SINGAPORE (July 11): Singapore Exchange (SGX) serves the needs of listed companies by providing a public platform for fundraising activities and information dissemination to their shareholders. Where companies wish to privatise, they may apply to SGX to be delisted.
A delisting reduces the exit channels for shareholders who remain invested in what is now a private company. As such, companies implementing a Voluntary Delisting are subject to certain requirements to safeguard investor interest.
The SGX Listing Rules stipulate that SGX may agree to a Voluntary Delisting if:
- the resolution to delist the issuer has been approved by at least 75% of the total number of issued shares held by independent shareholders (i.e. excluding the shares held by the offeror and parties acting in concert with it) present and voting; and
- a fair and reasonable exit offer, which includes a cash alternative as the default alternative, is offered to shareholders. The independent financial adviser appointed to advise on the exit offer must also opine that the exit offer is fair and reasonable.
An offeror seeking to privatise an issuer may also utilise other mechanisms, including a scheme of arrangement under the Companies Act (Chapter 50 of Singapore) or a general offer under the Singapore Code on Take-overs and Mergers.
An offeror should not utilise other forms of privatisation as a mechanism to avoid compliance with the principles applicable to a Voluntary Delisting. The SGX Listing Rules set out the limited circumstances where the Voluntary Delisting requirements would not be applicable, such as a General Offer where the offeror is exercising its compulsory acquisition right. In all other circumstances, SGX Regulation (SGX RegCo) must be consulted.
SGX RegCo will generally consider waiving compliance from the requirements imposed on a Voluntary Delisting if the General Offer is fair and reasonable (and the independent financial adviser has opined that the General Offer is fair and reasonable), and as at the close of the General Offer, the offeror has received acceptances from independent shareholders that represent a majority of least 75% of the total number of issued shares held by independent shareholders. If these waiver conditions are not met, the issuer will remain listed. If the issuer has lost its public float, SGX may suspend the trading of the issuer’s securities, in which case, the issuer is obliged to comply with the SGX Listing Rules, including the requirement to restore its public float (through private placement or otherwise).
To ensure that shareholders are aware of the potential consequences in considering whether to accept a General Offer, SGX RegCo expects that takeover documents contain appropriate disclosures to shareholders highlighting the risk that the issuer may be subject to prolonged suspension should free float be lost but the requisite conditions for delisting are not met. These documents would include any announcements released by the offeror when a conditional General Offer turns unconditional. These disclosures give shareholders all facts necessary to make an informed judgement on the merits or demerits of any General Offer.