Legal News & Analysis – Asia Pacific – Singapore – Capital Markets

On 4 June 2014, the Singapore Exchange (“SGX”) released a consultation paper on its proposed new secondary listings framework. This is expected to take effect during the fourth quarter of 2014.

The aim of this new framework is to provide greater clarity of SGX’s regulatory review methodology for secondary listing applicants (the “Applicant”), as well as of SGX’s two-tiered regulatory oversight of secondary-listed companies.

The New Regulatory Framework And How It Works

The following steps summarise the new procedures and considerations SGX proposes to adopt in considering applications for secondary listing:

1. What Is The Market Classification Of The Applicant?

SGX has proposed to rely on the market classification developed by MSCI and FTSE to determine whether the home jurisdiction of the Applicant will be considered a “Developed Market” or a “Developing Market”.

A “Developed Market” is considered to have well-established and matured legal and regulatory regimes which offer a high level of shareholder protection and corporate governance standards.

2. Which Jurisdiction Qualifies As A “Developed Market”?

In view of the maturity of the legal and regulatory regimes, SGX recognises each of the following 23 jurisdictions as a “Developed Market”:

• Australia
• Austria
• Belgium
• Canada
• Denmark
• Finland
• France
• Germany
• Hong Kong
• Ireland
• Israel
• Italy
• Japan
• Netherlands
• New Zealand
• Norway
• Portugal
• Singapore
• Spain
• Sweden
• Switzerland
• United Kingdom
• United States of America

3. What Are The Listing Criteria For Applicants From A “Developed Market”?

The Applicants will still have to meet SGX’s Main Board admission criteria. Please see here.

4. What Are The Continuing Listing Obligations For The Secondary-Listed Company From A “Developed Market”?

Once the company obtains its secondary listing on SGX, it will have to meet the continuing listing obligations under Rule 217 of the SGX Listing Manual.
SGX is also proposing to impose new listing obligations under the new Rule 751 which obliges the company to do the following on a continuing basis:

• Maintain its primary listing in the home jurisdiction;
• Be subject to all applicable listing rules of the home jurisdiction; and
• Provide an annual certification in a prescribed form that it has complied with the applicable continuing listing obligations in the SGX Listing Manual

Apart from the above, SGX will not impose additional continuing listing obligations to be fulfilled.

5. What Are The Listing Criteria For Applicants From A “Developing Market”?

As with Applicants from a Developed Market, Applicants from a Developing Market will also have to meet SGX’s Main Board admission criteria before listing.

6. What Are The Continuing Listing Obligations For The Secondary-Listed Company From A “Developing Market”?

As with secondary–listed companies from Developed Markets, companies from Developing Markets will also have to fulfil their obligations under Rules 217 and the new Rule 751 of the Listing Manual.

In addition, because the legal and regulatory regimes in Developing Markets may not offer sufficient assurance on shareholder protection and corporate governance standards, SGX is proposing enhancements through imposition of additional continuing listing obligations. This will be done through imposing the continuing listing obligations in Chapters 9 (Interested Party Transaction), 10 (Acquisitions and Realisations) and 13 (Delisting) of the SGX Listing Manual.

7. Some Exceptions

SGX predominantly relies on the place of primary listing as the determining factor in deciding whether a company is from a Developed or Developing Market. However, in the following exceptions, SGX may still review whether such classification remains appropriate:

a) where the company has presence in multiple jurisdictions (having regard to its place of primary listing, dominant operations and incorporation); or

b) the company’s place of primary listing is on the MSCI or FTSE Watch List/Review List, such that it may be downgraded from a Developed Market.

8. How Will Implementation Of The New Framework Affect Secondary-Listed Companies From Developed Markets?

If at the time of their listing, these companies were not subject to the continuing listing obligations under Chapters 9, 10 and 13 of the SGX Listing Manual, there will be no impact on them.

For companies that were subject to the continuing listing obligations under Chapters 9, 10 and 13 of the SGX Listing Manual at the time of their listing, they will no longer have to comply with these listings obligation three months from the date the framework is implemented.

9. How Will The Implementation Of The New Framework Affect Secondary-Listed Companies From Developing Markets?

There will be no impact on these companies if:

a) based on past regulatory review, SGX determined that there were no areas for enhancements in the home jurisdiction’s legal and regulatory requirements and SGX had not imposed continuing listing obligations under Chapters 9, 10 and 13 on these companies;

b) based on past regulatory review, SGX determined that they were subject to continuing listing obligations under Chapters 9, 10 and 13, these companies will continue to be subject to these obligations when the new framework is implemented; or

c) they were not obliged to fulfil continuing listing obligations under Chapters 9, 10 and 13 as they were listed prior to SGX commencing its practice of reviewing the home jurisdiction’s legal and regulatory requirements.

Comments

From the Applicant’s viewpoint, the new regulatory framework certainly affords the Applicant a more transparent and predictable roadmap to secondary listing on the SGX. The new framework also gives the Applicant clear visibility on its scope of continuing listing obligations once listed. Overall, this can only be good news for Applicants seeking secondary listing on the SGX.

It is unlikely that these proposed changes will have significant impact on the 33 companies that are currently secondary-listed on SGX. For companies from Developed Markets that were subject to the continuing listing obligations under Chapters 9, 10 and 13 of the SGX Listing Manual at the time of their listing, SGX has already suggested removing these requirements three months after the start of the new regime. This will give investors an adjustment period to assess their positions.

The consultation paper is available from the SGX website here. This consultation ends on 25 June 2014.

(Click to enlarge)

For further information, please contact:

Danny Lim, Partner, Rajah & Tann
[email protected]

Rajah & Tann Capital Markets Practice Profile in Singapore

Homegrown Capital Markets Law Firms in Singapore

International (with Local Law Capabilities) Capital Markets Law Firms in Singapore

International Capital Markets Law Firms in Singapore