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Singapore – Key Issues For Your Business In 2015: Mergers & Acquisitions.

10 March, 2015

 

Legal News & Analysis – Asia Pacific – Singapore – Corporate/M&A

 

New And Enhanced Incentives For Companies To Expand Overseas


In order to motivate more companies to explore overseas markets, the Government has announced a new 10% concessionary tax rate (dubbed the “International Growth Scheme“) on certain income of larger companies that are expanding abroad. Although the details for the concessionary tax rate have not been announced, the Government has said that such companies must continue to centre their headquarters and key business activities in Singapore in order to avail themselves of these benefits.


In addition, the Government will be raising its support under its internationalisation grants awarded by IE Singapore from the current 50% to 70% for all forms of overseas activities for three years. The Government will also be broadening an existing double tax deduction scheme against qualifying market expansion activities to cover manpower expenses. The enhanced scheme could thus cover salaries incurred for Singaporeans posted overseas.
The current M&A allowance will be extended for another 5 years and will be enhanced to 25% of the value of a qualifying investment, up from the 5% threshold allowed previously. The M&A allowance scheme applies to a qualifying Singapore company that acquires the ordinary shares of a target company on or before 31 March 2020, and provides for a tax allowance that is capped at SGD 5m for all qualifying share acquisitions occurring in the basis period for each Year of Assessment. Additionally, from 1 April 2015 onwards, companies will be able to claim benefits for acquisitions that translate to a 20% shareholding in the target company, down from the current 50% threshold. This move is ostensibly to help small and medium enterprises, which may not be able to acquire large stakes in their internationalisation strategies.


Schemes Of Arrangement


Section 210 of the CA currently provides that a scheme of arrangement must be approved at a court-ordered meeting by a majority in number (the “numerical majority requirement”), with such majority representing ¾ in value of the members or creditors present and voting. The scheme of arrangement must also be approved by the court. Given the numerical majority requirement, a member’s scheme could be defeated by parties opposed to the scheme engaging in “sharesplitting”, which involves one or more members transferring small parcels of shares to a large number of other persons who are willing to vote in accordance with the transferor’s wishes.


When the Amendment Act comes into operation, Section 210 will be amended such that the Singapore court would be given the discretion with respect to the numerical majority requirement so as to deal with the issue of share-splitting and the latitude to decide who the members are in a particular case. In other words, the amendment will enable the court to approve a scheme of arrangement where the numerical majority requirement is not satisfied by reason of share splitting.

 

Rajah & Tann

 

For further information, please contact:

 

Lawrence Tan, Partner, Rajah & Tann
lawrence.tan@rajahtann.com

 

Wee Hann Lim, Partner, Rajah & Tann
wee.hann.lim@rajahtann.com

 
Rajah & Tann Corporate/M&A Practice Profile in Singapore 

 

 

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