Capital Markets: Debt 2019 Comparisons

Last Updated June 10, 2019

Law and Practice

Authors



DLA Piper Singapore Pte Ltd is part of a global legal services organisation with over 4,200 lawyers located in more than 30 countries. The global capital markets group is based in London and works closely with experienced capital markets lawyers in DLA Piper's offices across Europe, the Middle East, Africa, the USA and Asia. The practice group comprises more than 175 lawyers worldwide and offers integrated securities advice on complex, cross-border transactions requiring support under different laws. The firm’s lawyers advise issuers, underwriters, selling shareholders, sponsors, arrangers, lead managers, originators, dealers, trustees and depositaries on a broad range of securities offerings, including equity, equity-linked and debt securities, as well as structured and project financings and securitisations. Disclaimer: DLA Piper is restricted for regulatory reasons from practising local law in Singapore, as are most international law firms. Our team leverages our own knowledge and experience in international advisory and transactional work, whilst regularly working alongside leading local firms who deliver Singapore law advice as needed.

Singapore has one of the most developed and actively growing bond markets in Asia. The Singapore Corporate Debt Market Development 2018 published by the Monetary Authority of Singapore (MAS) reported that Singapore's total debt issuance reached SGD259 billion in 2017, achieving a 39% increase compared with SGD186 billion in 2016, with the majority of these issuances being non-SGD denominated.

The Singapore dollar bond market is comprised of Singapore government securities, quasi-government bonds, corporate bonds and structured securities. In Singapore, there is only one debt securities exchange, the Singapore Exchange Securities Trading Limited (SGX-ST).

Companies seeking to issue debt securities can list their debt securities in one of the SGX-ST's markets: the wholesale bond market or the retail bond market. Wholesale bonds are offered in larger denominations and are typically traded OTC after issuance. Further, wholesale bonds are offered solely to 'institutional investors' and 'sophisticated investors', as defined under the Securities and Futures Act (SFA). In contrast, retail bonds are offered to all investors and are usually traded on the exchange.

The Singapore bond market can be further categorised into the below types of offerings.

  • Singapore government securities (SGS) – Singapore government securities are issued by the MAS on behalf of the government of Singapore. As opposed to other countries, the Singapore government does not need to finance its expenditures through the issuance of government bonds. Instead, the Singapore government invests in developing the capital market of Singapore and issues SGS for the following objectives:
      1. to establish a liquid SGS market to furnish a robust government yield curve for the pricing of private debt securities;
      2. to attract domestic and international investors and issuers, and encourage them to participate in the bond market of Singapore; and
      3. to stimulate the growth of an active cash transaction secondary market and a derivatives secondary market, to enable efficient risk management.
  • Corporate bonds – the corporate bonds market in Singapore is comprised of statutory board bonds, domestic bonds and non-domestic bonds (available to local and foreign investors). Typically, corporate bonds are traded and sold OTC.
  • Statutory bond issuers – the statutory boards of the Singapore government are independent organisations. Their issues typically indicate a good credit rating, even though there is no explicit guarantee by the government. In addition, statutory board debt obligations are regarded as the most liquid debt instruments in the Singapore corporate bond market. The three largest statutory board issuers are (i) the Land Transport Authority, which leads land transport developments; (ii) the PUB, the national water agency that is responsible for the collection, production, distribution and reclamation of water; and (iii) the Housing Development Board, the public housing authority that plans and develops public housing.
  • Domestic corporate bond issuers – the domestic corporate bond market of Singapore is primarily comprised of property-related companies, statutory boards, financial institutions, government-linked companies (GLCs) and other non property-related companies. Prominent GLC issuers include SingTel, DBS Bank, SMRT Corporation and Singapore Airlines.
  • Non-domestic/foreign bond issuers – the Singapore dollar bond market has no capital controls, withholding taxes or hedging restrictions, which makes it completely accessible to all issuers globally. The non-domestic corporate bond market of Singapore is comprised of supranational, quasi-sovereign agencies, banks and other corporations. Multiple debt structures are used in this market, including fixed and floating-rate notes, ABS, equity-linked notes, MBS and many other structured products.
  • Structured securities – these include equity-linked notes, convertible bonds, credit-linked notes and asset securitisation transactions.

There are no commonly recognised bond indices in Singapore. Nonetheless, the ABF Singapore Bond Index Fund consists of bonds (denominated in Singapore dollar) issued by the Singapore government (as well as other Asian governments) or the government-linked entities of Singapore and is often used by investors to track the debt market's performance (ie, yield and volatility).

The main regulatory bodies in Singapore are the MAS and the SGX-ST. The MAS regulates the offering of debt securities and the SGX-ST looks after the listing and trading of the securities.

Applicants of a standalone debt offering shall lodge their application to the SGX, which acts on behalf of the MAS. Please refer to 6 Offering Documents for the content requirements of the offering documents.

An issuer can also make multiple offers of separate tranches of debentures under a debenture issuance programme, provided that it registers with the MAS a base prospectus that is applicable for the entire programme. For each subsequent offer of debentures under the programme, the issuer will only need to lodge with the MAS a brief pricing statement containing information specific to that particular offer. The base prospectus is valid for 24 months.

The key legislative instruments that govern debt listing in Singapore are:

  • the SFA and its subsidiary legislation;
  • the Companies Act (Chapter 50);
  • various notices issued by the MAS under the Monetary Authority of Singapore Act;
  • the SGX-ST Listing Manual (applies to listing of debt securities on the SGX-ST); and
  • the Income Tax (Qualifying Debt Securities) Regulations.

There are different listing requirements for local and foreign debt securities (as set out below).

Listing Requirements for Local Debt Securities

One of the following requirements must be met for the listing of an issue of local debt securities.

  • For an issuer whose equity securities are listed on the SGX-ST, the issue of debt securities must have a principal amount of at least SGD750,000 (or its equivalent in foreign currencies).
  • For an issuer whose equity securities are not listed on the SGX-ST:
      1. the issue of debt securities must have a principal amount of at least SGD750,000 (or its equivalent in foreign currencies) and at least 80% of the issue must be subscribed by sophisticated investors; or
      2. the issuer must be the government or a Singapore government agency; or
      3. the issue of debt securities must have a credit rating of investment grade and above; or
      4. the issuer must have a principal amount of at least SGD750,000 (or its equivalent in foreign currencies) and meet specific requirements as set in the SGX Listing Manual, Rule 210(2), (3), (4) and (5) (the 'Mainboard Listing Requirements'). The issuer must have a minimum one-year track record and must satisfy one of the following market capitalisation thresholds: (a) a minimum consolidated pre-tax profit (based on full-year consolidated audited accounts) of at least SGD30 million for the latest financial year and have an operating track record of at least three years; (b) be profitable in the latest financial year (a pre-tax profit based on the latest full-year consolidated audited accounts), have an operating track record of at least three years and have a market capitalisation of not less than SGD150 million based on the issue price and post-invitation issued share capital; and (c) have operating revenue (actual or pro forma) in the latest completed financial year and a market capitalisation of not less than SGD300 million based on the issue price and post-invitation issued share capital. REITs and business trusts (BTs) that have met the SGD300 million market capitalisation test but do not have historical financial information may apply under this rule if they are able to demonstrate that they will generate operating revenue immediately upon listing. An issuer listing in accordance with the first or second threshold must have been engaged in substantially the same business, and have been under substantially the same management, throughout the period for which the three-year operating track record applies.
  • For an issue when the issuer is not listed on the SGX-ST or does not meet the Mainboard Listing Requirements, the issuer's obligations under the issue of the debt securities must be:
      1. guaranteed by an entity that is listed on the SGX-ST and the issue of debt securities must have a principal amount of at least SGD750,000 (or its equivalent in foreign currencies); or
      2. guaranteed by an entity that meets the Mainboard Listing Requirements and the issue of debt securities must have a principal amount of at least SGD750,000 (or its equivalent in foreign currencies); or
      3. guaranteed by the government or a Singapore government agency.
  • The issuer or guarantor must meet the criteria for exemption under the Securities and Futures (Offers of Investments) (Exemption for Offers of Straight Debentures) Regulations 2016; ie, that the offer is one of the following: (i) a BT offer (straight debentures by a trustee‑manager of a business trust, on behalf of the business trust); or (ii) a REIT offer (ie, offer of straight debentures by a manager of a REIT, on behalf of the REIT).
  • The issuer or guarantor must meet the eligibility criteria under Part VI Chapter 3 of the SGX Listing Manual (Seasoning of Debt Securities).

In addition, the issuer is required to pay a listing fee of SGD15,000 and a process fee of SGD10,000.

Trustee and Trust Deed

The issuer must appoint a trustee to represent the holder of its debt securities listed on the SGX-ST, unless the offer is only made to sophisticated investors and traded in a minimum board lot size of SGD200,000 (or its equivalent in foreign currencies). The trustee must be a person satisfying one of the following requirements:

  • a holder of a trust business licence under the Trust Companies Act that is carrying on business in Singapore in that capacity;
  • a bank licensed under the Banking Act that is carrying on business in Singapore in that capacity;
  • an approved trustee referred to in Section 289 of the SFA that is carrying on business in Singapore in that capacity; or
  • a trustee that is licensed or regulated in an equivalent foreign jurisdiction and that is carrying on business in or outside Singapore in that capacity.

Further, the issuer shall ensure that it has no interest in or relation to the trustee that may conflict with the trustee’s role as trustee.

Listing Requirements for Foreign Debt Securities

A foreign company seeking to list an issue of foreign debt securities on the SGX-ST must comply with the listing requirements contained in Rule 304 of the SGX Listing Manual. The listing requirements are as follows.

  • The foreign issuer must be one of the following.
      1. A supranational body.
      2. A government, or a government agency whose obligations are guaranteed by a government.
      3. An entity whose equity securities are listed on the SGX-ST.
      4. A corporation that meets the following requirements: (a) the Mainboard Listing Requirements, or (b) a cumulative consolidated pre-tax profit of at least SGD50 million for the last three years, or a minimum pre-tax profit of SGD20 million for any one of those three years; and (c) consolidated net tangible assets of at least SGD50 million.
      5. A corporation whose obligations under the issue of the bonds are guaranteed by any of the entities in (i), (ii), (iii) or (iv) above.
  • The issue of the securities must be at least 80% subscribed by institutional investors and/or sophisticated investors.
  • The issue of the bonds must have a credit rating of investment grade and above.
  • The issuer or guarantor must meet the criteria for exemption under the Securities and Futures (Offers of Investments) (Exemption for Offers of Straight Debentures) Regulations 2016.
  • The issuer or guarantor must meet the eligibility criteria under Part VI of Chapter 3 of the SGX Listing Manual.
  • Under Rule 305 of the SGX Listing Manual, a foreign issuer is typically required to appoint a paying agent in Singapore while the debt securities are quoted on the SGX-ST and upon the issue of debt securities in definitive form. The SGX-ST may accept other arrangements to enable definitive certificate holders of the bearer debt securities in Singapore to be paid promptly.

There are no local currencies issuance restrictions. In particular, non-residents are free to issue Singapore dollar-denominated securities and to carry out transactions that are denominated in Singapore dollars. The only restriction is that the non-Singaporean financial institutions are required to convert their proceeds from Singapore dollars into foreign currencies when they repatriate it out of Singapore.

Other than Singapore dollars, debt securities in Singapore are commonly denominated in the G3 currencies; ie, the US dollar, euro and Japanese yen.

Listing a Debt Issuance Programme

Medium-term note (MTN) programmes are popular in Singapore and are issued frequently. MTNs are not offered on an underwritten basis. Instead, MTNs are offered continuously through dealers or agents on a best effort basis, which enables issuers to meet investors’ demand as it is established.

Under Section 309 of the SGX Listing Manual, in order to list an MTN programme on the SGX-ST, the principal amount of each listed series of the MTN Programme must be at least SGD5 million (or its equivalent in foreign currencies).

An issuer seeking listing on the SGX-ST should take the following steps:

  • advisers – the issuer needs to appoint advisers such as a lead manager, arranger, trustee, legal advisers and accountants;
  • pre-offering restructuring (if required);
  • conduct due diligence on its operations;
  • draft the prospectus, offering memorandum or introductory document (whichever apply);
  • prepare the independent auditors and expert reports;
  • submit Section A of the Listing Admissions Pack to the SGX-ST;
  • submit Section B of the Listing Admissions Pack (the listing application) to the SGX-ST together with submitting the draft prospectus for pre-lodgement review by the MAS;
  • liaise with the SGX-ST and the MAS, including responding to their queries with regards to the draft prospectus and the listing application;
  • negotiate with the other parties to the offering (eg, investment banks) with regards to legal documentations (eg, underwriting agreements and subscription agreements);
  • lodge the preliminary prospectus with the MAS;
  • market the offer;
  • bookbuilding;
  • register the prospectus with the MAS;
  • on satisfaction of the conditions expressed in the eligibility-to-list letter, the issuer’s debt securities will be listed and quoted on the SGX-ST; and
  • appointment of a paying agent in Singapore (for foreign issuers).

No response provided.

No response provided.

Primary issuance can be in the form of a public offering or a private placement. A public offering is the selling of registered securities to the broad market, rather than to a select group of investors. Public bond offerings are usually listed on a stock exchange in relatively small denominations and a prospectus is required to be lodged.

A private placement, on the other hand, is the selling of unregistered securities directly, where the offer is made to not more than 50 investors within a twelve-month period. Private bond placements are not listed on a stock exchange, do not require a prospectus and consequently cost less than a public offering.

There are three types of methods available for primary market placement:

  • public issue;
  • private placement; and
  • continuous placement.

Licensed securities dealers and exempt dealers (eg, banks and merchant banks) are permitted to engage in primary market transactions as agents of the issuer. Every public offering of securities requires a prospectus for offering unless it qualifies for one of the legally defined exemptions. Whenever such exemption is applicable, an information memorandum or a statement of material facts is to be issued. All issue managers are required to comply with the requirements in the laws and regulations (eg, the Banking Act, the Securities and Futures Act, and the Companies Act, and their corresponding regulations).

The most common issuance method for government bonds in the Singapore market is via auction. Singapore government securities are issued via auctions conducted by the MAS. Underwriters for corporate bonds typically conduct bookbuilding exercises for their issuers.

Fiscal Agency Structure

In this structure, the issuer designates a fiscal agent who acts on the issuer's behalf in liaising with the security holders. Nevertheless the fiscal agent does not owe a duty of care to the security holders. It should be noted that even though this structure exists, it is rarely used in Singapore.

Trust Structure

Singapore's most common structure for the issuance of debt securities is the trust structure, in which the issuer designates a trustee to act on behalf of, and in the best interests of, the security holders. The trust structure allows the issuer to liaise directly with the trustee, instead of having to deal with numerous security holders.

No response provided.

The steps of setting up a programme for the issuance of debt securities are similar to that of the standalone debt offerings as outlined above.

As discussed, upon the establishment of the programme, any subsequent offerings can be made by lodging a pricing supplement with the MAS.

An arranger/lead manager is:

  • responsible for arranging the issue and advising on its timing, structure and pricing; and
  • if the arranger/lead manager agrees to underwrite the issue fully (ie, a 'hard underwriting'), it is covenanting to subscribe for all securities that are not taken up by investors.

Legal advisers:

  • are usually appointed by the issuer, lead manager and trustee respectively;
  • advise on the legal issues relating to the transaction (eg, the prospectus);
  • conduct legal due diligence on the company/issuer;
  • draft the prospectus, review and comment on regulatory issues; and
  • draft the other documents required and any other agreements entered into in respect of the offering (eg, agreements between the company and the underwriters, auditors, etc).

A trustee:

  • acts on behalf of, and in the interest of, the security holders;
  • owes a duty of care to the security holders; and
  • where a prospectus had been lodged with the MAS, has further statutory duties under Section 266(1) of the SFA, including exercising due diligence and vigilance in carrying out its functions and duties.

A fiscal agent:

  • acts on the issuer's behalf when a trust structure is not used, in particular, to receive payments of interest and principal from the issuer, and pass these on to the security holders.

A principal paying agent is:

  • appointed by the issuer where a trust structure is used to assist in the making of interest and principal payments.

Auditors:

  • prepare the offering document and the financial statements;
  • conduct financial due diligence; and
  • issue a comfort letter to the lead manager on the issuer's accounts.

Offering Documents

The key documents that are usually required in a debt issuance are the following.

  • Offering document – such as a prospectus or information memorandum. The offering document is aimed to give investors more information about the issuer and any guarantor in order for investors to make an informed decision as to whether to purchase the securities.
  • Subscription/underwriting agreement – which is entered into between the issuer, any guarantor, lead manager and other managers, and contains the issuer's agreement to issue the securities and the managers' agreement to subscribe or procure subscribers for the securities.
  • Material contracts (other than those entered into in the ordinary course of business) entered into during the preceding 24 months or proposed to be entered into by the issuer and its subsidiaries with any director, controlling shareholder or their associates.
  • Trust deed – which is required when a trust structure is adopted and includes provisions governing the appointment of the trustee and the trustee's duties.
  • Agency agreement – which covers the appointment and duties of any agent appointed by the issuer.
  • Central Depository Limited (CDP) application form – which appoints CDP to act as the depository in respect of the debt issuance and contains a set of standard, non-negotiable documents.
  • Deed of covenant – executed by the issuer in favour of the account holders of CDP, which is required where CDP is used as the depository for a global security.
  • Programme agreement (for MTNs).
  • Auditors' report to management on the internal control and accounting system of the issuer and its principal subsidiaries.
  • Valuation report(s) – for an issuer that is engaged in property investment or development of each principal asset of the group that is revalued.
  • Mortgage indenture or equivalent instrument certified by the trustee.
  • Checklist showing compliance with the relevant requirements.
  • Other supporting documents – the SGX-ST may require the applicant to provide additional information and any other documents that it requires for a proper consideration of the application.

All offers of debt securities must comply with the prospectus requirements set out in Chapter 289 of the SFA, unless the offer is excluded or exempted from the prospectus requirements. Debt securities that require a prospectus include debentures, bonds, notes and any other debt security, whether accrued by a charge on the assets of the issuer or not.

A prospectus is not required for debt securities (i) issued by an entity whose equity securities are listed on the SGX-ST. In this case, an offer information statement (OIS) is prepared, which must contain information as prescribed by the MAS (lenient requirements); or (ii) offered primarily to institutional investors and/or sophisticated investors. In this case, the information memorandum must contain the information that such investors customarily expect to see in these documents.

Main Content and Disclosure Requirement

The content requirements for a prospectus can be found in Section 243 of the SFA, the relevant schedule to the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 (SFR) and Chapter 6 of the SGX Listing Manual.

The prospectus must include, inter alia, the following information:

  • information on the issuer and its directors, key executives and employees;
  • information on the ownership of the company;
  • information on the debt securities;
  • financial information, including information on accounting policies;
  • information on the business prospects of the issuer, including any known trend information and profit forecast;
  • information on the issuer's auditors, registrars and other agents;
  • information on the issuer's credit rating;
  • information on any interested person transactions and interests of experts, underwriters and financial advisers;
  • information regarding taxes;
  • use of proceeds from the offer; and
  • risk considerations.

The content requirements for a prospectus are more rigorous than those required for an information memorandum. The prospectus must include more detailed information about the issuer and its management, the liquidity and capital resources of the issuer, background information and material disclosures on use of proceeds and information regarding material contracts.

An information memorandum typically contains the following information:

  • a cover page;
  • risk factors;
  • selected financial information;
  • a description of the issuer (and guarantor, if applicable);
  • directors of the issuer;
  • a description of the notes or programme (if it is an MTN programme);
  • terms and conditions of the notes;
  • use of proceeds of the notes;
  • tax considerations;
  • ratings (if applicable);
  • subscription, purchase and distribution information; and
  • clearing and settlement information.

Liability for the Content of the Prospectus

Under Sections 253 and 254 of the SFA, civil and criminal liability for false or misleading statements in the prospectus can be attached to:

  • the issuer;
  • each director of the issuer;
  • the underwriter;
  • each person who is, and who has consented to be, named in the prospectus as a proposed director or equivalent of the issuer; and
  • the advisers, both the issuer and the arranger's advisers who assisted in preparing the prospectus.

Content Requirements of Wholesale and Retail Issuances

In Singapore, the majority of offers of wholesale debt securities are not made under a prospectus but instead under Sections 274 and 275 of the SFA, which provide an exemption from the requirement to publish a prospectus. Consequently, the primary offering document that is used instead is an information memorandum.

Similarly, retail issuances are usually conducted or initiated by listed companies. Therefore, those issuances do not require a prospectus and are most commonly issued under Section 277 of the SFA, which provides that an offer information statement should be prepared.

In addition, corporate bonds (being plain vanilla bonds) meeting the eligibility criteria of the Bond Seasoning Framework and Exempt Bond Issuer Framework (introduced by the MAS in 2016) could be exempted from the need to publish a prospectus under the SFA for the offering in the retail bond market.

The prospectus must be signed by all directors, proposed directors or their authorised agents. The prospectus must be dated and no debentures can be issued in relation to a prospectus that has been issued more than six months before the issuance. Further, the prospectus must be registered with the MAS before it can be circulated and must be accompanied by a product highlights sheet.

The following principal terms and conditions of the issue must be disclosed in the public offer: issue price, redemption price, form, rate of interest, guarantees constituted in favour of the holders of the debt securities and maturity date. Further, the financial covenants of the issuer and the definition of events constituting events of default must be disclosed in the prospectus.

The prospectuses and offer information statements must first be lodged with the MAS through its online Offers and Prospectuses Electronic Repository and Access (OPERA) database for seven days before they can be listed on the SGX-ST. Once lodged, these prospectuses and offer information statements will remain on the OPERA and accessible to the public for a period of six months after registration. This requirement does not apply to simplified disclosure documents and information memorandums. Nevertheless, all offering documents, including simplified disclosure documents and information memorandums, are made publicly available on the SGX-ST.

The main exemptions to the prospectus requirement under the SFA are, inter alia:

  • small offers – where the total amount raised within a twelve-month period does not exceed SGD5 million;
  • private placements – where the offers are made to no more than 50 persons within a twelve-month period;
  • offers made to institutional investors or sophisticated investors;
  • an offer of international debentures where the issuer is a foreign issuer and is listed on a recognised stock exchange, and the debentures are denominated in foreign currency with a face value equivalent to USD5,000;
  • offers made using an offer information statement in the form prescribed in the Sixteenth Schedule of the Securities and Futures (Offers of Investment) (Shares and Debentures) Regulations 2005, where the issuer is a company whose equity securities are already listed on the SGX-ST for quotation; and
  • an issue or transfer of securities for no consideration.

Generally speaking, the same as having registered as a prospectus with the MAS, documents or materials in connection with the offer or sale or invitation for subscription or any shares or debentures or units in a BT may not be circulated or distributed, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.

A bookbuilding process is used for corporate bonds. Some corporate bonds are offered through public offering/private placement. Underwriters of these corporate bonds may conduct the bookbuilding exercise.

On the other hand, government bonds are offered via auctions.

MTNs are usually offered continuously through agents or dealers on a best efforts rather than underwritten basis, allowing issuers to meet investors’ demand as it emerges. Therefore, it is common to have a best effort underwriting commitment.

The main terms of an underwriting agreement are the following:

  • the underwriting obligations;
  • termination rights;
  • representations, warranties and undertakings of both the issuer and the banks;
  • conditions precedent;
  • lock-up;
  • issuer's indemnities to the banks;
  • over-allotment and stabilisation; and
  • fees and commissions, usually less than 1% of the gross proceeds of the issue for investment-grade bonds.

Stabilisation

In Singapore, price stabilisation of securities is prohibited and may violate Chapter 289 of the SFA, which includes provisions prohibiting false trading and market rigging, securities market manipulation and insider trading.

Exemptions to the prohibition of price stabilisation are provided under the Securities and Futures (Market Conduct) (Exemptions) Regulations 2006 (Market Conduct Regulations).

Market Manipulation

Market manipulation is prohibited in Singapore. The SFA sets out several conducts that are prohibited and that are construed as illegal market manipulation, such as:

  • false trading and market rigging transactions;
  • inducement of other persons to deal in the securities of the issuer or its related corporation;
  • dissemination of false or misleading statements and information that is likely to induce others to deal in securities or manipulate the market price of securities;
  • insider trading;
  • fraudulently inducing persons to deal in securities;
  • employment of manipulative and deceptive devices in connection with the dealing of securities; and
  • dissemination of information about illegal transactions.

Breach of the market manipulation prohibitions may result in criminal prosecution. The punishment for market manipulation is imprisonment for a maximum term of seven years, or a maximum fine of SGD250,000, or both. Corporations may also be convicted and punished by fines.

In addition, civil penalties can be imposed on the person and he will be exposed to civil liability for claims made by investors under the SFA.

There are no restrictions on the use of foreign governing laws.

This firm is not aware of such cases, other than those based on public policy or those that do not fall within the statutory schemes on the recognition of foreign judgments as set out below.

Foreign judgments are generally enforceable in Singapore. Notwithstanding, a foreign judgment may be void and unenforceable if it violates public policy. Also, a foreign judgment may be unrecognisable where it does not fit within one of the statutory or common law schemes of recognition. The statutory schemes are:

  • the Choice of Court Agreements Act (CCAA) (Chapter 39A) (for the recognition of civil or commercial disputes only, covering judgments obtained in Austria, Belgium, Italy, the United Kingdom, etc);
  • the Reciprocal Enforcement of Commonwealth Judgments Act (RECJA) (Chapter 264) (for the recognition and enforcement of judgments obtained in jurisdictions such as the United Kingdom, Australia, New Zealand, Malaysia, India); and
  • the Reciprocal Enforcement of Foreign Judgments Act (REFJA) (Chapter 265) (for the recognition and enforcement of judgments obtained in Hong Kong and China).

An arbitral award that is made in another country that is a signatory to the New York Convention on the Enforcement of Arbitral Awards (the New York Convention) is recognised by Section 30 of the International Arbitration Act (Chapter 143A). For awards made in another country that is not a signatory to the New York Convention, they may be enforced by, inter alia, an action commenced under the RECJA and the REFJA, and common law action commencing an action afresh in Singapore as a judgment debt.

Under common law, a foreign judgment will only be enforced if it is (i) for a fixed and ascertainable sum of money, (ii) from a court of competent jurisdiction (in the conflict of laws sense), and (iii) final and conclusive on the merits by the law of that country.

For the recognition of a foreign judgment, similar requirements must be satisfied, with the exception of the sum of money, which need not be fixed or ascertainable.

For the RECJA, the judgment must be issued by a superior court of the relevant jurisdictions for a sum of money payable. This also covers an arbitration award if such arbitration award can be enforceable as a judgment order made by the court of the relevant jurisdiction.

For the REFJA, the judgment must be issued by a superior court for a sum payable (excluding tax, fines or penalties). The judgment shall also be final and conclusive even if it may be subject to appeal.

Under the CCAA, courts in Singapore will enforce and recognise foreign judgments rendered in international cases where there is an exclusive choice of court agreement concluded in a commercial or civil matter. An 'international case' under the CCAA is prescribed as a case in which the claim is for recognition or recognition and enforcement of a foreign judgment; or the enforcement of a judicial settlement recorded before a court of a foreign state. A 'foreign judgment' is a judgment given by a court of a state that is a party to the Hague Convention of 30 June 2005 on Choice of Court Agreements, being a chosen court; or a court to which a chosen court has transferred the case. A 'judgment' is a final court decision on the merits, a consent order, a consent judgment or a judgment given by default.

For debt securities, while it is not registrable, common law requirements on assignment/notice should be complied with. For instance, for common law security over book-entry securities, the security grantor and the lender must each open a sub-account with the same depository agent. The grantor and the lender must then enter into a security agreement under the terms of which the grantor will charge in favour of, and assign to, the lender (i) all its right, title and interest in the sub-account maintained by it with the depository agent; and (ii) all the book-entry securities held in that sub-account.

Notice of that assignment must be given to, and acknowledged by, the depository agent

It is unlikely that bondholders domiciled in a foreign jurisdiction will be jeopardised. However, although individual aggrieved investors may bring claims (assuming sufficient jurisdiction), Singapore does not permit class action suits that may be permitted in many other worldwide jurisdictions.

This firm is not aware of such regulatory restrictions. It is also common for foreign entities to enter into bond transactions and offer debt securities in Singapore.

The timetable for issuing and listing debt securities relies upon several components. If the debt securities are being issued under an existing programme, the timetable is prone to be significantly shorter. Most of these issuances, commonly referred to as drawdowns, are completed within one to two weeks. In contrast, in retail or standalone issuances, the regulatory interference is greater and consequently the time is much longer.

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Bonds and other debt securities that are sold in the international markets are usually cleared through a clearing system. In general, debt securities are typically cleared through one of the following: Clearstream Banking SA, Euroclear Bank SA/NV, Central Moneymarkets Unit Service, and Société Anonyme (for investors outside the USA) and the Depository Trust & Clearing Corporation (DTC) (for US investors). In Singapore, debt securities that are denominated and issued in Singapore dollar are often cleared through CDP. Notwithstanding, debt securities can be denominated and issued in other foreign currencies (eg, US dollar, Chinese renminbi, Australian dollar, euro), subject to the issuer's choice.

Debt securities cleared via a clearing system are issued as a single note certificate, known as a 'global note'. The global note represents all the debt securities globally and is issued in the name of the common depository or the nominee. In situations where the note certificate is being held for or on behalf of the common depositary for clearing, principal amounts of the debt securities would be allocated to investors through their account held by the pertinent clearing system.

Delivery and exchange of the debt securities between account holders is facilitated electronically, which allows the free and easy transfer of interests in the debt securities, without the need of transferring any physical certificate, thus mitigating any potential risks stemming from non-concurrent transfers.

Each clearing system is limited to debt securities denominated in certain currencies. In Singapore, CDP supports Singapore dollars, US dollars, euros, Chinese renminbi, Australian dollars and Hong Kong dollars.

The main tax issues to consider are, inter alia, withholding tax, and goods and service tax (GST).

Payments of interest or principal are subject to withholding tax. The items below are deemed under the Income Tax Act to be income derived from Singapore.

  • Any interest or any other payment in connection with any loan or indebtedness that is either:
      1. borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore; or
      2. deductible against any income accruing in, or derived from, Singapore.
  • Any income derived from loans where the funds provided by such loans are brought into, or used in, Singapore.

The withholding tax rate is 15% for interest earned by non-Singapore tax residents not engaged in business in Singapore or not having a permanent establishment in Singapore.

There are certain exemptions and exclusions from Singapore withholding tax available on interest and related payments falling under Section 12(6) of the Income Tax Act, particularly the Qualifying Debt Securities (QDS) scheme.

The QDS Scheme

Under the QDS scheme, tax exemption (including withholding tax exemption) is granted on certain qualifying income (including interest) derived by investors who are non-resident holders of debt securities.

The main conditions for the above tax exemption are as follows.

The issue of the QDS must be arranged by certain financial institutions in Singapore that have been granted one of the following statuses:

  • Financial Sector Incentive (Bond Market) company;
  • Financial Sector Incentive (Capital Market) company; or
  • Financial Sector Incentive (Standard Tier) company.

The exact requirements depend on whether the QDS are issued under a programme or as a standalone issuance.

During the primary launch of the QDS (or a tranche of the QDS, in the case of a programme), the QDS are issued to four or more persons, or less than 50% of the principal amount of the QDS is beneficially held or funded, directly or indirectly, by related parties of the issuer.

The holder of the QDS is not resident in Singapore and either does not have a permanent establishment in Singapore or has a permanent establishment in Singapore but does not acquire the QDS using any funds from Singapore operations.

Payments of qualifying income under the QDS are not derived by any related parties of the issuer or any other person who acquired the QDS using funds from related parties of the issuer, if at any time during the life of the QDS, 50% or more of the QDS that are outstanding at any time during the life of their issue is beneficially held or funded by any related parties of the issuer.

The issuer has included in all offering documents certain statements relating to the QDS and a return on debt securities in respect of the QDS is submitted to the MAS within the prescribed time and in the prescribed form.

In addition, the QDS scheme grants companies or bodies of persons in Singapore a 10% concessionary tax rate on their qualifying income derived from the QDS, subject to meeting certain requirements that are broadly in line with the above.

Stamp duty is payable on the instrument of transfer of stocks or shares having a register kept in Singapore, at the rate of 0.2% based on the net asset value of such shares or consideration (whichever is higher). Thus, debt securities, save as being equity-linked, are not subject to stamp duty.

Stamp duty is also not applicable to electronic transfers of stocks or shares through CDP.

Singapore currently does not impose tax on capital gains. However, any gains derived by any person from the sale of debt securities that are gains from any trade, business, profession or vocation carried on by that person, if accruing in or derived from Singapore, may be taxable as such gains are considered revenue in nature.

Holders who are taxpayers and are required to comply with the Financial Reporting Standard (FRS) 39 – Financial Instruments: Recognition and Measurement for financial reporting purposes may be eligible for exemptions/tax treatment under Section 34A of the Income Tax Act, which provides for the tax treatment for financial instruments in accordance with the FRS 39 (subject to certain exceptions and 'opt-out' provisions). The Inland Revenue Authority of Singapore has also issued a circular entitled Income Tax Implications Arising from the Adoption of the FRS 39 – Financial Instruments: Recognition and Measurement.

Issuers with debt securities listed on the SGX-ST must comply with the continuing obligations set out in Part VII of Chapter 3 of the SGX Listing Manual. Generally, for the entire tenure of the debt securities, the issuer is obliged to disclose its annual report, and semi-annual and quarterly financials to the SGX-ST.

Immediate Disclosure

An issuer shall immediately disclose to the SGX-ST any information that may have a material effect on the price or value of its debt securities or on an investor's decision whether to trade in such debt securities.

Further, an issuer shall immediately announce the following:

  • the redemption or cancellation of the debt securities, when every 5% of the total principal amount of those securities (calculated based on the principal amount at the time of initial listing) is redeemed or cancelled;
  • the details of any interest payment(s) to be made (except for fixed-rate debt securities to which Rule 308 does not apply pursuant to Rule 308(2)); and
  • any appointment of a replacement trustee.

Financial Reporting

Where a trustee was appointed and the issuer/guarantors have their equity securities listed on the SGX-ST, the issuer must announce its own and the guarantor's consolidated profit and loss account and balance sheet in accordance with the timelines prescribed in the SGX Listing Manual in relation to such equity securities.

Notwithstanding, the issuer does not need to announce the consolidated profit and loss account and balance sheet of any entity that is not an equity issuer (non-equity issuer) if the following cumulative conditions are met:

  • the debt securities are guaranteed by one or more guarantors;
  • the guarantee is full and unconditional;
  • where there is more than one guarantor, the guarantors are joint and several;
  • the profit and loss accounts and balance sheets of the equity issuer and the non-equity issuer are consolidated in accordance with Rule 220 of the SGX Listing Manual; and
  • the issuer announces on the consolidated profit and loss account and balance sheet of the equity issuer in accordance with the timelines prescribed in the SGX Listing Manual in relation to its equity securities.

In a situation where the issuer/guarantors do not have their equity securities listed on the SGX-ST, a proposal needs to be submitted for the SGX-ST's approval of its proposed arrangements for the disclosure of their financial statements. The arrangements approved by the SGX-ST are to be disclosed through the offer documents.

Debt securities offered solely to institutional and sophisticated investors, and traded in a minimum board lot size of SGD200,000 (or its equivalent in foreign currencies) are not subject to the above-mentioned financial reporting obligations.

The continuing obligations apply to foreign and local companies that list debt securities on the SGX-ST.

The SGX-ST is empowered under the listing rules to deal with an issuer's non-compliance with the continuing obligations.

Contravention (whether it is unable or unwilling to comply) of the continuing obligations by the issuer could result in:

  • suspension of trading of the securities of the issuer;
  • removal of the issuer from the Official List of the SGX-ST without the issuer's agreement; and
  • the exercise of other investigative or enforcement power (eg, disciplinary and enforcement action against the person who is deemed to have contravened the listing rules).

Singapore courts may also, on application by the MAS or the SGX-ST, make an order directing the person to comply with, observe, enforce or give effect to the listing rules.

Penalties Under the SFA

A breach of continuing obligations may attract criminal liability or civil penalties under the SFA. An issuer must not (whether intentionally, recklessly or negligently) fail to notify the SGX-ST of information that is required to be disclosed by the SGX-ST under the listing rules or any other requirement of the SGX-ST. An intentional or reckless contravention is an offence.

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DLA Piper Singapore Pte Ltd is part of a global legal services organisation with over 4,200 lawyers located in more than 30 countries. The global capital markets group is based in London and works closely with experienced capital markets lawyers in DLA Piper's offices across Europe, the Middle East, Africa, the USA and Asia. The practice group comprises more than 175 lawyers worldwide and offers integrated securities advice on complex, cross-border transactions requiring support under different laws. The firm’s lawyers advise issuers, underwriters, selling shareholders, sponsors, arrangers, lead managers, originators, dealers, trustees and depositaries on a broad range of securities offerings, including equity, equity-linked and debt securities, as well as structured and project financings and securitisations. Disclaimer: DLA Piper is restricted for regulatory reasons from practising local law in Singapore, as are most international law firms. Our team leverages our own knowledge and experience in international advisory and transactional work, whilst regularly working alongside leading local firms who deliver Singapore law advice as needed.

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