SGX RegCo proposes new delisting rules to protect minority interests

SGX RegCo proposes new delisting rules to protect minority interests

Jeffrey Tan
09/11/18, 05:13 pm

SINGAPORE (Nov 9): The Singapore Exchange Regulation (SGX RegCo) is proposing several changes to its delisting rules for Singapore companies, and expects to implement the new delisting rules next year.

A public consultation is now open to market feedback, and will close on Dec 7.

SGX RegCo’s move comes in the wake of many upset minority shareholders who had felt oppressed by the controversial delisting of several locally-listed companies so far this year.

The delisting of VARD Holdings, an Italy-based shipbuilder, was a particular reason why SGX RegCo is pursuing an amendment to the current delisting rules, alludes SGX RegCo CEO Tan Boon Gin.

VARD’s controlling shareholder Fincantieri O&G had amassed a stake that was more than sufficient to delist the company. On the other hand, the odds were against minority shareholders, who had to collectively gather at least a 10% stake in VARD to vote against its delisting.

“I would say that [VARD] is a case that highlights this particular constraint,” Tan tells a media briefing today. Hence, the changes proposed are aimed to safeguard the interests of all parties and not just minority shareholders, as much as possible, he says. 

For one, the stock market regulator is recommending that only certain shareholders can vote on the voluntary delisting resolution at the shareholder meeting. These include minority shareholders, and directors and controlling shareholders who are not the party making the delisting offer or not acting in concert with it.

This means that the offeror and the parties acting in concert to delist the company are barred from participating in the vote.

Secondly, SGX RegCo is calling for the approval threshold for a voluntary delisting to proceed be lowered to a simple majority.

Furthermore, it is proposing that the 10% threshold required to block a delisting be removed.

Currently, companies can proceed with a delisting only if at least 75% of shareholding approve the move and less than 10% of shareholding are against it.

Finally, SGX RegCo is recommending that the exit offer, which is made in conjunction with a voluntary delisting, must be “reasonable and fair” in order for the voluntary delisting to proceed.

This means that the independent financial adviser must opine that the offer meets both criteria.

According to SGX RegCo, “fair” is defined as the offer price is equal to, or greater than, the value of the securities, which are subject to the offer.

Meanwhile, “reasonable” is defined as the offer that takes into consideration of other matters. This includes the existing voting rights in the offeree company held by the offeror and parties acting concert with it, and the market liquidity of the relevant securities.

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