20 September 2022
On 12 September 2022, the Business Trusts (Amendment) Bill (“Bill”) was introduced for first reading in Parliament. The Bill will amend the Business Trusts Act 2004 (“BTA”) to:
- align the provisions in the BTA with the relevant provisions in the Companies Act 1967 (“CA”) where appropriate, taking into account the Companies (Amendment) Act 2014 and the Companies (Amendment) Act 2017 (collectively, “CAAs”);
- strengthen governance safeguards for business trusts (“BTs”) by taking reference from the regime governing real estate investment trusts (“REITs”); and
- streamline certain regulatory requirements.
The Monetary Authority of Singapore (“MAS”) issued a consultation paper seeking feedback on the proposed Bill on 19 November 2021. In an explanatory brief published on 12 September 2022, MAS said that respondents were generally supportive of the proposals. MAS incorporated the feedback into the Bill where appropriate.
Aligning BTA provisions with CA provisions
As BTs combine the elements of a company and a trust, the BT regime was developed by adapting the requirements of the CA as much as possible. Since the BTA came into operation in 2004, substantive changes have been made to the CA. The Bill will make similar changes to the BTA to provide a more efficient and transparent regulatory framework for businesses and investors, reduce compliance costs, and improve Singapore’s business competitiveness. The key changes include the following:
- Disclosures and trust administration:
- requiring chief executive officers to disclose interests in transactions;
- requiring unlisted BTs to obtain and maintain information on beneficial ownership of their units; and
- simplifying the process for adopting electronic transmission of notices and documents to unitholders.
- Unitholders’ rights and general meetings:
- expanding the scope of statutory derivative actions to include arbitration (in addition to court proceedings);
- adding an option for a court to order a buy-out of a BT in addition to winding up the BT;
- lowering the thresholds for the minimum share of unitholders that are required to demand a poll; and
- simplifying the deadlines for holding annual general meetings and filing of annual returns.
- Auditors and financial statements:
- replacing the requirement for a separate directors’ report with a directors’ statement in the financial statements;
- removing duplication of legislation relating to independence of auditors in the BTA and the Accountants Act 2004 by deleting the relevant provisions from the BTA;
- requiring compliance with the accounting standards of the Accounting Standards Council; and
- requiring auditors of listed BTs to seek MAS’ consent before resigning from their position.
- Governance and right of compulsory acquisitions:
- prohibiting the improper use of position by an officer or agent of the trustee-manager (“TM”);
- clarifying that individuals (and not only corporations) are entitled to exercise the right to compulsorily acquire units held by dissenting unitholders in a takeover situation; and
- introducing new provisions to deal with joint offers.
Strengthening governance safeguards for BTs
Taking reference from the REIT regime, the Bill will strengthen the governance requirements of the BT regime by reducing the percentage of voting rights required to remove a TM from not less than three fourths to a simple majority of the voting rights of all the unitholders, with this reduced threshold overriding any contrary provision in the trust deed of the BT. This will instil greater market discipline by facilitating investors in holding TMs accountable for their performance.
The Bill also introduces clarificatory amendments, amendments to align with provisions under the Securities and Futures Act 2001, miscellaneous amendments consequential to the CAAs, and amendments to reduce administrative requirements. These include providing for:
- passing resolutions by written means;
- delegation of the MAS Managing Director’s powers to approve exemptions under the BTA to the relevant MAS group or department head;
- deregistration of a BT upon MAS’ receipt of the notification of completion of winding up from the TM without the need for a separate application for voluntary deregistration; and
- a trust that has received approval-in-principle to be listed on an approved exchange to be considered a BT for the purposes of the BTA, even if each of the unitholders is a related corporation of the trustee.