Knowledge Highlights 9 April 2020
On 8 April 2020, Singapore Exchange Regulation (“SGX RegCo”) announced that it will, in consultation with the Monetary Authority of Singapore (“MAS”), introduce measures to support issuers amid the challenging business and economic climate due to Covid-19, including enabling the acceleration of fund-raising efforts and the provisional suspension of entry into the financial watch-list.
Enhanced share issue limit for Mainboard issuers
SGX RegCo will provisionally enable 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) (“Enhanced Share Issue Limit”) as compared to the previous limit of 50%. The Enhanced Share Issue Limit came into effect on 8 April 2020 and will be in force until 31 December 2021.
The Enhanced Share Issue Limit only applies to pro-rata issues, with the limit on the aggregate number of shares and convertible securities issued other than on a pro-rata basis remaining at not more than 20%.
To raise funds using the Enhanced Share Issue Limit, issuers must first obtain shareholders’ approval by way of an ordinary resolution either through a general mandate for the Enhanced Share Issue Limit (“Enhanced Share Issue Mandate”) at their annual general meeting (“AGM”) or an extraordinary general meeting (“EGM”).
The Enhanced Share Issue Limit is subject to the following conditions:
- The issuer’s board of directors must confirm to SGX RegCo that the Enhanced Share Issue Limit is in the interest of the issuer and its shareholders;
- The issuer must comply with any applicable legal requirements governing the issuer and its constitution/trust deed (or the equivalent in the issuer’s country of incorporation) arising from the Enhanced Share Issue Limit;
- The issuer cannot issue more than 100% of the issuer’s total number of issued shares (excluding treasury shares and subsidiary holdings in each class) as at the conclusion of the first AGM of the issuer following the passing of the resolution on the general mandate for the Enhanced Share Issue Limit.
- The issuer must disclose in the notice of general meeting seeking the Enhanced Share Issue Mandate the following:
- Why the issuer’s 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;
- That the Enhanced Share Issue Limit may be renewed annually during the issuer’s AGM and is only valid until 31 December 2021, by which date the shares issued pursuant to the Enhanced Share Issue Limit must be listed; and no further shares shall be issued under this limit; and
- If the issuer is seeking shareholders’ approval for the Enhanced Share Issue Mandate at an EGM and has already utilised part of its existing share issue mandate (“Existing Amount Used”), the remaining balance as at the date before the EGM that would be available under the Enhanced Share Issue Limit after deducting the Existing Amount Used.
- Once the Enhanced Share Issue Limit has been approved by its shareholders, the issuer must notify SGX RegCo of the date of such approval. This notification must be made by email to firstname.lastname@example.org.
- The issuer must disclose that it is utilising the Enhanced Share Issue Limit in its announcement of an issue of shares or convertible securities.
SGX RegCo has also highlighted that the notice of general meeting does not have to be cleared with SGX RegCo and no circular is required.
SGX RegCo has stated that it will work closely with issuers in effecting these measures and giving expedited clearance to their fund-raising efforts.
Suspension of entry into the financial watch-list
SGX RegCo 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 (“Suspension”).
During this period, companies that meet the exit criteria under the listing rules will continue to be able to exit the financial watch-list.
SGX recognises that Covid-19 has caused a drastic global deterioration in business conditions for all companies, with many experiencing significant loss of revenue and profitability. Share prices of companies have also fallen, translating to sharp declines in market capitalisation. Companies are also likely to face liquidity crunch at this time as banks are tightening credit.
SGX operates a financial watch-list and places companies on the list to compel them to turn around their financial performance after three years of losses and when market capitalisation falls below S$40 million. However, placing listed issuers on the financial watch-list during this period of unprecedented and unforeseen conditions might cause undue prejudice to companies. The Suspension is to enable issuers to focus on meeting the current business and economic challenges and dealing with any resultant liquidity crunch.
SGX RegCo shall determine, where appropriate, if the Suspension requires further extension.
In addition, we have a cross-disciplinary Covid-19 Legal Task Force consisting of Partners across various practice areas to provide rapid assistance. Should you have any queries, please do not hesitate to get in touch with us at email@example.com.