11 October 2022
On 3 October 2022, the Business Trusts (Amendment) Bill (“Bill”) was passed 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 amendments are not yet in force.
In his speech at the second reading of the Bill, Alvin Tan, Minister of State, Ministry of Culture, Community and Youth and Ministry of Trade and Industry, and Board Member of the Monetary Authority of Singapore (“MAS”), explained that the amendments will enhance the transparency and governance of registered BTs in Singapore. They will streamline regulatory requirements and reduce compliance costs. This will improve the efficiency and robustness of the BT regulatory regime, benefiting the industry and investors.
The key features of the Bill are outlined below.
Improve alignment with regulatory regime for companies
Given the similarities between BTs and companies, many of the BTA provisions are based on provisions under the CA. The Bill incorporates into the BTA amendments similar to those implemented in the CA by the CAA. These amendments are set out below.
Enhance transparency and corporate governance
- Information on beneficial ownership: The Bill introduces requirements for unlisted BTs that are registered under the BTA to obtain and maintain information on their controllers, also commonly known as beneficial owners, and to provide such information to MAS and other public agencies on request. These requirements will help to mitigate the risk of business vehicles being used for illicit purposes.
- CEOs to disclose interests in transactions: Currently, directors of trustee-managers of registered BTs are required to disclose conflicts of interest in transactions, as well as their interests in the registered BTs. The Bill will extend such requirements to chief executive officers (CEOs) of trustee-managers, in recognition of the influence that they have on the affairs of BTs.
- Auditors of listed registered BTs and subsidiaries to seek MAS consent before resigning: The Bill introduces requirements for auditors of listed registered BTs and their subsidiaries to seek MAS’ consent if they wish to resign before the end of their term. It also sets out procedures for the appointment of a new auditor where the resigning auditor is the sole auditor, including a reserve power for MAS to make such appointment. These requirements will allow MAS to prevent a listed BT or its subsidiary from being left without an auditor.
Strengthen rights of unitholders
- Lower threshold to call for poll: Currently, unitholders holding at least 10% of the voting rights of unitholders present at a meeting have the power to call for a poll. The Bill lowers this threshold to 5%.
- Expansion of scope of statutory derivative action to include arbitration: The Bill expands the scope of the statutory derivative action in the BTA to allow a unitholder to apply to the court for leave to commence arbitration on behalf of all unitholders of the BT or to intervene in an arbitration to which the BT is a party.
- Additional court option to order buy-out of BT: Where an application to wind up a registered BT has been filed in court, the Bill expands the range of orders that the court may make, including an order to buy out the interests of one or more unitholders. Currently, a court hearing such an application can only make an order for the registered BT to be wound up. The additional remedy helps to protect the rights of minority unitholders, as there may be cases where the company is still viable and it would be a more efficient solution for the majority to buy out the minority, or vice versa.
Improve ease of doing business and reduce administrative burden
- Simplified deadlines for holding AGMs and filing annual returns: Currently, registered BTs are required to hold their annual general meetings (“AGMs”) once every calendar year and not more than 15 months after the preceding AGM, and are required to file annual returns within one month after the AGM. These requirements do not refer to the financial year end of the registered BT. The Bill will align these timelines with the BT’s financial year end.
- Reduction of documentation accompanying financial statements: The Bill will mirror amendments to the CA to reduce the number of documents accompanying a set of financial statements.
- Electronic transmission of notices and documents: To facilitate electronic communications by registered BTs, the Bill will allow for electronic transmission of notices and documents with the implied or deemed consent of unitholders, in accordance with the trust deed of the registered BT. Currently, registered BTs wishing to publish notices and documents on a website can only do so with their unitholders’ express consent.
Strengthen governance safeguards for registered BTs
Currently, a trustee-manager of a registered BT can only be removed by unitholders by way of a resolution passed by not less than 75% of the voting rights of all unitholders present and voting at a general meeting. For REITs, a lower removal threshold of more than 50% applies. The Bill will align the removal threshold for trustee-managers of registered BTs with that of REIT managers. This will help strengthen accountability to unitholders.
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 trustee-manager 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.
MAS issued a consultation paper seeking feedback on proposed amendments to the BTA on 19 November 2021. The Bill was introduced for first reading in Parliament on 12 September 2022. MAS issued its response to feedback received on the consultation paper on 30 September 2022.
- Business Trusts (Amendment) Bill
- “Business Trusts (Amendment) Bill” – Second Reading Speech by Mr Alvin Tan, Minister of State, Ministry of Culture, Community and Youth & Ministry of Trade and Industry, and Board Member of MAS, on behalf of Mr Tharman Shanmugaratnam, Senior Minister and Minister-in-charge of the Monetary Authority of Singapore, on 3 October 2022
- Response to Feedback Received on Proposed Amendments to the BTA