Debt capital markets in Singapore: regulatory overview

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

The Q&A gives an overview of main debt markets/exchanges, regulators and legislation, listing requirements, offering structures, advisers, prospectus/offer document, timetables, tax, clearing and settlement, continuing obligations and reform.

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

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

Margaret Chin and Daselin Ang, Allen & Gledhill LLP
Contents

Legislative restrictions on selling debt securities

1. What are the main restrictions on offering and selling debt securities in your jurisdiction?

The main legislation that applies to the offering and selling of debt securities in Singapore is the Securities and Futures Act, Chapter 289 of Singapore (SFA). Under the SFA, all offers of debt securities must prima facie be accompanied by a prospectus, except if any of the exemptions under Part XIII of the SFA apply (which include exemptions relating to institutional and accredited investors, small offers, private placements, and where an offer information statement is used). Since May 2016, the Bond Seasoning Framework and the Exempt Bond Issuer Framework introduced by Singapore's central bank, the Monetary Authority of Singapore (MAS), provide two further exemptions to the need to publish a prospectus, where the issuer meets certain size, credit and listing requirements.

If a prospectus is required, it must fulfil the detailed disclosure requirements stipulated in the SFA. The SFA also sets out the requirements relating to capital markets services licensing, as well as other restrictions relating to market conduct and advertising when offering and selling debt securities in Singapore.

Additionally, debt securities which are listed on the Singapore Exchange Securities Trading Limited (SGX-ST) must comply with the listing and continuing obligations contained in the SGX Listing Manual.

 

Market activity and deals

2. Outline the main market activity and deals in your jurisdiction in the past year.

In March 2016, United Overseas Bank Limited became the first Asian bank to issue euro-denominated fixed-rate covered bonds under its US$8 billion global covered bond programme (which was established on 23 November 2015), raising a total of EUR500 million through global investors, including banks, fund managers and central banks. This follows on the heels of Singapore's first ever issue of covered bonds in July 2015 by DBS Bank Ltd under its US$10 billion global covered bond programme established on 16 June 2015.

Retail debt security issuances also continue to grow with over ten retail debt securities now listed on the Singapore Exchange Securities Trading Limited, including Hyflux Ltd's issuance of perpetual securities in May 2016 which was oversubscribed more than three times. Additionally, in June 2016, Azalea Asset Management, an indirect wholly-owned subsidiary of Temasek Holdings, launched Astrea III, Singapore's first listed bond issuance backed by cash flows from private equity funds.

 

Structuring a debt securities issue

3. Are different structures used for debt securities issues to the public (retail issues) and issues to professional investors (wholesale issues)?

The issue of a prospectus is necessary when there is an offer of securities which does not fall within any of the exemptions set out in the Securities and Futures Act, Chapter 289 of Singapore (SFA). A prospectus must contain the information prescribed by the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 (SFR), and criminal and civil liability attach where the prospectus contains either false or misleading statements, or non-disclosure of material facts.

In Singapore, the most common exemptions invoked for debt securities offerings are those relating to institutional investors and certain other specified persons (including accredited investors) under sections 274 and 275 of the SFA (specified investors). Such an offering is exempt from the requirement for a prospectus and instead, an information memorandum which purports to describe the securities being offered, and the business and affairs of the issuer, is often issued and used by the issuer in connection with the offer. An information memorandum, unlike a prospectus, is not subject to the disclosure requirements prescribed by the SFR, and does not attract criminal and civil liability in respect of false or misleading statements or non-disclosure of material facts, as is the case with a prospectus. However, Rule 313 of the SGX Listing Manual will apply, and this provides that if debt securities are issued without a prospectus and offered primarily to specified investors, the offering documents must contain the information that such investors would customarily expect to see in these documents.

For retail issuances, issuers typically invoke the exemption relating to an offer information statement under section 277 of the SFA. This is possible where the shares of the issuer are already listed on the Singapore Exchange Securities Trading Limited (SGX-ST), and the offer information statement contains the information prescribed by the Sixteenth Schedule of the SFR. Disclosure requirements for an offer information statement under this Schedule are less onerous than those for a prospectus, but civil and criminal liability still applies.

More recently, the introduction of the Bond Seasoning Framework and the Exempt Bond Issuer Framework in 2016 have eased the requirements for the making of an offer of debt securities to the retail public by allowing retail offers of debt securities to be made without the need for a prospectus in certain specified circumstances. Debt securities issued under both frameworks need not be accompanied by a prospectus, and can be bought and sold on the SGX-ST. A brief summary of the requirements to qualify for the prospectus exemption under these frameworks, which are governed by the Securities and Futures (Offers of Investments) (Exemption for Offers of Post-seasoning Debentures) Regulations 2016 (Bond Seasoning Framework) and the Securities and Futures (Offers of Investments) (Exemption for Offers of Straight Debentures) Regulations 2016 (Exempt Bond Issuer Framework), is set out below.

Bond Seasoning Framework

Under the Bond Seasoning Framework, seasoned debt securities may be issued to persons who are not institutional investors or a "relevant person" as defined in section 275 of the SFA (retail investors) through a "re-tap" (that is, the subsequent offer of new debt securities on principally the same terms as the seasoned debt securities) or made available to retail investors through secondary trading on the SGX-ST. Debt securities are seasoned when debt securities that have been initially offered only to specified investors are subsequently made available for trading on the SGX-ST by retail investors after the seasoning period (prescribed by law as six months after the date of listing on the SGX-ST of a bond issuance).

The requirements for an issuer to fall under the Bond Seasoning Framework include the following:

  • "Seasoned debentures" exclude bonds with embedded option features, but may include bonds structured as plain vanilla bonds which offer additional security to investors by way of collateral, or bonds with early redemption features which are exercisable at the option of securityholders.

  • "Size test" means the issuer must have either:

    • a minimum market capitalisation of SGD1 billion over the six months prior to the offer; or

    • net assets of at least SGD500 million in its most recent financial statements; or

    • a minimum annual average amount of at least SGD500 million in net assets from its three most recent financial years.

  • "Listing test" means that the issuer must have had its equity securities listed on a recognised securities exchange for at least five years, or has listed or guaranteed the issuance of bonds on the SGX-ST for at least five years, before the date of the offer.

  • "Credit test" means that the issuer must either:

    • receive a minimum credit rating of BBB from an international credit rating agency; or

    • establish that it has not recorded an average net loss and has recorded an average positive net operating cash flow for its three most recent financial years; or

    • have listed or guaranteed the issuance of bonds on the SGX-ST for SGD500 million over the previous five years and there has been no default in the repayment of moneys under the bonds.

  • The issuer must fulfil a minimum initial offer size of SGD150 million to specified investors.

  • Seasoned bonds and bonds offered to retail investors via a re-tap must be listed and traded on the SGX-ST.

  • The aggregate amount of bonds offered to retail investors via a re-tap must not exceed 50% of the total value of the initial offer of seasoned bonds.

  • Any other requirements as prescribed by the Monetary Authority of Singapore (MAS) and/or in accordance with Part VI of Chapter 3 of the SGX Listing Manual.

Offer documents issued to specified investors and the product highlights sheet (PHS) that complies with the requirements under the requisite regulations must be announced via SGXNET upon receiving SGX-ST's confirmation or approval-in-principle (Rule 320, SGX Listing Manual), to ensure that issuers provide retail investors with a PHS at the time of the re-tap. The offer documents must also satisfy the disclosure obligations contained in Rule 322 of the SGX Listing Manual.

Exempt Bond Issuer Framework

Under the Exempt Bond Issuer Framework, issuers who satisfy certain specified thresholds may issue debt securities directly to retail investors without any seasoning period. These thresholds are broadly similar to, but more stringent than, those under the Bond Seasoning Framework.

The requirements for an issuer to fall under the Exempt Bond Issuer Framework include the following:

  • "Straight debentures" similarly exclude bonds with embedded option features, but may include bonds structured as plain vanilla bonds which offer additional security to investors by way of collateral, or bonds with early redemption features which are exercisable at the option of securityholders.

  • "Size test" is equivalent to that under the Bond Seasoning Framework.

  • "Listing test" is equivalent to that under the Bond Seasoning Framework.

  • "Credit test" means that the issuer must either:

    • receive a minimum credit rating of AA- from an international credit rating agency; or

    • establish that it has recorded a net profit of at least SGD100 million and has a positive net cash inflow from its operating activities for its three most recent financial years; or

    • have listed or guaranteed the issuance of bonds on the SGX-ST for at least SGD1 billion over the previous five years and there has been no default in the repayment of moneys under the bonds.

  • Bonds offered under the exemption must be listed and traded on the SGX-ST.

  • The bonds must comprise tranches to retail and institutional investors or relevant persons, and the amount of bonds issued under the institutional investors or relevant persons tranche must be at least 20% of the aggregate debenture size.

  • Any other requirements as prescribed by the MAS.

A simplified disclosure document (SDD) that complies with the requirements under the requisite regulations must be issued in lieu of a prospectus to institutional investors and relevant persons, and retail investors should receive both the SDD and a PHS. Both the SDD and PHS must be announced and made available via SGXNET at the time of the offer.

The provisions discussed in this question only apply to companies. Similar provisions apply to bonds issued by a trustee-manager of a business trust (BT) on behalf of the BT, and by a manager of a real estate investment trust (REIT) on behalf of the REIT.

 
4. Are trust structures used for issues of debt securities in your jurisdiction? If not, what are the main ways of structuring issues of debt securities in the debt capital markets/exchanges?

Debt securities can either be issued under a trust structure or a fiscal agency structure. Under a fiscal agency structure, the issuer appoints a fiscal agent who acts on its behalf in dealing with the securityholders. The fiscal agent does not owe the securityholders a duty of care. A fiscal agency structure in respect of issues of debt securities in Singapore is relatively uncommon.

A trust structure is the prevailing structure for issues of debt securities in Singapore. Under this structure, the issuer appoints a trustee to act on behalf of, and in the best interests of, the securityholders. In this way, the issuer may deal with the trustee directly rather than with a large number of diverse securityholders.

A trust deed governing the relationship between the issuer and the trustee (on behalf of the securityholders) commonly includes, but is not limited to, the following features:

  • The issuer's promise to pay the securityholders.

  • A restriction on the securityholders from bringing proceedings against the issuer (unless the trustee, having been instructed, fails to bring proceedings against the issuer within a reasonable time).

  • The extent and scope of the trustee's discretion in the exercise of its powers under the trust deed.

  • A provision stating that the trustee is not a paying agent.

  • A provision stating that the issuer cannot remove the trustee without the consent of the securityholders.

In addition, under the new rules which were introduced in the SGX Listing Manual alongside the Bond Seasoning Framework and the Exempt Bond Issuer Framework, the trust deed must contain provisions to the effect that:

  • The trustee shall upon the occurrence of an event described in Rule 308(5)(b)(i) of the SGX Listing Manual, take action, which shall be set out in the trust deed, on behalf of the holders of debt securities.

  • The trustee shall ensure that it has the ability and powers to perform all of its duties as set out in the trust deed.

  • The issuer shall promptly notify the trustee when the issuer is aware that any event of default, enforcement event or other event that would cause acceleration of the repayment of the principal amount of the debt securities has occurred, or any condition of the trust deed cannot be fulfilled.

  • A meeting of holders of debt securities shall be called on a requisition in writing signed by holders of at least 10% of the nominal amount of the outstanding debt securities.

  • If the trustee ceases to perform its function, the issuer shall appoint another trustee which meets the criteria in Rules 308(3) and 308(4) of the SGX Listing Manual.

 

Main debt capital markets/exchanges

5. What are the main debt securities markets/exchanges in your jurisdiction (including any exchange-regulated market or multi-lateral trading facility (MTF))?

Main debt markets/exchanges

There is only one debt securities exchange in Singapore: the Singapore Exchange Securities Trading Limited (SGX-ST). Debt securities issuers can list their debt securities on one of the SGX-ST's two bond markets:

  • Wholesale bond market.

  • Retail bond market.

Wholesale bonds are offered only to institutional and certain other specific persons, including accredited investors, in larger denominations, while retail bonds are offered to all investors, including retail investors. Further, wholesale bonds are usually traded over-the-counter after issuance, while retail bonds can be traded on the exchange.

Approximate total issuance on each market

According to the latest publicly available data from the SGX-ST, as at July 2016, the SGX-ST had over 1,900 listed debt securities issued by companies from 34 countries and denominated in 19 currencies, with more than US$800 billion raised. Between January and July 2016 alone, there were 233 new issues of debt securities, with more than SGD112 billion raised. Approximately 28% of all debt securities issuances were by local issuers, while 78% were by foreign issuers. The retail bond market has also seen growth in recent years and now has over ten listed retail debt securities.

 
6. What legislation applies to the debt securities markets/exchanges in your jurisdiction? Who are the main regulators of the debt capital markets?

Regulatory bodies

The debt capital markets in Singapore are principally regulated by the Monetary Authority of Singapore (MAS) and the Singapore Exchange Limited (SGX). MAS regulates the offering of debt securities while SGX regulates the listing and trading of securities on its exchange.

Legislative framework

The main legislation applicable to the debt securities markets includes the following:

  • The Securities and Futures Act, Chapter 289 of Singapore and its subsidiary legislation.

  • Various notices issued by the MAS under the Monetary Authority of Singapore Act, Chapter 186 of Singapore.

  • The Companies Act, Chapter 50 of Singapore.

  • The Income Tax (Qualifying Debt Securities) Regulations.

In addition, the SGX Listing Manual also applies to listings of debt securities on the Singapore Exchange Securities Trading Limited.

 

Listing debt securities

7. What are the main listing requirements for bonds and notes issued under programmes?

Main requirements

A company wishing to list bonds and notes on the Singapore Exchange Securities Trading Limited (SGX-ST) must comply with the listing requirements contained in Rule 303 of the SGX Listing Manual.

Minimum size requirements

For local issuers listed on the SGX-ST, the issue of debt securities must have a principal amount of at least SGD750,000 (or its equivalent in foreign currencies).

For local issuers not listed on the SGX-ST, either:

  • The issuer must meet the SGX-ST's requirements in Rules 210(2), (3), (4) and (5) of the SGX Listing Manual for the listing of equity securities, and the issue of debt securities must have a principal amount of at least SGD750,000 (or its equivalent in foreign currencies).

  • The issue of debt securities must have a principal amount of at least SGD750,000 (or its equivalent in foreign currencies), and at least 80% of the issue must be subscribed by specified investors.

  • The issuer must be the Singapore government or a Singapore government agency.

  • The issue of debt securities must have a credit rating of investment grade and above.

For a local issuer who does not meet any of the above requirements, the issuer's obligations under the issue of the debt securities must be either:

  • Guaranteed by an entity that is listed on the SGX-ST, and the issue of debt securities must have a principal amount of at least SGD750,000 (or its equivalent in foreign currencies).

  • Guaranteed by an entity which meets the requirements in Rules 210(2), (3), (4) and (5) of the SGX Listing Manual, and the issue of debt securities must have a principal amount of at least SGD750,000 (or its equivalent in foreign currencies).

  • Guaranteed by the Singapore government or a Singapore government agency.

A listing fee of SGD15,000 must also normally be paid in order to list debt securities on the SGX-ST, in addition to a process fee of SGD10,000. Further, under Rule 309 of the SGX Listing Manual, the principal amount of each listed series of a medium term note programme must be at least SGD5 million (or its equivalent in foreign currencies).

Additionally, issuers seeking to issue debt securities under the Bond Seasoning Framework must meet the eligibility criteria under the Securities and Futures (Offers of Investments) (Exemption for Offers of Post-seasoning Debentures) Regulations 2016 and Part VI of Chapter 3 of the SGX Listing Manual, which includes having a minimum principal amount of at least SGD150 million in the initial issuance to specified investors. Issuers seeking to issue debt securities under the Exempt Bond Issuer Framework must meet the criteria for exemption under the Securities and Futures (Offers of Investments) (Exemption for Offers of Straight Debentures) Regulations 2016. Issuers must also comply with such other listing requirements of the SGX Listing Manual as may be applicable.

 
8. Are there different/additional listing requirements for other types of securities?

A foreign company wishing to list an issue of debt securities on the Singapore Exchange Securities Trading Limited (SGX-ST) must comply with the listing requirements contained in Rule 304 of the SGX Listing Manual. The foreign issuer must meet one of the following requirements:

  • Be a supranational body.

  • Be a government, or a government agency whose obligations are guaranteed by a government.

  • Be an entity whose equity securities are listed on the SGX-ST.

  • Be a corporation which meets the requirements contained in Rules 210(2), (3), (4) and (5) of the SGX Listing Manual for the listing of equity securities.

  • Have either:

    • a cumulative consolidated pre-tax profit of at least SGD50 million (or its equivalent in foreign currencies) for the last three years; or

    • a minimum pre-tax profit of SGD20 million (or its equivalent in foreign currencies) for any one of the three years, and consolidated net tangible assets of at least SGD50 million (or its equivalent in foreign currencies).

  • Be a corporation whose obligations under the issue of the debt securities are guaranteed by any of the entities listed above.

Alternatively, one of the following requirements must be met:

  • The issue of debt securities must be at least 80% subscribed by specified investors.

  • The issue of debt securities must have a credit rating of investment grade and above.

  • The issuer or guarantor must meet the criteria for exemption under the Securities and Futures (Offers of Investments) (Exemption for Offers of Straight Debentures) Regulations 2016.

  • The issuer or guarantor must meet the eligibility criteria under Part VI of Chapter 3 of the SGX Listing Manual.

Additionally, under Rule 305 of the SGX Listing Manual, a foreign issuer is normally required to appoint a paying agent in Singapore while the debt securities are quoted on the SGX-ST and upon the issue of debt securities in definitive form. The SGX-ST may accept other arrangements to enable definitive certificate holders of the bearer debt securities in Singapore to be paid promptly.

 

Continuing obligations

9. What are the main areas of continuing obligations applicable to companies with listed debt securities and the legislation that applies?

Companies with debt securities listed on the Singapore Exchange Securities Trading Limited (SGX-ST) must observe the continuing obligations set out in Part VII of Chapter 3 of the SGX Listing Manual. Under Part VII, the main continuing obligation applicable to debt issuers is to immediately disclose to the SGX-ST any information which may have a material effect on the price or value of its debt securities, or on an investor's decision whether to trade in such debt securities (Rule 323, SGX Listing Manual).

A debt issuer must also immediately announce:

  • The redemption or cancellation of debt securities when every 5% of the total principal amount of debt securities is redeemed or cancelled (Rule 324(1), SGX Listing Manual).

  • The details of any interest payments to be made (except for fixed-rate debt securities offered only to specified investors and traded in a minimum board lot size of SGD200,000) (Rule 324(2), SGX Listing Manual).

  • The appointment of a replacement trustee (Rule 324(3), SGX Listing Manual).

Financial reporting

Additionally, if a debt issuer or, where there are any guarantors, any of the guarantors, has its equity securities listed on the SGX-ST (that is, it is an "equity issuer"), the issuer must announce via SGXNET its own and the guarantor's consolidated profit and loss account and balance sheet in accordance with the timelines prescribed in the SGX Listing Manual in relation to such equity securities.

However, the debt issuer need not announce the consolidated profit and loss account and balance sheet of any entity that is not an equity issuer (that is, it is a "non-equity issuer") if all of the following conditions are met:

  • The debt securities are guaranteed by one or more guarantors.

  • The guarantee is full and unconditional.

  • Where there is more than one guarantor, the guarantors are joint and several.

  • The profit and loss accounts and balance sheets of the equity issuer and the non-equity issuer are consolidated in accordance with Rule 220 of the SGX Listing Manual.

  • The issuer announces via SGXNET the consolidated profit and loss account and balance sheet of the equity issuer in accordance with the timelines prescribed in the SGX Listing Manual in relation to its equity securities.

If the debt issuer and, where there are any guarantors, all of the guarantors do not have their equity securities listed on the SGX-ST, a proposal must be submitted for the SGX-ST's approval of its proposed arrangements for the disclosure of their financial statements on SGXNET. The arrangements approved by the SGX-ST are to be disclosed via the offer documents.

These financial reporting requirements do not apply to debt securities which are offered only to specified investors and traded in a minimum board lot size of SGD200,000 (or its equivalent in foreign currencies).

 
10. Do the continuing obligations apply to foreign companies with listed debt securities?

The continuing obligations apply equally to both local and foreign companies with debt securities listed on the Singapore Exchange Securities Trading Limited.

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

Under section 203(2) of the Securities and Futures Act, Chapter 289 of Singapore (SFA), companies shall not intentionally, recklessly or negligently fail to notify the securities exchange of such information as is required to be disclosed by the securities exchange under the listing rules or any other requirement of the securities exchange. Therefore, any failure to comply with the disclosure obligations in the SGX Listing Manual can result in civil or criminal liability under the SFA. Penalties can include a fine not exceeding SGD250,000 and/or imprisonment for a term not exceeding seven years.

 

Advisors and documents: debt securities issue

12. Outline the role of advisers used and main documents produced when issuing and listing debt securities.

The advisers and other parties to a debt issuance include the following:

  • Arranger or lead manager. Appointed by the issuer and responsible for arranging the issue and advising on its timing, structure and pricing. Sometimes agrees with the issuer to be the underwriter of the issuance, and in that scenario will take on the risk of subscribing for any unsubscribed securities.

  • Trustee. Appointed by the issuer to act on behalf of, and in the interest of, the securityholders, and owes the securityholders a duty of care. Where a prospectus has been lodged with the Monetary Authority of Singapore, a trustee has further statutory duties under section 266(1) of the Securities and Futures Act, Chapter 289 of Singapore, including exercising due diligence and vigilance in carrying out its functions and duties. Debt securities issued under the Bond Seasoning Framework and the Exempt Bond Issuer Framework must also comply with the requirement to have a trustee and a trust deed.

  • Fiscal agent. Appointed by the issuer to act on its behalf when a trust structure is not used, in particular, to receive payments of interest and principal from the issuer and pass these on to the securityholders.

  • Principal paying agent. Appointed by the issuer where a trust structure is used to assist in the making of interest and principal payments.

  • Auditors. Appointed by the issuer to take part in the preparation of the offering document and to issue a comfort letter (confirming, amongst other things, correct extraction) to the lead manager on the issuer's accounts.

  • Legal advisers. The issuer, lead manager and trustee typically each appoints legal advisers to advise on the legal issues relating to the transaction. It is usually the lead manager's advisers that prepare the transaction documents (other than any business related write-ups or documents, which are usually prepared by the issuer's advisers).

The main documents required in a typical debt issuance are:

  • An offering document (for example, a prospectus or an information memorandum), which is provided to give investors more information about the issuer and any guarantor in order for investors to make an informed decision as to whether or not to purchase the securities.

  • A trust deed, which is required when a trust structure is used and includes provisions governing the appointment of the trustee and the trustee's duties.

  • An agency agreement, which covers the appointment and duties of any agent appointed by the issuer.

  • A Central Depository (Pte) Limited (CDP) application form, which appoints the CDP to act as depository in respect of the debt issuance and contains a set of standard, non-negotiable documents.

  • A deed of covenant, executed by the issuer in favour of the account holders of CDP, which is required where CDP is used as depository for a global security.

  • A subscription/underwriting agreement, which is entered into between the issuer, any guarantor, lead manager and other managers, and contains the issuer's agreement to issue the securities and the managers' agreement to subscribe or procure subscribers for the securities.

 

Debt prospectus/main offering document

13. When is a prospectus (or other main offering document) required? What are the main publication/delivery requirements?

The starting position is that all offers of debt securities must comply with the prospectus requirements set out in the Securities and Futures Act, Chapter 289 of Singapore (SFA), unless the offer is either excluded or exempted from the prospectus requirements. Debt securities that require a prospectus include debentures, bonds, notes and any other debt security, whether constituting a charge on the assets of the issuer or not.

The key publication and delivery requirements for a prospectus include, but are not limited to, the following:

  • It must be signed by all directors, proposed directors or their authorised agents.

  • It must be dated, as no debentures can be issued in relation to a prospectus that has been issued more than six months previously.

  • It must be registered with the Monetary Authority of Singapore (MAS) before it can be circulated.

  • It must be accompanied by a product highlights sheet (section 240AA, SFA).

  • Disclosure must be made of the principal terms and conditions of the issue to be publicly offered, including the:

    • issue price;

    • redemption price;

    • form;

    • rate of interest;

    • guarantees constituted in favour of the holders of the debt securities; and

    • maturity date.

  • Disclosure must be made of the financial covenants of the issuer and the definition of events constituting events of default.

Additional requirements are also imposed on investment funds, life science companies and mineral, oil and gas companies when they are setting out their prospectuses (Parts III, IV and V of Chapter 6, SGX Listing Manual).

However, offers of most wholesale debt security issuances in Singapore are not made under a prospectus but instead under sections 274 and 275 of the SFA, which provide an exemption from the requirement to publish a prospectus. The main offering document used is typically an information memorandum.

Retail issuances are typically issued under section 277 of the SFA, where an offer information statement is made available to the public, rather than a prospectus.

Prospectuses and offer information statements must also first be lodged with the MAS via its online OPERA database for seven days before they can be listed on the Singapore Exchange Securities Trading Limited (SGX-ST). Once lodged, these prospectuses and offer information statements will remain on OPERA and accessible to the public for a period of six months after registration. This requirement does not apply to simplified disclosure documents (SDDs) and information memorandums. Nevertheless, all offering documents, including SDDs and information memorandums, are made publicly available on the SGX-ST.

 
14. Are there any exemptions from the requirements for publication/delivery of a prospectus (or other main offering document)?

An offer of securities does not need to be accompanied by the publication of a prospectus if the offer is excluded or exempted from this requirement. The main exemptions under the Securities and Futures Act, Chapter 289 of Singapore (SFA) are as follows:

  • Small offers, where the total amount raised within any 12-month period does not exceed SGD5 million.

  • Private placements, where the offers are made to no more than 50 persons within any 12-month period.

  • Offers made to institutional investors or specified persons (including accredited investors).

  • An offer of international debentures where both:

    • the issuer is a foreign issuer and is listed on a recognised stock exchange; and

    • the debentures are denominated in foreign currency with a face value equivalent to US$5,000.

  • Offers made using an offer information statement in the form prescribed in the Sixteenth Schedule of the Securities and Futures (Offers of Investment) (Shares and Debentures) Regulations 2005, where the issuer is a company whose equity securities are already listed on the Singapore Exchange Securities Trading Limited for quotation.

Most wholesale issuances are carried out in reliance on sections 274 and 275 of the SFA, where the offer is made to institutional or specified persons (including accredited investors) and so do not require a prospectus. Instead, these issuances are normally carried out using an information memorandum.

Retail issuances are usually conducted or initiated by listed companies. Therefore, such offers are almost invariably made using an offer information statement, a document which requires a lower degree of disclosure as compared to a prospectus.

Additionally, from 2016, offers made under the recently introduced Bond Seasoning Framework and Exempt Bond Issuer Framework are exempt from the need to publish a prospectus under the SFA (see Question 3).

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

The content requirements for a prospectus are contained in:

  • Section 243 of the Securities and Futures Act, Chapter 289 of Singapore.

  • The relevant schedule to the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 (SFR).

  • Chapter 6 of the SGX Listing Manual.

Issuers should note that a checklist showing compliance with Part II of Chapter 6 of the SGX Listing Manual must be provided in the prospectus (Rule 312, SGX Listing Manual), and the documents set out in Rule 314 of the SGX Listing Manual must be submitted with the applicable listing fee.

The information required to be included in a prospectus includes, among other things:

  • Information on the issuer and its directors, key executives and employees.

  • Information on the ownership of the company.

  • Information on the debt securities.

  • Financial information, including information on accounting policies.

  • Information on the business prospects of the issuer, including any known trend information and profit forecast.

  • Information on the issuer's auditors, registrars and other agents.

  • Information on the issuer's credit rating.

  • Information on any interested person transactions and interests of experts, underwriters and financial advisers.

  • Information regarding taxes.

  • Use of proceeds from the offer.

  • Risk considerations.

The content requirements for a prospectus are more onerous than those required for an information memorandum. For example, far more detailed information on the issuer and its management, as set out in Part V of the Seventh Schedule of the SFR, must be provided, including information on the liquidity and capital resources of the issuer. Further, more extensive background information and material disclosures on use of proceeds, material contracts and directors and equivalent persons of the issuer must also be provided.

An information memorandum typically contains the following information:

  • Description of the notes or programme (if it is a programme).

  • Risk factors.

  • Use of proceeds of the notes.

  • Selected financial information.

  • Description of the issuer (and guarantor, if applicable).

  • Directors of the issuer.

  • Terms and conditions of the notes.

  • Tax considerations.

  • Ratings (if applicable).

  • Subscription, purchase and distribution information.

  • Clearing and settlement information.

 
16. Who is responsible for the prospectus (or other main offering document) and/or who is liable for its contents?

Under sections 253 and 254 of the Securities and Futures Act, Chapter 289 of Singapore, civil and criminal liability for false or misleading statements in the prospectus can also attach to, amongst others:

  • The issuer.

  • Each director of the issuer.

  • An underwriter.

  • Each person who is, and who has consented to be, named in the prospectus as a proposed director or equivalent of the issuer.

 

Timetable: debt securities issue

17. What is a typical timetable for issuing and listing debt securities?

The timetable for issuing and listing debt securities depends on a number of factors. In the event that the debt securities are being issued under an existing programme, the timetable is likely to be much shorter. In fact, most of these issuances, commonly referred to as drawdowns, are completed within one to two weeks. This stands in contrast to retail or standalone issuances where there is a greater incidence of regulatory interference.

In the event that none of the prospectus exemption provisions apply, a prospectus must be lodged with the Monetary Authority of Singapore (MAS) for a minimum public disclosure period of seven days before being registered. This public disclosure period can range from seven to 21 days, with a possibility of extension by the MAS to 28 days.

Additionally, approval must be sought from the Singapore Exchange Limited (SGX) to list on the Singapore Exchange Securities Trading Limited (SGX-ST). This approval can be sought online via the SGX-ST's e-submission system. According to the SGX, applications to list wholesale debt securities are normally processed within one business day, while applications to list retail debt securities are normally processed within ten business days.

Further, an International Securities Identification Number (ISIN) code must be generated for listed debt issuances. An application for an ISIN code, containing the pricing details of the debt issuance, must be made no later than three market days prior to the listing date of the debt securities.

 

Tax: debt securities issue

18. What are the main tax issues when issuing and listing debt securities?

Withholding tax

Section 12(6) of the Income Tax Act, Chapter 134 of Singapore (ITA) provides that certain income shall be deemed to be derived from Singapore, including:

  • Any interest or any other payment in connection with any loan or indebtedness which is either:

    • borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore; or

    • deductible against any income accruing in, or derived from, Singapore.

  • Any income derived from loans where the funds provided by such loans are brought into, or used in, Singapore.

Such payments will generally be subject to Singapore withholding tax when made to non-residents of Singapore, at the rate of:

  • 17% for non-resident companies.

  • 22% for non-resident individuals.

These rates may be reduced to 15% of the gross amount of such payment where the income is not derived by the recipient from a trade, business, profession or vocation carried on or exercised by such person in Singapore, and is not effectively connected with any permanent establishment in Singapore of that person, or any lower tax rate as provided under an applicable tax treaty.

There are certain exemptions and exclusions from Singapore withholding tax available on interest and related payments falling under section 12(6) of the ITA, particularly the Qualifying Debt Securities (QDS) scheme (see below, QDS scheme).

QDS scheme

Under the QDS scheme, tax exemption (including withholding tax exemption) is granted on certain qualifying income (including interest) derived by investors who are non-resident holders of debt securities which qualify as QDS under the ITA.

The main conditions for the above tax exemption are as follows:

  • The issue of the QDS must be arranged by certain financial institutions in Singapore which have been granted one of the following statuses:

    • Financial Sector Incentive (Bond Market) company;

    • Financial Sector Incentive (Capital Market) company; or

    • Financial Sector Incentive (Standard Tier) company.

    The exact requirements depend on whether the QDS are issued under a programme or as a standalone issuance.

  • During the primary launch of the QDS (or a tranche of QDS, in the case of a programme), either:

    • the QDS are issued to four or more persons; or

    • less than 50% of the principal amount of the QDS is beneficially held or funded, directly or indirectly, by related parties of the issuer.

    The holder of the QDS is not resident in Singapore and either does not have a permanent establishment in Singapore, or has a permanent establishment in Singapore but does not acquire the QDS using any funds from Singapore operations.

  • Payments of qualifying income under the QDS are not derived by any related parties of the issuer or any other person who acquired the QDS using funds from related parties of the issuer, if at any time during the life of the QDS, 50% or more of the QDS which are outstanding at any time during the life of their issue is beneficially held or funded, by any related parties of the issuer.

  • The issuer has included in all offering documents certain statements relating to QDS, and a return on debt securities in respect of the QDS is submitted to the Monetary Authority of Singapore within the prescribed time and in the prescribed form.

In addition, the QDS scheme grants companies or bodies of persons in Singapore a 10% concessionary tax rate on their qualifying income derived from QDS, subject to meeting certain requirements which are broadly in line with the above.

As an additional incentive for eligible issuers under the Bond Seasoning Framework and the Exempt Bond Issuer Framework, the Minister for Finance will grant a tax deduction of up to two times to qualifying retail bond issuers for certain qualifying issuance costs attributable to qualifying retail bonds for a period of five years beginning from 19 May 2016, subject to a cap of SGD500,000 per qualifying bond issue and a cumulative cap of SGD1 million per issuer for the whole duration of the concession.

 

Clearing and settlement of debt securities

19. How are debt securities cleared and settled and what currency are debt securities typically issued in? Are there special considerations for holding, clearing and settling debt securities issued in foreign currencies?

Debt securities can be cleared and settled through different clearing systems, such as:

  • The Central Depository (Pte) Limited (CDP).

  • Euroclear Bank SA/NV.

  • Clearstream Banking SA.

  • Central Moneymarkets Unit Service.

  • Depository Trust & Clearing Corporation.

Debt securities can be denominated in Singapore dollar or any other foreign currencies, such as United States dollar, Euro or Japanese yen.

Debt securities are typically issued in the form of a global security or a global certificate (as the case may be) which is then held by a depositary for safekeeping. Delivery and transfer of debt securities between the respective accountholders are by way of electronic book-entry changes in the securities accounts maintained by such accountholders. This facilitates the transfer of interests in the debt securities in global form among the accountholders, eliminating the need for physical movements of securities or certificates and reducing the risks arising from non-simultaneous transfer.

Clearing systems can only support clearance of debt securities denominated in specific currencies. For instance, the list of currencies supported by the CDP includes Singapore dollar, Australian dollar, Chinese renminbi, Hong Kong dollar, United States dollar and Euro.

 

Reform

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

There are no publicly-known proposals for reform.

 

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

Margaret Chin, Partner

Allen & Gledhill LLP

T +65 6890 7718
F +65 6302 3110
E margaret.chin@allenandgledhill.com
W www.allenandgledhill.com

Professional qualifications. Singapore Bar, 1990

Areas of practice. Banking & finance; capital markets

Recent transactions:

  • Advised DBS Bank Ltd on the establishment of a US$10 billion global covered bond programme and issue of US$1 billion, 1.625% covered bonds due 2018 as the first series off it. This covered bond programme and issue is the first by a Singapore-incorporated bank and the first in the Singapore market.

  • Advised DBS Bank Ltd on the retail perpetual securities offering in Singapore issued by Hyflux Ltd. This is also the first retail perpetual securities offering in Singapore since the Product Highlights Sheet requirement was introduced, where the intention was to provide a clear and objective overview of the features and risks of the perpetual securities in a user-friendly and easy to read structure and format.

Languages. English

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

Daselin Ang, Partner

Allen & Gledhill LLP

T +65 6890 7745
F +65 6302 3100
E daselin.ang@allenandgledhill.com
W www.allenandgledhill.com

Professional qualifications. Roll of Solicitors of England and Wales, 2008; Singapore Bar, 2005

Areas of practice. Banking & finance; capital markets

Recent transactions

  • Advised Bayfront Covered Bonds Pte Ltd, as the covered bond guarantor, on the establishment of a US$10 billion global covered bond programme by DBS Bank Ltd and issue of US$1 billion, 1.625% covered bonds due 2018 as the first series off it. This covered bond programme and issue is the first by a Singapore-incorporated bank and the first in the Singapore market.

  • Advised Deutsche Bank AG, Singapore Branch, Deutsche Bank AG, Hong Kong Branch and DB International Trust (Singapore) Limited in relation to the issuance of US$510 million asset-backed securities by Astrea III Pte Ltd, which is sponsored by Astrea Capital Pte Ltd, a wholly-owned subsidiary of Azalea Asset Management Pte Ltd, which is an indirect wholly-owned subsidiary of Temasek Holdings (Private) Limited. These are the first listed notes in Singapore backed by cash flows from private equity funds.

Languages. English

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


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