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

The Singapore Exchange (“SGX”) has issued a consultation paper on a proposed new regulatory framework for secondary listings. In brief, the SGX proposes that all companies that have a secondary listing on the SGX or that apply for such a listing (“secondary listed companies”) be categorised as being primary listed either on a “Developed Market” or a “Developing Market”. This classification will impact what continuing listing obligations under the SGX Listing Manual will apply to them. Secondary listed companies with a primary listing on a market classified as “Developing” may be required by the SGX to comply with the continuing listing obligations set out in Chapters 9, 10, and 13 of the SGX Listing Manual. The last day for feedback is 25 June 2014.

 
This Update takes a look at the proposals.

New Rule 751

The SGX proposes that the SGX Listing Manual be amended to expressly require secondary listed companies to comply with the following:

• They must maintain a primary listing on their home exchange;
• They must be subject to all the applicable listing rules of their home exchange (unless a waiver has been obtained for any non-compliance); and
• They must provide an annual certification that they have complied with the applicable continuing listing obligations under the SGX Listing Manual imposed on them.

 
These requirements will be set out in a new Rule 751 of the Listing Manual.

 
Classification Of Markets/Countries

 
In determining what continuing listing obligations will apply to secondary listed companies, the SGX has proposed that this should be determined based on whether the market of their home jurisdiction is classified as a “Developed Market” or as a “Developing Market”:

• Companies which are primary listed in “Developed Markets” may be secondary listed subject to compliance with Rule 217 (which requires the provision of certain undertakings to the SGX) and the proposed Rule 751 discussed above and without the SGX imposing any additional continuing listing obligations.
• Companies which are primary listed in “Developing Markets” may be secondary listed subject to compliance with Rule 217, the proposed Rule 751, as well as—if so required by the SGX— the continuing listing obligations in Chapters 9, 10, and 13 of the Listing Manual. The SGX will so require if, after conducting a full review of the home exchange’s legal and regulatory requirements, it determines that its standards related to interested person transactions, acquisitions and realisations, and delistings are found to require enhancements.

 
The SGX proposes to adopt the following principles for classifying a market as either a “Developed Market” or a “Developing Market”:

• The basic framework will rely on the market/country classification developed by two international leading index providers, MSCI and FTSE. A jurisdiction will be classified as a “Developed Market” only if it is classified as such by both MSCI and FTSE.
• For companies listed on the main boards of stock exchanges within the European Union, such companies will be classified as having their place of primary listing in a Developed Market only if the home exchange falls under the list of jurisdictions classified by both MSCI and FTSE as a “Developed Market”.
• The market classification used for the proposed secondary listing framework will only apply to companies with a primary listing on the main board or main market (and not the junior board) of the home exchange.
• Where the home exchange’s main board or main market has more than one listing segment (for example, the London Stock Exchange), a company which is primary listed on the main board of a home exchange in a “Developed Market” will be classified as being from a “Developed Market” regardless of listing segment.

In certain exceptional cases, the SGX may review whether it is (or remains) appropriate for a company that is primary listed in a home jurisdiction that is classified as being a “Developed Market” to continue to be treated as such. The exceptions are:

• Where the company has presence in multiple jurisdictions (having regard to its place of primary listing, dominant operations, and incorporation); or
• The company’s place of primary listing is on the index providers’ Watchlist/Review List, such that it may be downgraded from a “Developed Market”.

In these cases, the SGX will undertake a regulatory assessment based on responses of the company and its professional advisers as to whether the company’s home jurisdiction should still be classified as a Developed Market. Such regulatory assessment will entail the SGX considering factors including but not limited to:

• The level of shareholder protection available (such as whether there is fair and equitable treatment of all shareholders, matters requiring shareholders’ approval, availability of proxy voting etc.);
• The enforceability of Singapore court orders in the place of dominant operations/place of incorporation; and
• The presence of extradition treaties or arrangements between Singapore and the company’s place of dominant operations/place of incorporation.

 
Impact And Implementation Of The Framework

 
The SGX intends to implement the proposed framework for secondary listings from the fourth quarter of 2014. Companies that already have a secondary listing on the SGX will be impacted as set out in the table below:

For further information, please contact:

Rachel Eng, Partner, WongPartnership
[email protected]

 
Gail Ong, Partner, WongPartnership
[email protected]

 
Chee Shan Long, Partner, WongPartnership
[email protected]

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