31 January 2018
On 7 December 2017, the Singapore Exchange (“SGX”) released a consultation paper titled “Enhancements to Continuous Disclosures” seeking feedback on proposed amendments to Singapore Exchange Securities Trading Limited (“SGX-ST”) Listing Rules (Mainboard) and the SGX-ST Listing Rules (Catalist) (together, “Listing Rules”) which are aimed at enhancing disclosures in relation to, among others, rights issue fund raising, interested person transactions, the provision of financial assistance to third parties and significant transactions. Feedback was also sought on other amendments to the Listing Rules to provide greater clarity on the application of the Listing Rules. The consultation closed on 12 January 2018.
If adopted, SGX expects to implement the changes to the Listing Rules in 2018.
Additional disclosure obligations in relation to rights issues
Issuers are currently required under the Listing Rules to disclose certain information in relation to rights issues, such as the price, terms and purpose of a rights issue. To enhance disclosure and transparency standards, SGX intends to amend the Listing Rules to impose additional disclosure obligations on an issuer which intends to make a rights issue including:
- announcing upfront and prominently (on the first page of the announcement) in a prescribed format the principal terms of the issue, including the discount, ratio and use of proceeds;
- announcing a statement from the issuer’s directors on why the issue is in the interests of the issuer and their basis for forming such views, including justification on the extent of any discount; and
- where the issuer undertakes the issue within one year from its previous equity fund raising, providing a description of the equity funds raised within the past 12 months, the use of such proceeds and the intended use of any unutilised amount, and how the issuer has dealt with such amount.
Removal of S$100,000 de minimis threshold for IPTs
Chapter 9 of the Listing Rules deals with obligations in respect of IPTs. The Listing Rules currently providing that IPTs below S$100,000 are exempted from computing the relevant materiality IPT thresholds (“de minimis threshold”). Owing to concerns that this exemption may encourage issuers to abuse the de minimis threshold by structuring their IPTs into multiple IPTs with individual values below S$100,000, SGX proposes to remove the de minimis threshold.
To enhance disclosure and transparency standards, SGX proposes that all IPTs entered into by the issuer’s group with the same interested person group within the same financial year should be aggregated. The aggregated IPTs will then be benchmarked against SGX’s materiality thresholds of 3% and 5% in determining whether IPTs would trigger announcement or shareholders’ approval requirements.
Additional disclosure of nature of relationship of issuer with interested person in annual report
The Listing Rules currently require an issuer to disclose the aggregate value of IPTs entered into during the financial year under review, together with the name of the interested person and the corresponding aggregate value of all IPTs, in the prescribed format in its annual report. To enhance disclosure and transparency standards, SGX proposes that issuers should additionally be required to disclose the nature of the relationship of the issuer with the interested person in its annual report.
Identification of relevant director, chief executive officer or controlling shareholder of the issuer covered by IPT mandate
The Listing Rules currently require disclosure of the “class of” interested persons which the entity at risk may transact with under their IPT mandates for recurrent transactions. SGX proposes to clarify that an issuer should specifically name the relevant director, chief executive officer or controlling shareholder of the issuer who will be covered by the IPT mandate, although it is not necessary to individually name each of such person’s associates. The effect is that if the relevant director, chief executive officer or controlling shareholder changes, the IPT mandate would no longer be valid and shareholders’ approval will need to be obtained for a “new” IPT mandate.
Additional disclosure obligations in respect of provision of financial assistance
Chapter 10 of the Listing Rules sets out the rules for transactions by issuers, principally acquisitions and realisations. SGX proposes to extend the scope of Chapter 10 to the provision of financial assistance, save for those in, or in connection with, the ordinary course of the issuer’s business. Where the issuer is intending to provide substantial loans (and other types of financial assistance), SGX proposes that shareholders be notified of transactions relating to the provision of financial assistance by the issuer and, if required by the Listing Rules, have the opportunity to vote on the proposed financial assistance.
The proposed definition of “financial assistance” will include: (a) the lending of money, the guaranteeing or providing security for a debt incurred or the indemnifying of a guarantor for guaranteeing or providing security; and (b) the forgiving of a debt, the releasing of or neglect in enforcing an obligation of another, or the assuming of the obligations of another.
Rule 1006 of the Listing Rules (“Rule 1006”) sets out the bases for computing the relative size of a transaction. The applicable tests which SGX proposes to apply in relation to the provision of financial assistance are Rules 1006(a) to (c) with the following modifications:
- for Rule 1006(a) (net assets test), the reference to “net asset value of the assets to be disposed of” shall mean the value of the financial assistance;
- for Rule 1006(b) (net profits test), the reference to “net profits attributable to the assets acquired or disposed of” shall mean the aggregate value of any interest payable on the financial assistance; and
- for Rule 1006(c) (consideration test), the reference to “aggregate value of the consideration given or received” shall mean the aggregate value of the financial assistance and any interest payable on the financial assistance.
New obligations in respect of valuation of assets acquired or disposed of
Where there is an acquisition or disposal of assets other than shares which constitutes a major transaction under Chapter 10 of the Listing Rules and no valuation is available, SGX proposes to require the issuer to provide an explanation as to why the issuer did not commission a valuation.
In addition, SGX proposes that where a disposal of assets is one where any of the relative figures as computed on the bases set out in Rule 1006 exceeds 75%, the issuer must appoint a competent and independent valuer to value the assets to be disposed of.
The following materials can be found on the SGX website www.sgx.com: