Singapore Exchange to Allow Dual Class Share Structures; Proposes Safeguards

Size: px

Start display at page:

Download "Singapore Exchange to Allow Dual Class Share Structures; Proposes Safeguards"

Roy King
6 years ago
Views:

1 Crprate Capital Markets Singapre Exchange t Allw Dual Class Share Structures; Prpses Safeguards Intrductin Having received brad supprt fr dual class share ( DCS ) structures fllwing a February 2017 public cnsultatin n a pssible listing framewrk fr DCS structures ( February 2017 cnsultatin ) (read abut this in ur February 2017 update), the Singapre Exchange ( SGX ) will allw the listing f cmpanies with DCS structures. Issuers wh wish t list with a DCS structure must meet the Mainbard listing criteria under Chapter 2 f the SGX-ST Listing Rules (Mainbard) ( Mainbard Rules ), and ther additinal requirements under the prpsed DCS listing framewrk ( Framewrk ). On 28 March 2018, SGX issued its respnse t feedback received n the February 2017 cnsultatin ( Respnse ), and at the same time, cmmenced its secnd cnsultatin in respect f the Framewrk. The cnsultatin sets ut prpsed amendments t the Mainbard Rules t cdify the Framewrk, and details f prpsed safeguards. The cnsultatin dcuments can be accessed at the SGX website. Feedback n the prpsals shuld reach SGX by 27 April This update lks at the Respnse, and the safeguards prpsed by SGX. Admissin and Related Criteria A majrity f the respndents were supprtive f the intrductin f the Framewrk. Hwever, they were against setting a minimum market capitalisatin fr DCS structures, a minimum level f participatin by sphisticated investrs, and the requirement fr a cmpelling reasn t use the DCS structure as they felt that this was t subjective. Taking int accunt the feedback received, SGX prpses t intrduce the Framewrk with the fllwing admissin and ther related criteria: The default structure fr listing will still be a ne-share-ne-vte structure, and existing cmpanies which had listed with a ne-share-ne-vte structure will nt be allwed t cnvert t a DCS structure pst-listing. SGX will nt prescribe additinal admissin requirements n DCS structures (as prpsed in the February 2017 cnsultatin) but instead will require the issuer t meet the existing admissin requirements under Chapter 2 f the Mainbard Rules. SGX will nt prceed with the cmpelling reasn requirement. Instead, each issuer must establish that it is suitable fr listing with a DCS structure. Factrs that SGX will take int accunt will include the business mdel f the cmpany, perating track recrd, the rle and cntributin f the intended sharehlders f multi-vtes shares ( MV shares ) t the success f the cmpany, hw actively invlved they are in the cmpany, participatin by sphisticated sharehlders and ther features f the cmpany that might require a DCS structure. SGX plans t frmalise such guidance n the suitability factrs at the apprpriate juncture. Rajah & Tann Singapre LLP 1

2 Crprate Capital Markets Hlders f MV shares must bserve a mratrium n the transfer r dispsal f their entire sharehldings in the issue in respect f their interests in bth MV and shares with ne vte ( OV shares ) fr at least 12 mnths after listing. Safeguards Against Entrenchment Risks All respndents t the February 2017 cnsultatin were supprtive f having safeguards against entrenchment risks, but views varied n the varius prpsals. Respnding t feedback received, SGX is prpsing the fllwing safeguards against entrenchment risks: Maximum vting differential Vting rights attaching t MV shares will be capped at a maximum f 10 vtes per share, and such vting rights must be clearly prescribed in the issuer s Articles f Assciatin ( Articles ) r ther cnstituent dcuments. This rati cannt be mdified pst-listing. The issuer must ensure that the vting rights f MV shares are clearly prescribed in its Articles r ther cnstituent dcuments. Rights f OV sharehlders OV sharehlders hlding at least 10% f the ttal vting rights n a ne-vte-ne-share basis must be able t cnvene a general meeting. Such rights must be clearly prescribed in the Articles r ther cnstituent dcuments. The numerical threshld f vting cntrl f OV sharehlders shuld be pegged at 10%. SGX is seeking feedback n whether the prpsed threshld f 10% shuld be based n (a) the ttal vting rights f the issuer n a ne-share-ne-vte basis, r (b) the ttal vting rights f the issuer (which takes int accunt the number f vtes attributable t all MV shares and OV shares). Restrictin n Issuance f MV shares pst-listing The issuer will nt be allwed t issue MV shares pst-listing except in the event f a rights issue. SGX is seeking feedback n whether this exceptin shuld be extended t bnus issue, scrip dividends and subdivisin and cnslidatin f shares which d nt raise new funds. The issuance f MV shares must be apprved by sharehlders in a special reslutin. When undertaking any crprate actin, the issuer must ensure that the prprtin f the ttal vting rights f MV shares as a class against thse f the OV shares after the crprate actin will nt increase abve that prprtin existing prir t the crprate actin. Autmatic cnversin f MV shares Only a directr f an issuer can be the hlder f MV shares at IPO, as they are subject t fiduciary duties. Rajah & Tann Singapre LLP 2

3 Crprate Capital Markets An issuer with a DCS structure must have autmatic cnversin requirements in its Articles r ther cnstituent dcuments that meet SGX s criteria, namely: if the hlder f MV shares sells r transfers any part r all f his interests in respect f his MV shares t anther party (whether r nt fr value), such shares will be cnverted int OV shares n a ne-fr-ne basis; If the hlder f MV shares ceases t be a directr, his MV shares will be cnverted t OV shares n a ne-fr-ne basis; Each deviatin f the abve is subject t specific sharehlders apprval at a general n the basis that ne MV share is limited t nly ne vte ( Enhanced Vting Prcess ). SGX is seeking feedback as t whether the relevant hlder f the MV shares, and his assciates, shuld be required t abstain frm vting n such a reslutin. Where any directr fails t meet the requirements expected f his ffice, SGX may exercise its pwers t bject t the appintment f individual directrs. The SGX Disciplinary Cmmitee will als have the pwer t require the resignatin f individual directrs. Safeguards Against Exprpriatin Risks Again, all respndents were in principle supprtive f safeguards against exprpriatin risks. Based n the feedback received, SGX is prpsing the fllwing safeguards against exprpriatin risks: A majrity f the Audit Cmmittee, Nminating Cmmittee and Remuneratin Cmmittee, including the Chairmen, must be independent. The Enhanced Vting Prcess will be extended t cver ther key matters f the issuer (nt nly the appintment f independent directrs). Such matters include changes t the issuer s Articles r ther cnstituent dcuments, variatin f rights f any class f shares, appintment and remval f independent directrs and auditrs, winding up and delisting f the issuer. In respnse t feedback received, SGX has stated that the earlier prpsed cat-tail prvisin will be mre apprpriately dealt with in the Singapre Cde n Take-vers and Mergers ( Take-ver Cde ). SGX has infrmed the Securities Industry Cuncil t cnsider the implicatins f a DCS structure in the cntext f a takever under the Take-ver Cde. DCS cmpanies will als be subject t the same prpsed independence requirements under the Cde f Crprate Gvernance as thse fr ther cmpanies with a ne-share-ne-vte structure. Measures t Enhance Clarity t Investrs SGX plans t intrduce new rules t require clear disclsure f rights f sharehlders and raise awareness f DCS structures: An issuer with a DCS structure must disclse its DCS structure, hlders f MV shares and their respective sharehlding and vting percentage bth at the pint f listing and thereafter, n a cntinuing basis, in its Rajah & Tann Singapre LLP 3

4 Crprate Capital Markets annual reprt and sharehlders circulars. The sharehlders circulars must als include infrmatin n the vting rights f each class f shares. In additin, such an issuer must, in its prspectus, disclse the risks f DCS structures, ratinale fr the adptin f a DCS structure, matters subject t the Enhanced Vting Prcess and its implicatins n OV sharehlders, and key prvisins in the Articles r ther cnstituent dcuments relating t DCS structures, in a prminent manner. The issuer is als required t include, n the cver page f the prspectus, and n a cntinuing basis in its annuncements, circulars and annual reprts, a prminent statement that it is a cmpany with a DCS structure. SGX will als raise awareness f DCS structures by investr educatin and demarcating clearly n trading screens, the securities f issuers with DCS structures. Cncluding Wrds If yu have any questins n the abve, r wish t include yur views in ur submissins t SGX, please cntact ur team members belw wh will be happy t assist. Rajah & Tann Singapre LLP 4

Cntacts Chia Kim Huat Reginal Head, Crprate & Transactinal Practice D +65 6232 0464 F +65

cm Evelyn Wee Deputy Head, Crprate & Transactinal Practice Head, Capital Markets D +65 6232

5 Cntacts Chia Kim Huat Reginal Head, Crprate & Transactinal Practice D F kim.huat.chia@rajahtann.cm Evelyn Wee Deputy Head, Crprate & Transactinal Practice Head, Capital Markets D F evelyn.wee@rajahtann.cm Please feel free t als cntact Knwledge and Risk Management at eoasis@rajahtann.cm Rajah & Tann Singapre LLP 5

6 Our Reginal Cntacts Rajah & Tann Singapre LLP T F sg.rajahtannasia.cm Christpher & Lee Ong T F R&T Sk & Heng Law Office T / 113 F kh.rajahtannasia.cm Rajah & Tann NK Legal Myanmar Cmpany Limited T / / F mm.rajahtannasia.cm Rajah & Tann Singapre LLP Shanghai Representative Office T F cn.rajahtannasia.cm Gatmaytan Yap Patacsil Gutierrez & Prtaci (C&G Law) T t 79 / t 32 / F Assegaf Hamzah & Partners Jakarta Office T F Surabaya Office T F Rajah & Tann (Las) Sle C., Ltd. T F la.rajahtannasia.cm R&T Asia (Thailand) Limited T F th.rajahtannasia.cm Rajah & Tann LCT Lawyers H Chi Minh City Office T / F Hani Office T F Member firms are cnstituted and regulated in accrdance with lcal legal requirements and where regulatins require, are independently wned and managed. Services are prvided independently by each Member firm pursuant t the applicable terms f engagement between the Member firm and the client. Rajah & Tann Singapre LLP 6

Our Reginal Presence Rajah & Tann Singapre LLP is ne f the largest full-service law firms in Singapre, prviding high quality advice t an impressive list f clients.

7 Our Reginal Presence Rajah & Tann Singapre LLP is ne f the largest full-service law firms in Singapre, prviding high quality advice t an impressive list f clients. We place strng emphasis n prmptness, accessibility and reliability in dealing with clients. At the same time, the firm strives twards a practical yet creative apprach in dealing with business and cmmercial prblems. As the Singapre member firm f the Lex Mundi Netwrk, we are able t ffer access t excellent legal expertise in mre than 100 cuntries. Rajah & Tann Singapre LLP is part f Rajah & Tann Asia, a netwrk f lcal law firms in Singapre, Cambdia, China, Indnesia, La PDR, Malaysia, Myanmar, Philippines, Thailand and Vietnam. Our Asian netwrk als includes reginal desks fcused n Japan and Suth Asia. The cntents f this Update are wned by Rajah & Tann Singapre LLP and subject t cpyright prtectin under the laws f Singapre and, thrugh internatinal treaties, ther cuntries. N part f this Update may be reprduced, licensed, sld, published, transmitted, mdified, adapted, publicly displayed, bradcast (including strage in any medium by electrnic means whether r nt transiently fr any purpse save as permitted herein) withut the prir written permissin f Rajah & Tann Singapre LLP. Please nte als that whilst the infrmatin in this Update is crrect t the best f ur knwledge and belief at the time f writing, it is nly intended t prvide a general guide t the subject matter and shuld nt be treated as a substitute fr specific prfessinal advice fr any particular curse f actin as such infrmatin may nt suit yur specific business and peratinal requirements. It is t yur advantage t seek legal advice fr yur specific situatin. In this regard, yu may call the lawyer yu nrmally deal with in Rajah & Tann Singapre LLP r Knwledge & Risk Management at eoasis@rajahtann.cm. Rajah & Tann Singapre LLP 7

Independent Director and Audit Committee

Independent Director and Audit Committee Independent Directr and Audit Cmmittee Rules summary The listed cmpany s bard f directrs is representing the sharehlders. They are respnsible fr making decisins n the cmpany s imprtant plicies and strategies.