, IFRS or US GAAP.

The auditors appointed by the issuer must be either:

  • Registered with the Accounting and Corporate Regulatory Authority of Singapore.

  • Registered with and/or regulated by an independent audit oversight body acceptable to the SGX-ST and be a member of the International Forum of Independent Audit Regulators.

  • Any other auditing firm acceptable to the SGX-ST.

Working capital

An issuer's directors must confirm in the prospectus that the working capital available to the group is sufficient for their present requirements. An issuer must also disclose to the SGX-ST:

  • Any shortfall in working capital or negative cash flow from operating activities, and the reasons for the shortfall.

  • The issue manager's views on the issuer's viability, and the basis for these views.

Minimum shares/units in public hands

For mainboard listings, a minimum of between 12% to 25% of the issuer's shares/units must be in public hands (that is, held by persons other than the directors, chief executive officer, substantial shareholders/unitholders or controlling shareholders/unitholders of the issuer or its subsidiaries, or their respective associates) at the time of listing, depending on the market capitalisation of the issuer (for example, larger issuers that have a market capitalisation at listing that is at least SGD1 billion are required to meet a free float of only 12%). Post-listing, there is a free float requirement of 10%. In addition, all issuers are required to have a minimum of 500 shareholders/unitholders on listing. Existing public shareholders/unitholders immediately before the IPO can be included in the calculation of the percentage of shares/units to be held by the public, subject to an aggregate limit of 5% of the issuer's post-IPO issued shares/units, provided that such shares/units are not under moratorium.

For Catalist listings, at least 15% of the post-IPO issued share capital of the applicant must be held by the public at the time of listing. In addition, there must be at least 200 public shareholders.

The minimum subscription and allocation value of the shares/units at IPO for each investor is SGD500 for a mainboard listing and SGD200 for a Catalist listing, based on a minimum offer price of SGD0.50 and SGD0.20 for the mainboard and Catalist, respectively.

 
4. What are the main requirements for a secondary listing on the main markets/exchanges?

Main requirements

An issuer (usually a foreign issuer) with a primary listing on its home exchange may seek a secondary listing on the mainboard.

The secondary listing on the Singapore Exchange Securities Trading Limited (SGX-ST) can be undertaken concurrently with, or subsequent to, the primary listing on the home exchange, in conjunction with a public offer for subscription or sale of the issuer's shares/units, or otherwise by way of introduction. However, a listing by way of introduction is not permitted if the issuer has carried out any fundraising activities in Singapore within six months prior to the submission of its listing application. Further, fundraising activities in Singapore are not permitted within three months of a listing by introduction.

An issuer seeking a secondary listing must meet the listing criteria prescribed in the listing rules, except those provisions relating to a moratorium of the promoters' shareholdings and shareholding distribution requirements. Where the secondary listing is undertaken in conjunction with a public offer of shares/units in Singapore, the Securities and Futures Act, Chapter 289 of Singapore and the following regulations regulate the offering of shares/units in Singapore:

  • Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005.

  • Securities and Futures (Offers of Investments) (Business Trusts) (No 2) Regulations 2005.

  • Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2005.

Similar to a primary listing on the mainboard, an issuer seeking a secondary listing must appoint an accredited issue manager (see Questions 3 and 9 for more information on the role of an issue manager).

Minimum size requirements

See Question 3.

Track record

See Question 3 for companies seeking a mainboard listing.

Minimum shares/units in public hands

In the case of a secondary listing, the issuer is not required to comply with the shareholding/unitholding spread and distribution requirements that are applicable to a primary listing. However, the issuer must have at least 500 shareholders/unitholders worldwide following the listing. Where the SGX-ST and the issuer's home exchange do not have an established framework and arrangement to facilitate the movement of shares/units between the jurisdictions, the issuer seeking a secondary listing must have at least either:

  • 500 shareholders/unitholders in Singapore.

  • 1,000 shareholders/unitholders worldwide.

 
5. What are the main ways of structuring an IPO?

An issuer can distribute its shares/units in conjunction with its IPO and listing on the mainboard or Catalist by way of a public offer and/or a placement. In either case, the shares/units offered can either be:

  • New shares/units offered for subscription by the issuer.

  • Existing shares/units offered by existing shareholders/unitholders (vendors).

Public offer

In Singapore, a public offer is typically undertaken through the automated teller machines and internet banking websites of the participating local banks as well as by way of printed application forms, so enabling a large number of participants (in particular, members of the retail public) to take part in the IPO.

Placement

A placement involves the offer of shares/units to institutional, high net-worth and other investors selected by the underwriters in conjunction with the issuer, typically following a bookbuilding process during which prospective investors may indicate the level of their interest in the IPO. As each such investor typically invests a larger amount for a larger number of shares/units as compared to retail investors, a placement often results in a narrower shareholder/unitholder base for the issuer than a public offer. As a result, mainboard listings, which are generally of a larger size as compared with Catalist listings and need to meet specified shareholding/unitholding spread and distribution requirements, are usually undertaken by way of a combination of a public offer with a placement.

Introduction

A listing by introduction is only permitted for mainboard listings and is appropriate where the issuer does not need to raise capital and it already meets the shareholding/unitholding spread requirements for a mainboard listing. Typically, a listing by introduction is undertaken where either:

  • The shares/units for which listing is sought are already listed on another stock exchange and the mainboard listing is intended to be either a dual primary or a secondary listing.

  • The shares/units of the issuer are distributed in specie to the shareholders of its holding company, and that distribution in specie enables the issuer to meet the shareholding spread requirements for a mainboard listing.

The main difference is that an introductory document (rather than a prospectus) is issued for a listing by introduction. While the contents of an introductory document are similar to that of a prospectus, an introductory document:

  • Is not reviewed by the Monetary Authority of Singapore (MAS).

  • Is not lodged or registered as a prospectus with the MAS.

  • Does not attract prospectus liability under the Securities and Futures Act, Chapter 289 of Singapore (SFA) (although the issuer and its directors may still incur liability in relation to the introductory document under other provisions of the SFA, other legislation and at common law).

Underwriting

IPOs in Singapore are generally fully underwritten by one or more investment banks. This means that any shares/units not subscribed for or purchased by investors in the IPO will be taken up by those underwriting investment banks for a fee. This provides the issuer and the vendors (if any) with certainty as to the success of the IPO. An issuer who proposes to undertake an IPO without underwriting must consult with the Singapore Exchange Securities Trading Limited on such proposal.

 
6. What are the main ways of structuring a subsequent equity offering?

Subsequent equity offerings are often referred to as "secondary" offerings. There are generally three types of secondary offerings:

  • Rights issues, which can be either:

    • renounceable rights issues;

    • non-renounceable rights issues.

  • Placements.

A rights issue gives existing shareholders/unitholders the entitlement (nil-paid rights) in proportion to their existing holdings. Holders can exercise the nil-paid rights to acquire new shares/units in the issuer, at the rights issue price (typically a discount to the market price). A rights issue can be either:

  • Renounceable in part or in whole in favour of a third party at the option of the entitled shareholder/unitholder, so enabling an entitled shareholder/unitholder who does not wish to exercise his nil-paid rights to sell his nil-paid rights on the Singapore Exchange Securities Trading Limited or transfer them to a third party.

  • Non-renounceable and made only to existing shareholders/unitholders. A non-renounceable rights issue is also known as a "preferential offering", and an entitled shareholder/unitholder who does not wish to exercise his nil-paid rights is not able to monetise his nil-paid rights.

A placement is a sale of new shares/units to a small group of new investors or existing shareholders/unitholders and, unlike a rights issue, it is not made pro rata to the issuer's existing shareholders/unitholders. A placement usually involves a sale of shares/units to specific institutional, accredited and/or other investors, or by way of private placement to not more than 50 offerees within any 12-month period, and it can also be combined with a preferential offering.

 
7. What are the advantages and disadvantages of rights issues/other types of follow on equity offerings?

Generally, a prospectus is required for all offers of securities in Singapore unless the offer falls within an exemption provided under the Securities and Futures Act, Chapter 289 of Singapore (SFA). Renounceable rights issues, preferential offerings and placements can all be undertaken under various exemptions from the prospectus requirements under the SFA.

An offer information statement (OIS) (which is a much shorter disclosure document as compared to a prospectus, but nevertheless still attracts prospectus liability under the SFA) must be prepared for a renounceable rights issue. However, preferential offerings (which are limited to existing shareholders/unitholders) and placements (which are made only to institutional, accredited and/or other investors or by way of private placement to not more than 50 offerees within any 12-month period) do not require the issue of an OIS and are often made on the basis of information on the issuer that is already publicly available, without any further disclosure document being prepared.

Apart from the time taken to prepare an OIS in a renounceable rights issue, the Singapore Exchange Securities Trading Limited (SGX-ST) prescribes a minimum offer period of:

  • Ten market days for renounceable rights issues.

  • Six market days for preferential offerings.

There is also a minimum trading period of six market days for nil-paid rights in the case of renounceable rights issues. These requirements result in an extended transaction timeline for rights issues and preferential offerings. In contrast, a placement can be conducted much more quickly and is often done in just one day (by way of an accelerated bookbuild transaction).

Listed issuers proposing to raise equity capital through a secondary offering typically seek to rely on the general mandate from shareholders/unitholders already obtained at their annual general meetings. For a mainboard listed issuer, any general mandate must limit the number of shares/units that can be issued under it to not more than 50% of the total number of issued shares/units, of which the number of shares/units that can be issued other than on a pro rata basis must not be more than 20%. As a result, when relying on the general mandate, a renounceable rights issue or a preferential offering can be used to raise up to 50% of the existing shares/units, while a placement cannot be used for larger capital raisings where the size of the issue is more than 20% of the existing shares/units. Note that for Catalist listed issuers, the corresponding limit for a general mandate is 100% of the total issued shares/units (with a sub-limit of 50% for non-pro rata issues where the general mandate was passed by an ordinary resolution, and with no sub-limit for non-pro rata issues where the general mandate was passed by a special resolution).

In terms of pricing, when relying on the general mandate:

  • For renounceable rights issues, there is no limit to the discount to the prevailing market price.

  • For preferential offerings and placements, the issue price is subject to a maximum discount of 10% to the prevailing market price.

When undertaking a placement pursuant to a general mandate, the issuer cannot place any shares/units to any of the following:

  • Its directors and substantial shareholders/unitholders.

  • The immediate family members of its directors and substantial shareholders.

  • The substantial shareholders, related companies, associated companies and sister companies of the issuer's substantial shareholders/unitholders.

  • Corporations in whose shares the issuer's directors and substantial shareholders/unitholders have an aggregate interest of at least 10%.

  • Any person who in the SGX-ST's opinion falls within the above categories.

However, the following exceptions apply:

  • In the case of a substantial shareholder/unitholder where:

    • the substantial shareholder/unitholder is not represented on the board of the issuer and does not have control or influence over the issuer in connection with the day-to-day affairs of the issuer and the terms of the placement;

    • the placement is effected through an independent process such as bookbuilding;

    • the placement is made to more than one person/entity; and

    • the substantial shareholder's/unitholder's percentage holding in the issuer immediately after the placement is not more than that immediately before the placement.

  • In the case of the following persons/entities where the SGX-ST is satisfied that the person or entity is independent and is not under the control or influence of any of the issuer's directors or substantial shareholders/unitholders:

  • immediate family members of the issuer's directors or substantial shareholders/unitholders;

  • substantial shareholders, related companies, associated companies and sister companies of the issuer's substantial shareholders/unitholders; or

  • corporations in whose shares the issuer's directors and substantial shareholders/unitholders have an aggregate interest of at least 10%.

Where the issuer is not able to rely on the general mandate, it will have to convene an extraordinary general meeting to seek specific approval from its shareholders/unitholders for the equity fundraising. For this purpose, it must first prepare a circular to shareholders/unitholders which must be reviewed by the SGX-ST (or its listing sponsor for Catalist issuers) before it can be issued and the extraordinary general meeting convened. This will extend the timeline for approximately another five weeks or so.

 
8. What are the main steps for a company applying for a primary listing of its shares? Is the procedure different for a foreign company and is a foreign company likely to seek a listing for shares or depositary receipts?

Procedure for a primary listing

The key steps to be taken for an IPO and mainboard listing are as follows:

  • Appointment of advisers (including issue manager and other professionals, such as legal advisers and accountants).

  • Pre-IPO restructuring (if required).

  • Conduct due diligence.

  • Prospectus drafting.

  • Preparation of independent auditors' and expert reports.

  • Submission of Section A of the Listing Admissions Pack to the Singapore Exchange Securities Trading Limited (SGX-ST).

  • Submission of listing application (Section B of the Listing Admissions Pack) to the SGX-ST and submission of the draft prospectus to the Monetary Authority of Singapore (MAS) for pre-lodgement review.

  • Review by and responding to queries from the SGX-ST and the MAS.

  • Negotiation of legal documentation, such as the underwriting agreement, bank comfort packages and cornerstone subscription agreements (if applicable).

  • Lodgement of preliminary prospectus with the MAS.

  • Marketing and bookbuilding.

  • Registration of prospectus with the MAS.

  • Pricing and allocation of shares/units.

  • Settlement.

  • Admission of issuer to the Official List of the SGX-ST and listing and quotation of shares/units.

  • Exercise of any over-allotment option/stabilisation.

Procedure for a foreign company

The procedure is the same for a foreign issuer. However, the SGX-ST will also give consideration to whether the laws and practices of the jurisdiction under which the foreign issuer is constituted and regulated afford sufficient protection to potential investors.

Most (if not all) foreign issuers list their shares/units directly on the SGX-ST rather than through depository receipts, although there is an Indian issuer whose shares were listed on the SGX-ST in the form of Singapore depository shares in 2004.

Separately, the SGX-ST also lists global depository receipts (GDRs) representing the equity securities of corporations that are listed on a foreign stock exchange. However, as such GDRs can only be offered to and traded by institutional and/or accredited investors, and retail investors are prohibited from participating in such offers or trades, such GDR listings are not covered in detail in this chapter.

 

Advisers: equity offering

9. Outline the role of advisers used and main documents produced in an equity offering. Does it differ for an IPO?

The main advisers in an IPO are as follows.

Issue manager

The issue manager acts as the sponsor for the issuer's listing on the Singapore Exchange Securities Trading Limited (SGX-ST). It manages the IPO for the issuer and advises it on all aspects relating to the IPO, from preparing the issuer for listing and ensuring that it meets the SGX-ST admission requirements to submitting the listing application and liaising with the SGX-ST on all matters relating to the listing application.

Financial adviser/underwriters

The issuer typically appoints a financial adviser to assist with the issue of shares/units. The financial adviser is responsible for arranging the issue and advising on timing, structure and pricing, taking into consideration the applicable listing rules.

The financial adviser may agree to underwrite the issue, in which case it will be referred to as an underwriter. In the event that investors do not fully subscribe for the shares/units offered, the underwriter will be obliged to subscribe for the shares/units that are not taken up by investors. If the IPO is large, there will be a syndicate of underwriters, with one or more acting as the lead underwriter (often known as the global co-ordinator).

Legal advisers

The legal advisers involved in an IPO advise the issuer, vendors (if any) and the underwriters. In general, the issuer's legal advisers are responsible for:

  • Advising the issuer on the legal aspects of preparing the issuer for listing.

  • Assisting the issuer in the preparation of the prospectus.

  • Negotiating the legal agreements the issuer enters into with the underwriters, auditors, registrars and others.

The underwriters' legal advisers are responsible for:

  • Advising on any legal agreements to which the underwriters are parties.

  • Assisting the underwriters in the preparation of the prospectus.

  • Advising the underwriters in relation to their obligations.

Both sets of legal advisers conduct legal due diligence and issue legal opinions.

Auditors

The independent auditors are responsible for conducting financial due diligence. They will issue an audit report in respect of the annual financial statements to be included in the prospectus. The auditors also provide various comfort letters to the underwriters.

Public relations (PR) consultants

PR consultants can generate press interest and publicity for the issuer prior to the IPO (in compliance with applicable publicity restrictions), as well as help to monitor public statements and press releases during the IPO process. After the IPO, ongoing press interest in the issuer can help sustain awareness of the issuer and liquidity in its shares/units.

Registrar and depository

The registrar deals with the setting up and maintaining of the issuer's share/unit register. The depository deals with arrangements relating to the scripless book-entry settlement system of The Central Depository (Pte) Limited (Singapore's depository).

Receiving bank

A receiving bank is required in a retail offering in order to receive funds from the public offer.

Experts

Depending on the nature of the issuer, valuers, industry consultants or other experts may need to be involved in the IPO process, and can produce reports for inclusion in the prospectus.

Main documents

The main documents produced in an equity offering are as follows:

  • Offering document (prospectus or offer information statement), unless there is an exemption (seeQuestion 11 ).

  • Audited financial statements.

  • Auditors' audit report (in the case of a prospectus).

  • Underwriting agreement (if underwritten).

  • Lock-up agreements.

  • Bank comfort package, including auditors' comfort letters, due diligence reports and opinions from the issuer's and underwriters' legal advisers.

  • Ancillary issuer documents, such as its constitution (in the case of an IPO), board and shareholder/unitholder resolutions.

  • Circular to shareholders/unitholders for secondary offerings (if required).

 

Equity prospectus/main offering document

10. When is a prospectus (or other main offering document) required? What are the main publication, regulatory filing or delivery requirements?

Prospectus (or other main offering document) required

Under the Securities and Futures Act, Chapter 289 of Singapore (SFA), an offer of shares/units in Singapore must be accompanied by a prospectus unless it falls within an exemption under the SFA (see Question 11).

Main publication, regulatory filing or delivery requirements

The SFA requires an issuer making a public offer of shares/units in Singapore to lodge a prospectus with the Monetary Authority of Singapore (MAS). A prospectus lodged with the MAS is posted on the MAS website under OPERA (Offers and Prospectuses Electronic Repository and Access) for seven to 21 days for public viewing and review by the MAS (unless a draft has previously been submitted to the MAS for pre-lodgement review). The MAS can register the prospectus between the 7th and 21st day (both days inclusive) from the date of lodgement of the prospectus. The MAS may extend the date for registration of the prospectus. Once the prospectus is registered, the issuer can commence the IPO.

 
11. What are the main exemptions from the requirements for publication or delivery of a prospectus (or other main offering document)?

Under the Securities and Futures Act, Chapter 289 of Singapore (SFA), an offer of shares/units in Singapore must be accompanied by a prospectus unless it falls within an exemption provided under the SFA. There are exemptions for certain types of offers such as the following, which are commonly relied on for secondary offerings:

  • Offer made to no more than 50 persons within any 12-month period.

  • Offer made to existing members of an entity whose shares/units are listed for quotation on the Singapore Exchange Securities Trading Limited (SGX-ST).

  • Offer made to institutional, accredited and other investors.

  • Offer made using an offer information statement by an SGX-ST listed issuer.

 
12. What are the main content or disclosure requirements for a prospectus (or other main offering document)? What main categories of information are included?

The requirements governing the information that needs to be disclosed in the prospectus are set out in the Securities and Futures Act, Chapter 289 of Singapore (SFA) and the following regulations, as applicable (which are collectively defined as the SFR):

  • Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005.

  • Securities and Futures (Offers of Investments) (Business Trusts) (No 2) Regulations 2005.

  • Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2005.

The SFA requires a prospectus to contain all the information that is reasonably required by the investors and their professional advisers to make an informed assessment of:

  • Rights and liabilities of the shares/units being offered.

  • Assets and liabilities, profits and losses, financial position and performance, and prospects of the issuer.

  • Assets and liabilities, profits and losses, financial position and performance, and prospects of the underlying entity if it is controlled by the offeror and/or its related parties (together or alone).

The SFA also requires the prospectus to contain the matters prescribed in the SFR, including:

  • Details of the issuer, its directors, its executive officers and the vendors (if any).

  • Details of the underwriters, independent auditors and other experts.

  • The issuer's share capital and its substantial shareholders/unitholders.

  • The issuer's business operations.

  • The operating and financial review (which is a description of the issuer's financial position, changes in financial condition and results of operations for each financial year and interim period reported on in the prospectus).

  • Recent developments and prospects.

  • Risk factors.

  • Interested person transactions and conflicts of interest.

  • Financial statements prepared or restated in accordance with the Singapore Financial Reporting Standards, International Financial Reporting Standards or US Generally Accepted Accounting Principles.

See also the table on Prospectus content requirements.

A supplementary or replacement prospectus must also be lodged with the Monetary Authority of Singapore (MAS) if, after the prospectus is registered with the MAS but before the close of the offer, the issuer is made aware that the prospectus is defective (for example, where the prospectus contains a false or misleading statement).

In addition, the prospectus must include the additional information mandated by the listing rules of the Singapore Exchange Securities Trading Limited (for example, a responsibility statement by the directors and vendors (if any)).

 
13. How is the prospectus (or other main offering document) prepared? Who is responsible and/or may be liable for its contents?

The prospectus is prepared by the issuer and its advisers, including its legal advisers, auditors and the various experts, with input from the banks and their legal advisers. Prior to the issue of the prospectus, verification exercises are conducted with the issuer to confirm the accuracy of key statements in the prospectus.

The following persons will have criminal liability as well as civil liability if there is a false or misleading statement in the prospectus, or there is an omission to state any information that must be included in the prospectus:

  • The person making the offer and, where that person is an entity, each director or equivalent person of the entity.

  • Where the person making the offer is the issuer, each person who has consented to be named in the prospectus as a proposed director or an equivalent person of the issuer.

  • Where the issuer is controlled by the offeror and/or its related parties, the issuer, each director or equivalent person, and each person who has consented to be named in the prospectus as a proposed director or an equivalent person of the issuer.

  • An issue manager to the offer of the shares who has consented to be named in the prospectus.

  • An underwriter (but not a sub-underwriter) to the issue or sale of the shares who has consented to be named in the prospectus.

  • A person named in the prospectus with his consent who either:

    • made the false or misleading statement in the prospectus; or

    • made a statement on which the false or misleading statement made in the prospectus is based.

  • Any other person who made the false or misleading statement, or omitted to state the information or circumstance, but only in respect of the inclusion of the false or misleading statement, or the omission to state the information or circumstances.

There are certain statutory defences available to such statutory criminal and civil liability. One of the more important statutory defences contained in the Securities and Futures Act, Chapter 289 of Singapore (SFA) applies in the case where the relevant person can prove that he both:

  • Made all inquiries (if any) that were reasonable in the circumstances.

  • After doing so, believed on reasonable grounds that the statement was not false or misleading.

A similar defence also applies in respect of omissions.

In addition to liability under the SFA, there are potential liabilities under:

  • Common law (for example, liability in tort for negligent misstatements).

  • Misrepresentation Act, Chapter 390 of Singapore (which could also cover innocent misrepresentations).

  • Provisions in the Penal Code, Chapter 224 of Singapore relating to obtaining money by deception and to fraud involving deliberate false statements.

  • Foreign securities laws, to the extent that the offer is extended or marketed to investors outside Singapore.

 

Marketing equity offerings

14. How are offered equity securities marketed?

IPOs are marketed at various stages through the following methods:

  • Pre-marketing or pre-deal investor education. Pre-marketing can be conducted at the early stages of the proposed IPO by holding informal meetings with potential investors that have been identified by the underwriters and who have entered into a non-disclosure agreement with the issuer and the underwriters. The purpose of these meetings is to introduce the issuer and its management team to these investors, and identify any possible issues at an early stage.

  • Pre-IPO placements. Pre-IPO placements to early investors (mostly at a substantial discount) can serve the purpose of increasing the issuer's credentials and incentivising the pre-IPO investors to persuade other investors to subscribe for the issuer's securities.

  • Cornerstone investors. Placements to investors concurrent with, but separate from, the IPO (at the offer price) also serve a purpose similar to pre-IPO placements.

  • Roadshows. Roadshow presentations can be held for institutional and accredited investors after the prospectus is lodged with the Monetary Authority of Singapore.

  • Advertising/other publicity. Advertising is only relevant for retail offers and can be an effective means of generating additional demand.

 
15. Outline any potential liability for publishing research reports by participating brokers/dealers and ways used to avoid such liability.

Participating brokers/dealers can be liable to investors in the following ways:

  • Contract law. There can be liability under established contractual principles if there is a contract between the investor and the broker.

  • Tort. The investor can claim tortious damages against the broker if he can prove that the broker owed him a duty of care and he suffered loss as a result of a breach of that duty.

  • Financial Advisers Act, Chapter 110 of Singapore. A licensed financial adviser can be liable, among other things, for:

    • making false or misleading statements (where he does not care whether the statement is true or false, or he knows or ought reasonably to have known that the statement is false or misleading) as to any amount payable in respect of a proposed contract in respect of any investment product, as to the effect of any provision of a contract in respect of any investment product, or in connection with the provision of any financial advisory service;

    • employing any device, scheme or artifice to defraud, or engaging in any act, practice or course of business which operates (or is likely to operate) as a fraud or deception upon any person; and

    • making a recommendation with respect to any investment product to a person who may reasonably be expected to rely on the recommendation where he did not have a reasonable basis for making the recommendation.

Brokers/dealers can minimise their liability in the following ways:

  • Forecasts and projections. Avoid including these in research reports.

  • Verification. Ensure research reports only contain information from the prospectus and which is verified by the issuer.

  • Management of conflicts of interest. Put in place internal conflict management policies that are commensurate with the scale and complexity of the broker/dealer's business to ensure effective controls and segregation of duties to mitigate potential conflicts of interest that may arise from the publication of research reports.

  • Independence. Put in place "Chinese walls" between research analysts and corporate finance teams involved in the management and underwriting of the offering.

  • Exercise confidentiality. Take reasonable steps to prevent leakage of information to any person who is not an institutional investor.

  • Disclaimers. Use disclaimers (for example, that the research report does not constitute an offer).

 

Bookbuilding

16. Is the bookbuilding procedure used and in what circumstances? How is any related retail offer dealt with? How are orders confirmed?

Bookbuilding procedure

The bookbuilding procedure is used in IPOs and secondary offerings, such as placements to get a better sense of the size of the demand and to determine the exact offer price.

Mainboard IPOs. Mainboard IPOs tend to adopt a sequential offering structure, where bookbuilding for the placement tranche takes place and the offer price and allocation to investors in the placement tranche are fixed in the period between lodgement and registration of the prospectus with the Monetary Authority of Singapore.

Placement. In a placement, the bookbuilding by the placement agent typically takes just one day (via an accelerated bookbuild transaction). The bookbuilding typically takes place overnight and the placement is announced thereafter.

Related retail offers

The sequential offering structure of mainboard IPOs means that the public offer will only open after registration of the final prospectus (that is, the allocation to placement investors and the offer price will have been firmed up by the time the public offer opens). Unlike the placement tranche, there is no process for sounding out retail investors for the public offer.

 

Underwriting: equity offering

17. How is the underwriting for an equity offering typically structured? What are the key terms of the underwriting agreement and what is a typical underwriting fee and/or commission?

Underwriting an equity offering

Mainboard IPOs are generally fully underwritten, while rights issues may or may not be underwritten. Underwriters will typically enter into an underwriting agreement to procure subscribers for the shares/units of the issuer being offered, and in the event that any shares/units are not taken up, the underwriters will subscribe for those shares/units themselves in agreed proportions.

In the case of placements, the issuer typically appoints a placement agent to assist with the issue of shares/units who may also agree to underwrite the issue, in which case that placement agent will be referred to as an underwriter.

Key terms of an underwriting agreement

Key terms of the underwriting agreement include:

  • Underwriting obligations.

  • Representations, warranties and undertakings from the issuer and the banks.

  • Lock-up.

  • Conditions precedent/termination rights.

  • Indemnities from the issuer to the banks.

  • Over-allotment and stabilisation (in the case of a mainboard IPO).

  • Fees and commissions, usually between 2% to 3.5%.

 

Timetable: equity offerings

18. What is the timetable for a typical equity offering? Does it differ for an IPO?

Timetable for mainboard listing

The indicative timetable for a mainboard listing is as follows:

  • Start of IPO process. Appoint issue manager, legal advisers, accountants and other experts. Conduct due diligence, restructure the issuer (if required), draft prospectus. Prepare listing application, consult the Singapore Exchange Securities Trading Limited (SGX-ST) about ambiguities concerning compliance with listing criteria (if required).

  • Lodgement date minus two to four months. Submit Section A of the Listing Admissions Pack to the SGX-ST. Review period of approximately one to three months.

  • Lodgement date minus four weeks. Submit Section B of the Listing Admissions Pack to the SGX-ST (together with draft prospectus). Review period of approximately four weeks. Submit draft prospectus to the Monetary Authority of Singapore (MAS) for pre-lodgement review (optional).

  • Lodgement date. Preliminary prospectus lodged with the MAS and published on OPERA (Offers and Prospectuses Electronic Repository and Access). The MAS reviews the prospectus (if not already reviewed pre-lodgement). Commence roadshows.

  • Registration date (lodgement date plus seven to 21 days). The MAS registers the prospectus if it has no comments. If the MAS so requires, consider whether to amend the prospectus or make pre-quotation disclosure. The MAS can extend the date for registration of a prospectus.

  • Commencement of public offer (lodgement date plus approximately 28 days). Public offer of three to five days.

  • Closing date (lodgement date plus approximately 33 days). Announce the outcome of the offer, subscription rate, and so on. The issuer is listed and trading in its shares/units commences.

Timetable for secondary offerings

The timetable for a secondary offering by way of a rights issue or placement will differ from an IPO as, among other things:

  • There is no MAS review process.

  • There is a shorter and less extensive SGX-ST review process.

  • It may be necessary to convene a shareholder/unitholder meeting to obtain approval for the issue of new shares/units (unless there is an existing general mandate).

 

Stabilisation

19. Are there rules on price stabilisation and market manipulation in connection with an equity offering?

Price stabilisation of securities that are the subject of an IPO and listing on the Singapore Exchange Securities Trading Limited (SGX-ST) may contravene the false trading and market rigging, securities market manipulation and insider trading prohibitions contained in the Securities and Futures Act, Chapter 289 of Singapore.

To facilitate price stabilisation, the Securities and Futures (Market Conduct) (Exemptions) Regulations 2006 (Market Conduct Regulations) provide for an exemption to the aforementioned prohibitions for stabilising actions taken during an IPO, provided that the stabilising actions have been taken in accordance with the conditions prescribed in the Market Conduct Regulations. Such conditions include, but are not limited to, the following:

  • Terms of the offer. The total value of the securities being offered under the IPO (calculated on the basis of the offer price) is not less than SGD25 million (or its equivalent in a foreign currency).

  • Maximum number of securities. The total number/nominal value of the securities that the stabilising manager can buy to undertake stabilising action must not exceed 20% of the total number/nominal value of securities offered in the IPO, before any over-allotment (if applicable).

  • Time limits. Stabilising actions can commence from the date of commencement of trading of the issuer's securities and must end on the earlier of either:

    • 30 calendar days after the commencement of trading; or

    • the date that the stabilising manager has bought the total number of those securities to undertake stabilising action as stated under the prospectus.

  • Price limits. The maximum price at which the stabilising manager can purchase the relevant securities under the IPO is its offer price where the initial stabilising action is taken. After the initial stabilising action, where there has been an independent transaction on the SGX-ST in the relevant securities at a price above the initial stabilisation price, the maximum price is the lower of the highest independently transacted price after the initial stabilising action, or the offer price of the relevant securities under the IPO. In the absence of such independent transaction after the initial stabilising action, the maximum price is the lower of the initial stabilisation price and the offer price of the relevant securities under the IPO.

  • Disclosures. Adequate prospectus disclosure and other notification and public announcement requirements.

 

Tax: equity issues

20. What are the main tax issues when issuing and listing equity securities?

The following are relevant tax issues to consider with respect to an equity issue of shares from a Singapore perspective.

Taxation of sale of shareholding

Singapore does not impose tax on capital gains but imposes tax on income. There are no specific laws or regulations which deal with the characterisation of whether a gain is income or capital in nature. Gains arising from the disposal of assets may be construed to be of an income nature and subject to Singapore income tax, especially if they arise from activities which the Inland Revenue Authority of Singapore (IRAS) regards as the carrying on of a trade or business in Singapore.

Case law has generally held that the most significant factor is the taxpayer's intention upon acquisition of the asset, that is, whether the asset was acquired for investment or trading purposes (and assuming there is no subsequent change of intention). The test to determine if gains derived on the disposal of assets are revenue or capital in nature is also an objective one, as opposed to the stated intention of the taxpayer, and is arrived at after having considered the activities of the taxpayer and all the circumstances relating to the purchase and sale of the securities in question. The Singapore courts have also endorsed the six badges of trade (as evolved from the United Kingdom) as relevant in determining whether a transaction of purchase and sale is, or is not, to be regarded as a trading transaction. Such badges of trade include:

  • The length of period of ownership.

  • The frequency of similar transactions.

  • The circumstances responsible for the disposal.

  • The motive for acquisition.

In this regard, the pertinent issue is whether the taxpayer will be regarded as having acquired the shares for subsequent disposal at a profit or pursuant to a trade or business in Singapore (in which case, the gains on disposal will be income in nature and taxable), or whether such shares are held for long-term investment purposes since acquisition (in which case, the gains will be treated as capital in nature and not taxable).

However, tax exemption is generally available (subject to certain exceptions) on any gains or profits derived by a divesting company from the disposal of ordinary shares during the period from 1 June 2012 to 31 May 2022 in another company where the divesting company has held the legal and beneficial ownership of at least 20% of the ordinary shares in that company for a period of at least 24 months prior to the disposal.

Dividends

The taxation in Singapore of dividends paid by the listing vehicle will depend on the tax residence of the listing vehicle (that is, whether or not the listing vehicle is resident in Singapore or elsewhere).

Where the listing vehicle is a Singapore-resident company. All Singapore-resident companies come under the one-tier corporate tax system (one-tier system). Under the one-tier system, the tax on corporate profits is final and dividends paid by a Singapore-resident company are tax exempt in the hands of a shareholder, regardless of whether the shareholder is a company or an individual, and whether or not the shareholder is a Singapore tax resident. Correspondingly, no Singapore withholding tax will be imposed on such dividends.

Where the listing vehicle is not a Singapore-resident company. In Singapore, income tax is chargeable on both:

  • Income accruing in, or derived from, Singapore.

  • Foreign-sourced income which is received (or deemed received) in Singapore from outside Singapore.

Foreign-sourced income in the form of dividends, branch profits and service income (specified foreign income) received, or deemed to be received, in Singapore by Singapore-resident companies are exempt from tax provided certain conditions are met, including the following:

  • Such income is subject to tax of a similar character to income tax under the laws of the jurisdiction from which such income is received.

  • At the time the income is received in Singapore, the highest rate of tax of a similar character to income tax (by whatever name called) levied under the laws of the territory from which the income is received on any gains or profits from any trade or business carried on by any company in that territory at that time is not less than 15%.

In the case of dividends paid by a company resident in a territory from which the dividends are received, the "subject to tax" condition above is considered met where either:

  • Tax is paid in that territory by that company in respect of its income out of which such dividends are paid.

  • Tax is paid on such dividends in that territory from which such dividends are received.

Certain concessions and clarifications have also been announced by the IRAS with respect to the above conditions.

Goods and services tax (GST)

The sale of shares by a GST-registered investor belonging in Singapore for GST purposes to another person belonging in Singapore is an exempt supply not subject to GST. Any input GST incurred by the GST-registered investor in making an exempt supply is generally not recoverable from the Singapore Comptroller of GST.

Where the shares are sold by a GST-registered investor in the course of, or furtherance of, a business carried on by that investor contractually to, and for the direct benefit of, a person belonging outside Singapore, the sale should generally (subject to the satisfaction of certain conditions) be considered a taxable supply subject to GST at 0%. Any input GST incurred by the GST-registered investor in making such a supply in the course of, or furtherance of, a business will generally (subject to certain conditions) be fully recoverable from the Singapore Comptroller of GST.

Services consisting of arranging, brokering, underwriting or advising on the issue, allotment or transfer of ownership of the shares rendered by a GST-registered person to an investor belonging in Singapore for GST purposes in connection with the investor's purchase, sale or holding of the shares will be subject to GST at the standard rate of 7%. Similar services rendered by a GST-registered person contractually to, and for the direct benefit of, an investor belonging outside Singapore should generally (subject to the satisfaction of certain conditions) be subject to GST at 0%.

Stamp duty

Stamp duty is not payable on the subscription of shares.

Where shares of a Singapore-incorporated company (or a foreign-incorporated company which maintains its share register in Singapore) evidenced in certificated form are acquired in Singapore, stamp duty is payable on the instrument of transfer of the shares at the rate of 0.2% of the consideration for, or market value of, the shares (whichever is higher). Where an instrument of transfer is executed outside Singapore or no instrument of transfer is executed, no stamp duty is payable on the acquisition of the shares. However, stamp duty may be payable if the instrument of transfer is executed outside Singapore and is received in Singapore.

Stamp duty is not applicable to electronic transfers of the shares through the scripless trading system operated by The Central Depository (Pte) Limited.

 

Continuing obligations

21. What are the main areas of continuing obligations applicable to listed companies and the legislation that applies?

The main areas of continuing obligations set out in the listing rules are as follows:

  • Disclosure of material information. Subject to limited exceptions and in accordance with the Corporate Disclosure Policy of the Singapore Exchange Securities Trading Limited (SGX-ST), issuers must disclose any information necessary to avoid the establishment of a false market in its securities, or in circumstances where such information would likely materially affect the price of its securities. Issuers must, among other things, promptly clarify or confirm rumours which have not been substantiated by the issuer and which are likely to have, or have had, an effect on the price of its securities.

  • Other disclosure obligations. Disclosure of certain specified information (such as appointment or cessation of service of key personnel, breach of loan covenants, and so on).

  • Periodic financial reporting. Announce financial statements for the full financial year and the first three quarters immediately after the figures are available, and in any event not later than 60 days after the financial year or 45 days after the quarter end.

  • Interested person transactions (IPTs). Immediately announce any IPTs of a value equal to, or more than, 3% of the group's latest audited net tangible assets. If the aggregate value of all transactions entered into with the same interested person during the same financial year amounts to 3% or more of the group's latest audited net tangible assets, an immediate announcement must be made of the latest transaction and all future transactions entered into with that same interested person during that financial year. Shareholders'/unitholders' approval is required for any IPT which (itself or when aggregated with other transactions) was entered into with the same interested person during the same financial year that is of a value equal to, or more than, 5% of the group's latest audited net tangible assets (save that a transaction which has been approved by shareholders/unitholders, or is the subject to aggregation with another transaction that has been approved by shareholders/unitholders, need not be included in any subsequent aggregation). In a meeting to obtain shareholder/unitholder approval, the interested person and its associates must not vote on the resolution, or accept appointments as proxies, unless specific instructions as to voting are given. IPTs which are below SGD100,000 are not subject to announcement or shareholder/unitholder approval requirements.

  • Acquisitions and realisations. Immediate announcement is required if the acquisitions or disposals of assets by an issuer or a subsidiary that is not listed on the SGX-ST or an approved exchange exceeds 5% of the relative figures calculated on the bases set out in the listing rules, subject to further conditions (including shareholder approval requirements) that will be imposed on the issuer for transactions that exceed 20% or 100% of the aforementioned relative figures.

  • Corporate governance. Expected to "comply or explain" in relation to the Code of Corporate Governance (Code) (which is given effect to by the listing rules), to describe their corporate governance practices with specific reference to the principles of the Code in their annual report, and to disclose any deviation from any guideline of the Code together with an appropriate explanation for such deviation.

 
22. Do the continuing obligations apply to listed foreign companies and to issuers of depositary receipts?

Listed foreign companies

Primary listing on the Singapore Exchange Securities Trading Limited (SGX-ST). A foreign issuer with a primary listing on the SGX-ST must comply with the continuing obligations under the listing rules.

Secondary listing on the SGX-ST. A foreign issuer with a primary listing in what the SGX-ST considers to be developed markets and which is secondary listed on the SGX-ST does not have to comply with additional continuing obligations (except for Rule 217 and Rule 751 of the Listing Manual), subject to its continued primary listing on its home exchange and compliance with all the relevant rules of its home exchange. However, issuers with a primary listing in jurisdictions other than developed markets will be subject to a full review by the SGX-ST of the home exchange's legal and regulatory requirements, particularly in relation to shareholder/unitholder protection and corporate governance standards. Where areas related to interested person transactions (IPTs), acquisitions and realisations, and de-listings are found to require enhancements, the continuing obligations in Chapters 9, 10 and 13 of the Listing Manual (relating to IPTs, acquisitions and realisations, and de-listings, respectively) will be imposed.

Issuers of depository receipts

A foreign issuer whose equity securities are listed on the SGX-ST in the form of depository receipts will be subject to similar disclosure obligations. However, the issuer of equity securities represented by global depository receipts listed on the SGX-ST is only subject to limited continuing disclosure obligations set out in Part XI of Chapter 2 of the Listing Manual.

 
23. What are the penalties for breaching the continuing obligations?

Penalties under the listing rules

The listing rules give the Singapore Exchange Securities Trading Limited (SGX-ST) the power to deal with an issuer's non-compliance with the continuing obligations.

Where an issuer is unable or unwilling to comply with, or contravenes, its continuing obligations, the SGX-ST can suspend trading of the securities of the issuer, or remove the issuer from the Official List of the SGX-ST without the issuer's agreement. The SGX-ST can also exercise investigative and enforcement powers for the purposes of enforcing its listing rules, including the powers to initiate disciplinary action or take enforcement action against a person who is deemed to have contravened a provision of the listing rules.

The listing rules are also given effect by the Securities and Futures Act, Chapter 289 of Singapore (SFA), which provides that where any person who is under an obligation to comply with, observe, enforce or give effect to the listing rules fails to do so, the court can, on the application of, among others, the Monetary Authority of Singapore or the SGX-ST, make an order directing the person to comply with, observe, enforce or give effect to the listing rules.

Penalties under the SFA

The SFA provides that an issuer must not intentionally, recklessly or negligently fail to notify the SGX-ST of information that is required to be disclosed by the SGX-ST under the listing rules or any other requirement of the SGX-ST, and that intentional or reckless contravention of this requirement is an offence. A breach of continuing obligations can attract criminal liability or civil penalty under the SFA.

 

Market abuse and insider dealing

24. What are the restrictions on market abuse and insider dealing?

Restrictions on market abuse/insider dealing

The restrictions on market abuse and/or market conduct set out below are found in the Securities and Futures Act, Chapter 289 of Singapore (SFA):

  • Not to engage in false trading and market rigging transactions that create a false or misleading appearance of active trading and/or manipulate the market price of the securities (for example, buying and selling securities with no change of beneficial ownership).

  • Not to engage in securities market manipulation with the intention of inducing other persons to deal in the securities of the issuer or its related corporation.

  • Not to disseminate false or misleading statements and information that is likely to induce others to deal in securities or manipulate the market price of securities.

  • Not to engage in insider trading by dealing, or procuring others to deal in, securities whilst in possession of non-public price-sensitive information, subject to certain exceptions.

  • Not to fraudulently induce persons to deal in securities.

  • Not to employ manipulative and deceptive devices in connection with the dealing of securities.

  • Not to disseminate information about illegal transactions.

However, the Securities and Futures (Market Conduct) (Exemptions) Regulations 2006 (Market Conduct Regulations) permit the price stabilisation of securities that are the subject of an IPO as an exception to market abuse (see Question 19), provided that such actions are taken in accordance with the Market Conduct Regulations.

Penalties for market abuse/insider dealing

A person in breach of the market abuse/insider dealing provisions can face criminal sanctions of a maximum fine of SGD250,000 or imprisonment for a maximum term of seven years, or both. That person can also be liable to pay a civil penalty, or be subject to civil liabilities arising from claims by deemed contemporaneous investors under the SFA.

Corporations can also be subject to the following penalties:

  • Fines or civil penalties if the corporation consented to, or connived in, an employee's or officer's market abuse/insider dealing activities.

  • Civil penalties if the corporation fails to prevent or detect contravention by an employee or officer.

  • Compensation to deemed contemporaneous investors under the SFA if the corporation made a profit, or avoided a loss, arising from an employee's or officer's market abuse/insider dealing activities.

 

De-listing

25. When can a company be de-listed?

Under the listing rules, an issuer listed on the mainboard can delist in the following ways:

  • Voluntary de-listing. The Singapore Exchange Securities Trading Limited (SGX-ST) can agree to the issuer's de-listing application provided that all the following conditions are met:

    • the issuer convenes a general meeting of its shareholders/unitholders to obtain their approval for the voluntary de-listing;

    • such approval consists of at least 75%, and is not voted against by 10% or more, of the total number of issued shares/units held by the issuer's shareholders/unitholders present and voting; and

    • a reasonable cash exit alternative, the terms of which are advised by an independent financial adviser appointed by the issuer, is offered to the issuer's shareholders/unitholders.

  • Compulsory de-listing. The SGX-ST can delist the issuer without its agreement if either:

    • the issuer is unable, or unwilling, to comply with, or contravenes, a listing rule; or

    • in the SGX-ST's opinion, it is appropriate to do so, or is necessary or expedient in the interest of maintaining a fair, orderly and transparent market.

    Compulsory de-listing can also occur after any of the following:

    • a general trading suspension of the issuer's securities by the SGX-ST;

    • a take-over offer subsequent to a suspension;

    • the issuer has insufficient free float with less than 10% of the total number of issued shares/units in a class held by the public (see Question 3);

    • the issuer's assets consist wholly or substantially of cash or short-dated securities (cash company) and the issuer is unable to meet the requirements for a new listing within 12 months from the time it becomes a cash company;

    • the issuer is not removed from the SGX-ST's watch-list after being on it for 24 months.

As at the end of August 2016, there were 18 de-listings from the SGX-ST in 2016, of which 16 were de-listings from the mainboard.

 

Reform

26. Are there any proposals for reform of equity capital markets/exchanges? Are these proposals likely to come into force and, if so, when?

Minimum allocation to facilitate greater retail participation in IPOs

In February 2016, the Singapore Exchange Limited (SGX) issued a public consultation proposing that issuers seeking a mainboard listing allocate to retail investors at least 10% of the total offer size (subject to a maximum value of SGD100 million of the shares allocated) of their IPOs. The proposal forms part of a series of measures aimed at facilitating greater retail participation in Singapore's capital markets.

Amendments to align the listing rules with the Companies Act

In January 2016, the SGX issued a public consultation proposing changes to the mainboard and Catalist listing manuals, to align the listing rules with the amendments to the Companies Act, Chapter 50 of Singapore (Companies Act), which took place in phases in July 2015 and January 2016. Some of the key issues that were consulted on included:

  • Whether listed issuers should be allowed to send notices and documents to shareholders by electronic communication under the new regimes permitted under the Companies Act, and the safeguards that should be implemented.

  • Whether insurance coverage and indemnities for directors that are permitted under the Companies Act should not be considered as interested person transactions.

  • Whether listed issuers should include an appropriate statement in shareholders' circulars where a shareholder is required to abstain from voting under any court order.

  • Whether shares held by a subsidiary in its listed holding company should be excluded from the calculation of the holding company's issued share capital where it relates to voting rights, and should not be excluded in the calculation of the holding company's market capitalisation and issued share capital where it does not relate to voting rights.

Dual class shares

In September 2016, it was announced that the Listings Advisory Committee (LAC) of the SGX recommended allowing companies with a dual class share (DCS) structure to list on the Singapore Exchange Securities Trading Limited (SGX-ST), subject to appropriate safeguards. The SGX-ST is considering the recommendations of the LAC.

A DCS structure gives certain shareholders of a company voting power or other related rights disproportionate to that of other shareholders. For instance, a company may have shares in one class that carry one vote each as well as shares in another class that carry multiple votes each. One of the purposes of a DCS structure is to allow holders of multiple-voting shares, typically the founders or owners managing the company, to have voting control without the corresponding financial investment risk.

The LAC identified various safeguards, including:

  • Undertaking a holistic assessment before admission of appropriate companies and referring listing applications to the LAC for advice (to mitigate the risk of poor quality listings).

  • Restricting the DCS structure to a maximum voting differential of 10:1 (to mitigate entrenchment risks).

  • Requiring companies with a DCS structure to provide clear disclosure of shareholder rights (to mitigate the risk of lack of clarity to investors).

 

Online resources

Singapore Stock Exchange

W www.sgx.com

Description. Website of the Singapore Stock Exchange.

Monetary Authority of Singapore

W www.mas.gov.sg

Description. Website of the Monetary Authority of Singapore.

Singapore Statutes Online

W http://statutes.agc.gov.sg/aol/home.w3p

Description. The official website for Singapore's legislation, owned by the Singapore Government and managed by the Legislation Division of the Attorney-General's Chambers of Singapore.



Contributor profiles

Tan Tze Gay, Partner

Allen & Gledhill LLP

T +65 6890 7712
F +65 6302 3188
E tan.tzegay@allenandgledhill.com
W www.allenandgledhill.com

Professional qualifications. Singapore Bar, 1988

Areas of practice. Capital markets; corporate regulatory & compliance

Recent transactions:

  • Advised Oversea-Chinese Banking Corporation Limited on its renounceable underwritten rights issue of 436.78 million rights shares which raised gross proceeds of SGD3.34 billion in 2014. The rights issue is the largest Singapore equity capital market deal since March 2011 and is Singapore's second-largest ever rights issue.

  • Advised IHH Healthcare Berhad on its initial public offering and dual listing on Bursa Malaysia Securities Berhad and the Singapore Exchange which raised approximately SGD2.49 billion in 2012. The transaction was the first simultaneous dual public offering in Singapore and Malaysia and the first simultaneous initial listing on Bursa Malaysia Securities Berhad and the Singapore Exchange.

Languages. English

Publications:

  • Woon's Corporation Law (co-author of chapters on "Offers of Investments" and "Shares, Debentures and Charges"), LexisNexis (2016).

  • Listing in Singapore: Corporate Governance Perspectives (co-author of chapter on "Corporate Governance for Listed Companies"), White Page (2016).

  • Capital Markets Law Journal (co-author of article on "Cornerstone investors in IPOs - An Asian perspective"), Oxford University Press (2013).

Alvin Zhuang, Partner

Allen & Gledhill LLP

T +65 6890 7409
F +65 6302 3378
E alvin.zhuang@allenandgledhill.com
W www.allenandgledhill.com

Professional qualifications. Singapore Bar, 2008

Areas of practice. Capital markets; corporate regulatory & compliance

Recent transactions:

  • Advised BOC Aviation Limited, an arm of Bank of China Limited, on its initial public offering and listing on the main board of the Stock Exchange of Hong Kong Limited. The gross proceeds raised were HKD8.7 billion (approximately SGD1.5 billion).

  • Advised Noble Group Limited on its renounceable underwritten rights issue of 6,535,409,562 rights shares which raised gross proceeds of SGD718.9 million.

Languages. English

Wu Zhaoqi, Partner

Allen & Gledhill LLP

T +65 6890 7720
F +65 6302 3152
E wu.zhaoqi@allenandgledhill.com
W www.allenandgledhill.com

Professional qualifications. Singapore Bar, 2009

Areas of practice. Capital markets; corporate regulatory & compliance

Recent transactions:

  • Advised Temasek Financial (I) Limited as issuer, and Temasek Holdings (Private) Limited, as guarantor, on Temasek Financial (I) Limited's inaugural Euro issuances of EUR1.1 billion notes under its US$15 billion guaranteed global medium term note programme.

  • Advised Oversea-Chinese Banking Corporation Limited on its renounceable underwritten rights issue of 436.78 million rights shares which raised gross proceeds of SGD3.34 billion in 2014. The rights issue is the largest Singapore equity capital market deal since March 2011 and is Singapore's second-largest ever rights issue.

Languages. English

Publication. Listing in Singapore: Corporate Governance Perspectives (co-author of chapter on "Corporate Governance for Listed Companies"), White Page (2016).


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