28 October 2022

On 7 October 2022, the Securities Industry Council (“SIC”) issued a practice statement (“Practice Statement”) setting out the regime for an unlisted public company to obtain a waiver of the application of the Singapore Code on Take-overs and Mergers (“Code”) if certain conditions are met (“Code Waiver”).

The Code applies to (among others) public listed companies, as well as public unlisted companies with more than 50 shareholders and having net tangible assets (“NTA”) of S$5 million or more. It provides guidelines to ensure that shareholders in such types of companies are accorded fair and equal treatment in a take-over or merger situation.

Specifically, for public unlisted companies with more than 50 shareholders and having an NTA of S$5 million or more, such companies may have minority shareholders who require protection for a sufficiently substantive investment. However, where the number of shareholders exceeds 50 because of shareholders who are (for example) institutional investors and accredited investors, the need to have in place guidelines to protect such “mature” investors may be less critical.

Hence, the Practice Statement is welcome as it would exempt such companies from compliance with the Code, thus giving more flexibility for fund-raising exercises and M&A transactions for such companies.

Code Waiver regime

The Practice Statement provides that an unlisted public company (“Company”) seeking a Code Waiver should apply in writing to the SIC Secretariat. The application should provide certain prescribed information on the Company and include a signed confirmation from the Company’s board of directors that the conditions for waiver (“Waiver Conditions”), as set out in the Practice Statement, have been or will be (as the case may be) complied with.

Among other things, the Waiver Conditions include confirmation of the following:

  • The number of shareholders in the Company, excluding the Excluded Persons (such as institutional investors and accredited investors, and directors, employees, consultants and advisers of the Company and its related companies), is not more than 50;
  • The Company has issued, at least 21 calendar days prior to the Company’s notification to SIC of the Code Waiver, a written notice to all its shareholders informing them of the Company’s intention to apply for the Code Waiver and the implications arising as a result thereof;
  • Subsequent to the Company’s issuance of such notification, the Company must not have received objections to the Code Waiver from shareholders representing more than 10% of the total voting rights of the Company during the 21-day notice period;
  • The Company has taken or will take (in the event of subsequent rounds of fundraising) reasonable measures to verify whether a shareholder or an incoming shareholder is an Excluded Person. The Company should put in place the necessary controls and procedures to establish whether a shareholder continues to meet the definition of an Excluded Person in order to comply with Waiver Condition (a) on an ongoing basis; and
  • Once the waiver is effective, the Company will state its waiver status prominently on its corporate website (if any) and will notify (i) shareholders that it has obtained the Code Waiver sought from SIC, and (ii) new investors before they invest (via their subscription agreements or otherwise) that it is not subject to the Code and the implications arising from the Code Waiver.

The Company’s written notification to its shareholders must (i) set out key protections afforded by the Code and the risks associated with the loss of such protection to shareholders if the Code Waiver is granted, and (ii) provide a point of contact for shareholders to object to or raise queries on the Code Waiver with the Company during the 21-day notice period.

The relevant templates are set out in the appendices to the Practice Statement.

Grant of Code Waiver

The list of unlisted public companies that have obtained a Code Waiver (“Code Waiver List”) will be published on SIC’s website. The Code Waiver will take effect when the Company is published on the Code Waiver List, 21 calendar days after the date of application to SIC or as otherwise communicated to the Company.

If the Company fails to comply with the Waiver Conditions at any point in time, the Code Waiver will cease to be in effect. The Company must promptly notify SIC and all relevant parties of the cessation of the Code Waiver.

Reference materials

The Practice Statement is available on the MAS website www.mas.gov.sg.