SGX issues guidance notes on bonus issue of shares, placement through placement agent to third parties and share consolidation
28 August 2020
On 7 August 2020, Singapore Exchange (“SGX”) issued guidance notes on bonus issue of shares, placement through placement agent to third parties, and share consolidation to assist listed companies with their regulatory compliance.
Guidance Note on Bonus Issue of Shares
This note provides guidance on SGX’s approach in assessing a listed company’s application for bonus issue of shares as follows:
- Shares under a moratorium: Issuers are required to confirm that none of their existing shares are presently under a moratorium pursuant to Rule 229 of the Mainboard Rules. If there are shares which are presently under a moratorium pursuant to Rule 229, the moratorium must be extended to bonus shares arising from the existing moratorium shares.
- Bonus issue pursuant to a general mandate: When relying on a general mandate to issue new bonus shares, the maximum number of bonus shares that may be issued, when aggregated with other shares issued under the same general mandate, must be within the stipulated limits in Rule 806(2). If the number of bonus shares proposed to be issued exceeds the limits under Rule 806(2), the issuer must seek shareholders’ approval for the proposed bonus issue pursuant to Rule 805. Issuers must keep in mind adjustments for any new shares arising from the conversion or exercise of convertible securities, exercise of share options or vesting of share awards, any subsequent bonus issue, consolidation or subdivision of shares.
- Bonus issue subject to shareholders’ approval: If shareholders’ approval is required, the issuer should disclose in the circular, the size of the bonus issue as a percentage of the existing paid-up and issued share capital as well as the enlarged share capital, and the rationale for the bonus issue.
- Computation of theoretical ex-bonus price: In complying with Rule 838 for the bonus issue of shares, the issuer should compute the adjusted price based on the proposed bonus issue ratio and the issuer’s lowest daily weighted share price of the shares for the month preceding the issuer’s proposed bonus issue application. The computations should be disclosed in the announcement and (if shareholders’ approval is required) circular for the proposed bonus issue. In addition, the issuer must confirm that there is no reason to believe that the theoretical ex-bonus price is likely to fall below S$0.50 for Mainboard issuers or S$0.20 for Catalist issuers.
- Capitalisation: If an issuer is capitalising its revaluation reserve for the proposed bonus issue pursuant to Rule 840, the issuer should obtain its auditors’ confirmation that the issuer would have sufficient distributable reserve for the capitalisation of the bonus issue and that the capitalisation does not exceed the limits stipulated under Rule 841.
- Restricted period on announcement of bonus issue: Pursuant to Rule 704(25), issuers seeking to announce a bonus issue after the end of a financial period must only announce it when the financial statements for that financial period have been released. Pursuant to Practice Note 7.7, the issuer should confirm that the bonus issue is not announced during the restricted periods set out in paragraphs 2.1 to 2.3 of Practice Note 7.7.
Guidance Note on Placement through Placement Agent to Third Parties
This note provides guidance on SGX’s approach in assessing a listed company’s application for placement through placement agent to third parties as follows:
- Disclosure requirements: Rule 810(1) provides that an announcement must be made promptly should an issuer intend to issue shares for cash, stating inter alia, the terms of the issue and the purpose of the issue, the identity of the placement agent, the amount of proceeds raised and the intended use of such proceeds. The note provides that the material terms of the placement agreement (including but not limited to, the percentage of the commission payable to the Placement Agent, the introducer of the placees (if any) and whether any placees are entitled to any benefit(s) other than by the placement of new shares to them) between the issuer and the placement agent should also be announced. The note further sets out the disclosure requirements for subsequent announcements on the use of proceeds, and where the use of proceeds is not in accordance with what was previously disclosed. Further guidance on the restrictions under Rule 812(1) on placements to restricted parties is also provided.
- Placement shares issued pursuant to a general mandate: Rule 806(2) imposes a cap on the number of placement shares that may be issued pursuant to a general mandate. The guidance note states that issuers must keep in mind adjustments to existing convertibles (if any) when carrying out a placement exercise.
- Details of shares: The issue price of the shares and the conversion price of warrants/convertibles must not be at more than a 10% discount to the volume weighted average price for trades done for the full market day on which the placement agreement or subscription agreement is signed, unless shareholders’ specific approval has been obtained. The issuer should disclose its computations of the discount and/or premium off the volume weighted average price for the preceding market day before the placement agreement was signed. The issue price of the shares must be above the tick size of S$0.001.
Guidance Note on Share Consolidation
This note provides guidance on SGX’s approach in assessing a listed company’s application for share consolidation as follows:
- Specific disclosures: The number of and/or maximum number of new shares to be issued, as well as the ratio of the share consolidation exercise, must be specifically defined. An issuer should also (1) disclose whether it will round down for fractional entitlements and provide details of the arrangements to facilitate the disposal/rounding of odd lots by affected shareholders; (2) confirm that each consolidated share will rank pari passu in all respects with each other and state how the consolidated shares will be traded; and (3) if there are any outstanding convertibles at the time of the share consolidation, disclose the effects of the share consolidation on outstanding convertibles and adjustments, if any.
The guidance also sets out how issuers should arrive at the consolidation ratio, as well as the minimum consideration price per share of the issuer after adjusting for any share consolidation in the case of reverse takeovers.
Reference materials
The following materials are available on the SGX website www.sgx.com: