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

The New Measures

The Singapore Exchange Limited (“SGX”) introduced new notification requirements for issuers listed on the Singapore Exchange Securities Trading Limited (“SGX-ST”). The new measures, which came into effect on 3 March 2014, require issuers and/or their controlling shareholder(s) to notify the SGX on a confidential basis without delay where there are discussions or negotiations that are likely to result in any one of the following transactions (“Potential Transaction”):

1. takeover of the issuer, including a scheme of arrangement or delisting;
2. reverse takeover of the issuer; or
3. very substantial acquisition by the issuer.

The requirements are set out in Practice Note 7.2 of the SGX Listing Rules for Mainboard issuers and Practice Note 7B for Catalist issuers.

Rationale For New Measures

The new notification requirements came as a result of instances where significant fluctuations in issuers’ stock prices occurred prior to any announcement being made.

The new notification requirements are therefore intended to facilitate SGX’s monitoring of trading activities and could potentially assist in insider-trading investigations in the event of information leaks.

Persons Required To Notify SGX

Depending on the circumstances, either the issuer or a controlling shareholder of the issuer may be required to notify SGX of a Potential Transaction.

The issuer has to notify the SGX when the board of directors (the “Board”) of the issuer is:

1. made aware of discussions or negotiations on a potential proposal or;
2. in discussion or negotiation on an agreement or document, whether binding or non-binding, that is likely to result in a Potential Transaction.

The controlling shareholder of the issuer is under a duty to notify the SGX when:

1. the discussions or negotiations are being carried out by the controlling shareholder without the issuer’s knowledge; and
2. the discussions or negotiations are likely to result in a Potential Transaction.

Form And Procedure For Notification

The notification to the SGX has to be made in a prescribed format. The following information must be provided:

1. the name of the issuer;
2. the type of transaction;
3. the name of target company (if applicable); and 
4. details of the contact person.

Disclosure of the counterparty is not required, and there is no obligation for any announcement to be made. However, compliance with the new notification requirements does not exempt issuers or parties to a Potential Transaction from compliance with their disclosure obligations under the SGX listing rules or the Singapore Code on Take-overs and Mergers. Consequently, parties to a Potential Transaction may want to closely monitor the issuer’s share price and volume for signs of undue movement and promptly make any public announcements that may be required.

• The SGX should be notified if the discussions or negotiations on the Potential Transaction cease.
• The issuer and/or the controlling shareholder should consider keeping a list of persons privy to the Proposed Transaction in a prescribed format, which SGX may request, as and when necessary.

What Is Next?

In the wake of last October’s penny stock crash, the new requirements mark the start of the slew of changes SGX may implement to strengthen the securities market in Singapore. It is likely that the SGX will continue to introduce additional regulatory enhancements to meet the increasing expectations of investors and companies.

For further information, please contact:

Ramiro Rodriguez, Director, Duane Morris & Selvam

[email protected]

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