[COVID-19] Moves by SGX RegCo to aid listed companies

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The pandemic is driving the business world on-line in more ways.

Arrangements for listed companies’ general meetings between March 27 and September 30, 2020 have to have certain arrangements in place e.g.:

  • Issuers have to conduct their meetings through electronic means;
  • Shareholders must vote by proxy as they are unable to attend physically;
  • Proxy forms can be submitted electronically;
  • Shareholders can pose questions before the meeting;
  • All documents relating to the meeting must be published on SGXNET; and
  • Issuers must publish minutes within one (1) month of the general meeting on SGXNET.

On 6 May 2020, the Singapore Exchange Regulation (SGX RegCo) together with the Monetary Authority of Singapore (MAS) and the Securities Industry Council (SIC), announced that it will allow listed issuers and parties involved in rights issue and takeover or merger transactions, the option to electronically disseminate offer documents through publication on the SGXNET and their corporate websites, as opposed to the usual requirements to despatch hardcopy offer documents as required under the Securities and Futures Act (Cap. 289), the Singapore Code on Take-overs and Mergers, and the SGX Listing Rules. This temporary measure on the electronic dissemination of offer documents came into effect on 6 May 2020 and will be in force until 30 September 2020.

Electronic Dissemination of Rights Issue and Take-over Documents

The usual requirements to despatch hardcopy offer documents or offer information statement under the relevant laws and regulations would have entailed printing a large number of documents of a substantial volume due to the compliance with disclosure requirements prescribed under, for instance, the Sixteenth Schedule of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018. Typically offer information statements and offer documents exceed 50 pages.

The temporary measures to allow electronic dissemination of rights issue and take-over documents are welcome amidst the stringent safe distancing requirements imposed by the Multi-Ministry Taskforce on all firms (including printers and mailing houses) to minimise risks of COVID-19 transmissions at their workplaces.

Not only will these measures remove the headaches associated with logistical hurdles involved in organising printing and despatch from home, listed companies will also enjoy costs-saving from printing.

Notification instructions

Under the temporary measures, issuers and parties who opt to disseminate their offer documents electronically must send a hardcopy notification to shareholders with instructions on how they can access the electronic version of the offer documents. They must also send the hardcopy application or acceptance forms to shareholders. These requirements will ensure that shareholders continue to be informed of these significant corporate actions by mail during this time and facilitate their participation in the corporate actions.

Electronic payment

SGX RegCo also strongly encourages parties undertaking rights issues or take-over or merger transactions to allow shareholders to apply and pay for the subscription of rights issues, accept offers and inspect documents through the internet. For instance, acceptance and payment for provisional allotments of rights shares may be made through an ATM of a participating bank or an electronic application through the online application website of the issuer. Details on these internet channels may be set out in the hardcopy notification provided to shareholders.

Cautionary statement

MAS has, on 6 May 2020, issued further guidelines on inter alia the publication of an electronic version of an offer information statement pursuant to Section 277 of the Securities and Futures Act (Cap. 289). In particular, the electronic version of the offer information statement must not differ significantly in form or content from the lodged offer information statement and the issuer must ensure that the physical document in which the offer is made includes cautionary statements which warn potential investors that:-

  1. All investments come with risk, including the risk that the investor may lose all or part of his investment; and
  2. The potential investor is responsible for his own investment decisions.

Further information on the electronic dissemination of rights issue and take-over documents may be accessed here.

Enhanced Share Issue Limit for Mainboard Issuers

Earlier in April 2020, SGX RegCo allowed for Mainboard issuers to seek a general mandate for an issue of pro-rata shares and convertible securities of up to 100% of their share capital (excluding treasury shares and subsidiary holdings in each class) as compared to the previous limit of 50% (the Enhanced Share Issue Limit).

Temporary loosening of fund raising limit

The Enhanced Share Issue Limit came into effect on 8 April 2020 and will be in force until 31 December 2021. The limit on the aggregate number of shares and convertible securities issued other than on a pro-rata basis remains at not more than 20%.

Issuers intending to raise funds using the Enhanced Share Issue Limit must seek shareholders’ approval by way of an ordinary resolution either through obtaining a general mandate for the Enhanced Share Issue Limit at their annual general meeting or via specific shareholder approval by convening an extraordinary general meeting (EGM).

The Enhanced Share Issue Limited is also subject to several conditions including, confirmation from the board of directors to SGX RegCo that the Enhanced Share Issue Limit is in the interest of the issuer and its shareholders and the issuer disclosing in its notice of general meeting:

  1. Why the Board of Directors is of the view that the Enhanced Share Issue Limit is in the interest of the issuer and its shareholders and their basis for forming such views;
  2. That the Enhanced Share Issue Limit may be renewed annually during the issuer’s annual general meeting and is only valid until 31 December 2021, by which date the shares and/or convertible securities issued pursuant to the Enhanced Share Issue Limit must be listed and no further shares and/or convertible securities shall be issued under this limit; and
  3. If the issuer is seeking shareholders’ approval via an EGM and has utilised any part of the existing share issue mandate (the Existing Amount Used), the issuer is to disclose as at the latest practicable date, the remaining balance that would be available under the Enhanced Share Issue Limit after deducting the Existing Amount Used.

Further details on the requirements may be found in SGX RegCo’s news release here.

Suspension of Entry into the Financial Watch-List

SGX RegCo had also announced that it will provisionally suspend the half-yearly reviews on the first market days of June 2020 and December 2020 to place issuers on the Financial Watch-List (the Suspension).

Breathing space

Prior to the temporary measures, SGX RegCo will place issuers on the Financial Watch-List if they record pre-tax losses for the three (3) most recently completed consecutive financial years and also fail to maintain an average daily market capitalisation of at least S$40 million over the last six (6) months. In light of current conditions as a result of the COVID-19 outbreak, placing listed issuers on the Financial Watch-List during this period might cause undue prejudice to companies in navigating the business challenges in this climate.

The Suspension is to enable issuers to focus on meeting the current business and economic challenges and dealing with any resultant liquidity crunch. Companies which meet the exit criteria under the listing rules will continue to be able to exit the Watch-List and SGX RegCo will determine where appropriate, if the Suspension requires further extension in due course.

Striking the right balance

SGX RegCo has applied a firm hand when it comes to adherence to the rules but demonstrates it has its hand on the business pulse, and is willing to calibrate its listing requirements to keep pace with the developing fallout of the pandemic.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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