Capital Markets: Equity 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.

The main equity exchange in Singapore is the Singapore Exchange Securities Trading Limited (SGX-ST), which is supervised by the Monetary Authority of Singapore (MAS). The SGX-ST is the sole approved exchange for both equity and debt securities in Singapore. The SGX-ST is a wholly-owned subsidiary of the Singapore Stock Exchange Limited (SGX).

There are two listing platforms under the SGX-ST, namely the Mainboard and the Catalist board. The main differences are as follows.

  • What can be listed:
      1. Mainboard – shares of a company;
      2. Catalist – shares of a company, units of a business trust, shares/units of an investment fund and units of a REIT.
  • Entry and listing requirements (eg, minimum profit and market capitalisation level):
      1. Mainboard – there are minimum quantitative entry criteria as set out in 1.4 Regulatory Bodies Governing the Listing Process;
      2. Catalist – there are no minimum quantitative entry criteria and the suitability to list is determined by the approved sponsors in accordance with the Catalist Rules; it is highlighted that the company must maintain the sponsor after the listing at all times.
  • Primary or secondary listing:
      1. Mainboard – both primary and secondary listings are allowed;
      2. Catalist – only primary listing is allowed.
  • Target issuers:
      1. Mainboard – more established issuers (eg, conglomerates);
      2. Catalist – smaller or fast-growing issuers.
  • Governing rules:
      1. Mainboard Listing Rules;
      2. Catalist Rules.

There are several benchmark indices in the Singapore stock market, of which the Straits Times Index (STI) is the most recognised.

The STI is capitalisation-weighted. It tracks the performance of the top 30 companies by capitalisation in Singapore. Other criteria for the companies on the STI include (i) 'free float' greater than 15% and (ii) liquidity of at least 0.05% in ten out of twelve months. The definition of free float includes portfolio investments, nominee holdings and holdings by investment companies. This excludes cross-holdings; significant long-term holdings by founders, their families and/or directors; restricted employee share schemes; government holdings; and portfolio investments subject to a lock-in clause, for the duration of that clause. The liquidity criterion refers to the median trading value of a stock in each month, when divided by its free float shares. For existing constituents, it could be 0.04% in eight out of twelve months.

The MAS is the main regulatory body in Singapore that oversees the offering of shares or units to the public.

The SGX-ST regulates the day-to-day operations of the securities market and its subsidiary rulebooks under which the listing procedures are set out.

Applicants of an IPO on the Mainboard are required to lodge a listing application to the SGX, which acts as an agent on behalf of the MAS. In accordance with the Mainboard Rules, the brief contents of a listing application are, inter alia, the name of the applicant, the date and place of incorporation, a brief description of the principal business, the full title or designation, the amount, the class and par value of the securities for which the listing is applied, and whether the securities are fully paid, etc (see 6 Offering Documents for further details on the content requirements).

For a Catalist listing, the pre-admission notification, which has a similar content requirement to a Mainboard listing, shall be submitted by the sponsor together with a specific confirmation by the sponsor as to the applicant's business and good standing.

The key legislative instruments that govern equity listings in Singapore are:

  • the Securities and Futures Act (SFA) and its subsidiary legislation (ie, Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005, Securities and Futures (Offers of Investments) (Business Trusts) (No 2) Regulations 2005, and Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2005) (collectively, the SFR);
  • the Companies Act (Chapter 50);
  • the SGX-ST Rules (Securities Trading);
  • the SGX-ST Listing Manual, including the Mainboard Rules and the Catalist Rules;
  • the Code of Corporate Governance; and
  • the Singapore Code on Take-overs and Mergers.

A company may undertake a primary listing on the Mainboard or the Catalist board of the SGX.

A company interested in listing on the Mainboard must first appoint an accredited issue manager, who prepares the company for listing, ensures that the company is suitable for listing and assists with obtaining approval of the SGX-ST for the listing.

For a company to be suitable for listing, it must first meet the admission requirements. Additionally, the company must be organised in an orderly manner that will facilitate compliance with its continuing listing obligations. Further, the company's directors must have the appropriate experience and expertise to manage the company.

A company interested in listing on the Catalist board must first collaborate with an approved full sponsor. The sponsor in a Catalist listing fulfils a similar role to the Mainboard's issue manager. The company's suitability for listing on the Catalist is assessed and determined solely by the sponsor.

The specific eligibility requirements for companies intended to undertake a primary listing on the Mainboard and the Catalist are set out below.

  • Track record:
      1. Mainboard – a minimum of one year (please refer to the tests below);
      2. Catalist – not applicable.
  • Market capitalisation:
      1. Mainboard – the issuer must satisfy one of the following three thresholds: (a) profitability test A – a minimum consolidated pre-tax profit (based on consolidated audited accounts for a full financial year) of at least SGD30 million for the latest financial year and an operating track record of at least three years; (b) profitability test B – profitability in the latest financial year (pre-tax profit based on the latest consolidated audited accounts for a full financial year), an operating track record of at least three years and a market capitalisation of not less than SGD150 million based on the issue price and post-invitation issued share capital; or (c) market capitalisation test – 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 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;
      2. Catalist – not applicable.
  • Repayment of debts: all debts owed to the group by its directors, substantial shareholders/unitholders or by companies controlled by its directors or substantial shareholders/unitholders must be settled prior to listing.
  • The requirement of free float (after the offer, the company must achieve a minimum percentage of shares to be held in public hands; ie, held by persons other than the directors, chief executive officer, substantial shareholders/unitholders or controlling shareholders/unitholders of the issuer or its subsidiaries, or their respective associates):
      1. Mainboard – 12% to 25% of the company's shares are required to be held in public hands at the time of the listing, depending on the market capitalisation of the company (typically the larger the market capitalisation of the company, the lower the free float percentage); existing public shareholders can be included in the calculation of the percentage of shares to be held by the public, subject to an aggregate limit of 5% of the company's post-IPO issued shares, provided that such shares are not issued under a moratorium;
      2. Catalist – at least 15% of the post-IPO issued share capital must be held by the public at the time of the listing and the company is required to have at least 200 shareholders at listing.
  • Minimum offer price:
      1. Mainboard – SGD0.50;
      2. Catalist – SGD500.
  • Minimum subscription:
      1. Mainboard – SGD500;
      2. Catalist – SGD200.
  • Accounts: the prospectus (see below for the definition) must include the annual audited financial statements of the issuer (or group if applicable) for the three most recent completed financial years. The financial statements must be prepared in accordance with Singapore Financial Reporting Standards (SFRS), International Financial Reporting Standards (IFRS) or US Generally Accepted Accounting Principles (US GAAP). In situations where the date of lodgement of the prospectus with the MAS is later than six months after the end of the company's financial year, an interim supplementary financial information must usually be submitted as well.
  • Corporate governance: the directors and executive officers should have appropriate experience and expertise to manage the company. A director who has no prior experience as a director of an issuer listed on the Exchange must undergo training in the roles and responsibilities of a director of a listed issuer as prescribed by the Exchange. The character and integrity of the directors, management and controlling shareholders of the issuer will be a relevant factor for consideration. In considering whether the directors, management and controlling shareholders have the character and integrity expected of a listed issuer, the SGX will take into account whether they are related to other directors or controlling shareholders of the company. Additionally, the issuer's board must have at least two non-executive directors who are independent and free of any material business or financial connection with the issuer. Also, the issuer must establish one or more committees as may be necessary to perform the functions of an audit committee, a nominating committee and a remuneration committee, with written terms of reference that clearly set out the authority and duties of the committees.

The following specialist companies that cannot satisfy the market capitalisation requirements may be able to list on the Mainboard subject to the satisfaction of their respective special eligibility criteria.

Mineral, Oil and Gas (MOG) Companies

The SGX allows listing of MOG companies that are not yet in production and hence have no revenue or profitability. In fact, the MOG listing rules present pre-productive MOG companies with a fundraising avenue to raise public equity funding for MOG operations.

Nonetheless, the MOG companies must be able to establish, inter alia, (i) the existence of a meaningful portfolio of reserves in a defined area that is substantiated by a qualified person's report prepared by an independent qualified person and (ii) at least one independent director with appropriate industry experience and expertise.

Life Science Companies

Similar to the MOG companies, companies that are involved in R&D or production or commercialisation of any item using living organisms or their life processes that are based on biology, medicine, or ecology (ie, life science companies) that cannot satisfy the market capitalisation requirements are subject to eligibility requirements, including (i) the company has as its primary reason for listing, the use of proceeds of the IPO to bring identified products to commercialisation; and (ii) the company demonstrates that it has a three-year record of operations in laboratory R&D, and submits the following to the SGX:

  • details of patents granted or details of the progress of patent applications;
  • the successful completion of, or the successful progression of, significant testing of the effectiveness of its products; and
  • the relevant expertise and experience of its key management and technical staff, etc.

An issuer wishing to undertake a secondary listing on the SGX-ST is required to satisfy a more stringent free float requirement, including:

  • where the total offer size is less than SGD75 million, at least 40% of the invitation shares or SGD15 million, whichever is lower, must be distributed to investors who are each allotted not more than 0.8% of the invitation shares or SGD300,000 worth of shares, whichever is lower;
  • where the total offer size is between SGD75 million and SGD120 million, at least 20% of the invitation shares must be distributed to the investors, who are each allotted not more than 0.4% of the invitation shares; or
  • where the total offer size is at least SGD120 million, the distribution requirements are not applicable.

Additionally, in a secondary listing, the issuer must have at least 500 shareholders worldwide following the listing. In situations where the SGX-ST and the issuer's home exchange do not have an established framework and arrangement to facilitate the movement of shares between the jurisdictions, the issuer seeking a secondary listing must have at least 500 shareholders in Singapore or 1,000 shareholders worldwide.

Further, financial statements that are not prepared in accordance with SFRS, IFRS or US GAAP will need to be reconciled.

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

  • advisers – the company needs to appoint advisers such as an issue manager, legal advisers and accountants;
  • undertake pre-IPO restructuring (if required);
  • conduct due diligence on its operations;
  • draft the prospectus;
  • prepare the independent auditors' and experts' 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 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 regard to legal documentation (eg, underwriting agreements, subscription agreements, etc);
  • lodge the preliminary prospectus with the MAS;
  • market the offer;
  • undertake bookbuilding;
  • register the prospectus with the MAS;
  • undertake pricing and allocation of shares; and
  • admit the company to the Official List of the SGX-ST together with the quotation of shares.

Companies interested in listing on the Catalist board must first collaborate with an approved full sponsor. The sponsor in a Catalist listing fulfils a similar role to the Mainboard's issue manager. The company's suitability for listing on the Catalist is assessed and determined solely by the sponsor.

Foreign companies seeking a listing on the SGX-ST need to follow the same procedure. The foreign jurisdiction's laws will be taken into account and the SGX-ST will verify that the foreign laws give adequate protection to investors. The majority of foreign companies list their shares on the SGX-ST, with only a few listing depositary receipts.

An issuer can distribute its shares in conjunction with its IPO and listing on the Mainboard or Catalist by means of a public offer and/or a placement. In both cases, the offered shares can be new shares offered for subscription by the issuer or existing shares offered by existing shareholders.

Public Offer

A public offer in Singapore is usually offered through the websites of the participating local banks as well as by way of printed application forms, thus enabling a large number of participants to participate in the IPO.

Placement Offer

A placement is the offer of shares to institutional investors, high net worth investors or other investors (who are chosen by the underwriters and the issuer). Before a placement, a bookbuilding process usually takes place. In the bookbuilding process, the underwriter introduces the IPO to various potential investors to ascertain their interest in the offer. Ordinarily, the potential investors will acquire a large number of shares for large amounts of money and therefore there will be fewer shareholders holding the capital than in a public offer.

Listing by Introduction

Listing by introduction is only permitted in Mainboard listings. It is typically adequate in situations where the issuer already satisfies the shareholding spread requirements and does not need to raise capital. Issuers usually seek listing by introduction when either their shares are distributed in specie (in their actual form rather than distributing the cash proceeds) to the shareholders of the issuer's holding company to satisfy the minimum shareholding spread requirements for a Mainboard listing or in a dual-class shares listing where the issuer's shares are already listed in another foreign exchange.

The primary difference between a listing by introduction and other listings is the offering document. While a prospectus is used in all other listings, an introductory document is used in a listing by introduction. Both documents are similar in nature and content, but the introductory document is not reviewed or registered with the MAS like a prospectus.

Underwriting

The majority of IPOs in Singapore are usually fully underwritten by investment banks. An IPO that is fully underwritten by a bank is an IPO in which shares that will not be purchased by investors will be taken by the underwriting investment banks. An underwritten IPO is beneficial to the issuing company because it ensures its success. Also, if the company chooses not to underwrite an IPO, it must first consult on the matter with the SGX-ST.

Subsequent/secondary offerings are usually either rights issues (which can be renounceable or non-renounceable) or placements.

Rights Issues

A rights issue grants the existing shareholders of the issuer an entitlement (the 'nil-paid rights') to subscribe for shares in proportion to their existing holdings. The shareholders can exercise this right to purchase new shares of the company at a 'rights issue price', which is usually lower than the current market price for shares.

A rights issue that is non-renounceable (a 'preferential offering') is granted only to the existing shareholders and a shareholder who is not interested in exercising his nil-paid rights is not entitled to transfer or sell that right.

In contrast, a rights issue that is renounceable grants the shareholders the ability to sell their nil-paid rights on the SGX-ST or to transfer them to a third party.

Placement

In comparison with a rights issue, a placement offer that can be made to the existing shareholders/unitholders or new investors does not need to be made in proportion to the existing shareholding/unitholding.

A placement offer can be made to institutional investors or by way of a private placement to not more than 50 offerees within any twelve-month period. A placement offer can also be made together with a non-renounceable rights issue.

Parties that will usually be involved in an equity offering are as follows.

  • Legal advisers (for the issuer):
      1. advise on legal issues with regards to the prospectus;
      2. conduct legal due diligence on the company/issuer;
      3. draft the prospectus and review and comment on regulatory issues;
      4. prepare the company for listing (restructuring, corporate governance, etc); and
      5. draft all other legal documents required for the IPO such as the new constitution of the company, service contracts (if necessary) and any other agreements entered into in respect of the offering (eg, agreements between the company and the underwriters, auditors, etc).
  • Issue manager/sponsor and legal adviser (issue manager/underwriter):
      1. manages the IPO process;
      2. consults with the issuing company on various aspects related to the offering;
      3. co-ordinates the work streams by all advisers;
      4. the issue manager assists in preparing the company for listing and ensuring that the company satisfies the listing requirements;
      5. undertakes the due diligence exercise;
      6. advises on the offer structure and marketing plan as well as obtaining an indication of pricing through the price discovery process;
      7. assists with the listing application;
      8. liaison with the SGX-ST and MAS;
      9. advises on the due diligence undertaken by the issuer;
      10. reviews and comments on regulatory issues; and
      11. drafts and negotiates the managing/underwriting agreements and any other agreements entered into in respect of the offering.
  • Underwriters/bookbuilders (financial advisers):
      1. administer the issuance and consult on the listing's timing, structure and pricing;
      2. the roles of the issue manager and the underwriters overlap; the difference is that the underwriter will underwrite the success of the IPO by covenanting to subscribe for any shares that are not taken up by investors; and
      3. large IPOs are often 'bookbuilt' rather than being taken through the traditional underwriting process. In bookbuilding, the bookbuilder (underwriter) does not commit to subscribe for the full offer. Instead, the bookbuilder markets the offer to potential investors and builds the demand for the issuer's shares.
  • Independent auditors:
      1. prepare a comfort letter for the issuer; and
      2. prepare the financial statements that are part of the prospectus (historical accounts for at least three years).
  • Share registrar:
      1. handles the receipt and processing of applications under the IPO;
      2. maintains the share register; and
      3. helps with issues related to the transfer of shares and other technical issues.
  • PR consultants:
      1. assist with advertising, carrying out a campaign, creating the marketing materials and retail marketing strategy; and
      2. ensure that the issuer gets sufficient exposure in the media and liaise with the media representatives.
  • Other experts might be needed; for example, where special reports are required, including industry reports or valuation reports for companies with many real property assets.

No response provided.

The main documents to be included in an equity offering are the following:

  • prospectus (offering document) unless the company is exempted;
  • audited financial statements;
  • auditors' audit report;
  • underwriting agreement (if applicable); and
  • other issuer documents; eg, the company's constitution, directors' and shareholders' resolutions (in an IPO), and circular to shareholders (in a secondary listing).

Prospectus

Under Chapter 289 of the SFA, all offers of securities are subject to the prospectus requirements of the Act unless the offer is excluded or exempted from the prospectus requirements. All prospectuses issued by an issuer must be registered with the MAS before they are circulated.

The prospectus must contain all the information that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of information, such as (i) the assets and liabilities, financial position and performance, profits and losses, and prospects of the issuer; and (ii) the rights and liabilities attaching to the shares being offered.

The issuer and its advisers must disclose all information that investors and their professional advisers would reasonably require to make an informed assessment of the relevant securities.

Ordinarily, the prospectus will include additional background information regarding the business, the board of directors, the management and the industry in which the issuer operates.

The information that must be included in the prospectus is of very wide nature. For example, all the information actually known or that could have reasonably been discovered by the directors and proposed directors of the issuer, the issue manager, the underwriters, lawyers, placement agents, experts quoted in the prospectus and others who are named in the prospectus with their consent must be presented in the prospectus in a clear, concise and effective manner.

The prospectus must be signed by all the directors and proposed directors (or by their authorised agents). Further, it must be dated – no shares or units in a business trust may be issued on the basis of a prospectus after six months from its date of issue.

Main Categories of Information in a Prospectus

The Fifth Schedule of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations prescribes the information to be introduced in the prospectus:

  • Part I – front cover, which must include certain health warnings;
  • Part II – identity of directors, key executives, advisers and agents, which must include the names, addresses, occupations and professional qualifications of the directors, key executives, advisers and agents such as the company secretary, auditors, registrars and agents of the issuer;
  • Part III – offer statistics and timetable, which must include the offer statistics (the offer price and number of shares being offered), and the method and timetable of the offer (procedures, settlement and allocation of shares);
  • Part IV – key information, which must include selected financial data, a statement of capitalisation and indebtedness of the issuer, intended use of the proceeds from the offer, the offer expenses to be incurred and the risk factors specific to the issuer, its industry and its shares;
  • Part V – information about the issuer, which must include the history of the issuer, an overview of its business, its organisational structure and information regarding its material tangible fixed assets;
  • Part VI – operating and financial review and prospects, which must include the liquidity and capital resources of the issue and the issuer's business and financial prospects for the relevant financial year;
  • Part VII – substantial shareholders, directors, key executives and employees, which must include key information about the substantial shareholders, directors and key executives of the issuer and management reporting structure, and information on employees and their labour unions;
  • Part VIII – interested person transactions and conflicts of interest, which must include information about interested person transactions in the past three years and any existing and potential conflicts of interest of directors/controlling shareholders of the issuer;
  • Part IX – financial information, which must include the issuer's audited financial statements, interim financial information and information regarding legal or arbitration proceedings of the issuer;
  • Part X – offer and listing, which must include information on the plan of distribution, exchanges on which the issuer's shares are already listed and details on the selling shareholders (other than the issuer) offering to sell the shares or units of shares; and
  • Part XI – additional information, which contains various information, including information on the share capital of the issuer, the constituent documents of the issuer, material contracts entered into by the issuer other than in the ordinary course of business, taxation to which shareholders of the issuer may be subject, dividends (including dividend restrictions, entitlement and procedures or claim, applicable to shareholders of the issuer), consent of the issue manager and the underwriters to be named in the prospectus, and a statement that certain documents have been made available for inspection.

Responsibility and Liability for the Content of the Prospectus

Under the SFA, any false or misleading statements in the prospectus, or non-disclosure of material facts therein, can result in criminal liability for:

  • the person making the offer or invitation;
  • if the offeror is an entity, the directors or equivalent persons of the entity;
  • if the offeror is an entity, and the entity is also the issuer, the persons who were named in the prospectus with their consent as proposed directors or equivalent persons of the entity;
  • where the issuer is controlled by the offeror, one or more related parties of the offeror, the issuer, the director or equivalent persons of the issuer and persons who were named in the prospectus with their consent as proposed directors or equivalent persons of the issuer;
  • an issue manager named in the prospectus with his consent (for criminal liability this is only if the misstatement was made intentionally or recklessly);
  • an underwriter (but not a sub-underwriter) named in the prospectus with his consent (for criminal liability this is only if the misstatement was made intentionally or recklessly);
  • a person named in the prospectus with his consent as having made a statement that is included in the prospectus or on which a statement in the prospectus is based, but only for the inclusion of that statement (for criminal liability this is only if the misstatement was made intentionally or recklessly); and
  • any other person who made the false or misleading statement or omission but only for the inclusion of the statement or the omission to state the information or circumstance (for criminal liability this is only if there is deceit). If the misrepresentation is made negligently, there may be recovery of damages in negligence if the investor can establish that a duty of care was owed to him. The persons liable will usually be the directors of the issuer who authorised the issue of the prospectus or the issuer itself. Experts who made inaccurate statements in the prospectus may also be liable.

In addition to criminal liability, false or misleading statements and non-disclosure of material facts can result in civil liability. The above listed persons may be liable to compensate all persons who subscribe for or purchase shares in the issuer in reliance on that prospectus in respect of any loss or damage sustained by reason of the false or misleading statement or non-disclosure of material facts.

Exceptions to criminal liabilities being imposed are:

  • when the false statement or non-disclosure was not materially adverse from the point of view of the investor;
  • the individual had made all enquiries (if any) that were reasonable in the circumstances and after doing so had reasonable ground to believe that the statement was true or not misleading (this is also a defence to civil liability); or
  • the individual had reasonably relied on information given to him by someone other than his employee or agent and (where the person is a corporation) its director (this is also a defence to civil liability).

In conjunction with criminal and civil liability under the SFA, additional potential liability exists in several sources such as the Penal Code, the Misrepresentation Act, common law and in cases where the offer is marketed to investors outside Singapore, where other foreign securities laws may apply.

Disclosure Requirements for Specialist Companies

Specialist companies shall, in addition to the foregoing, disclose in their prospectuses the issues as listed below.

For life science companies.

  • Details of its operations in laboratory R&D, to the extent material to investors, including details of patents granted and in relation to its products the successful completion of, or the successful progression of, significant testing of the effectiveness of its products. If there are no relevant details, a negative statement should be provided.
  • Details of the relevant expertise and experience of its key management and technical staff.
  • The salient terms of any service agreements between the applicant and its key management and technical staff.
  • The safeguards and arrangements that the applicant has in place, in the event of the departure of any of its key management or technical staff.
  • The risk and impact, financially or otherwise, from such departure of key management or technical staff to the group's business and operations.
  • Information on whether the applicant has engaged in collaborative R&D agreements with other organisations, to the extent material to investors.
  • A comprehensive description of each product, the development of which may have a material effect on the future prospects of the applicant.
  • The directors' opinion that must state, without requiring a profit forecast, that in their reasonable opinion, the working capital available to the applicant, as at the date of lodgement of the prospectus, is sufficient for the present requirements and for at least twelve months after listing.
  • Where relevant and appropriate, an expert technical assessment and industry report.

For MOG companies.

  • Plans to obtain all necessary approvals required to proceed with development.
  • A meaningful portfolio of reserves.
  • The directors' opinion, which must state, without requiring a profit forecast, that in their reasonable opinion, the working capital available to the applicant is sufficient for the present requirements and for at least 18 months after listing.
  • A statement by the issuer that no material changes have occurred since the effective date of the qualified person's report. Where there are material changes, these should be prominently disclosed together with a statement that the issuer will as soon as practicable following its listing announce the qualified person's report or the independent qualified person's report, as the case may be, on the material changes in accordance with Rule 750(1).
  • The issuer's plans and milestones to advance to the production stage with capital expenditure for each milestone for an issuer applying for listing pursuant to Rule 210(9)(g). These plans must be substantiated by the opinion of an independent qualified person.
  • The issuer's policies and practices in relation to operating in a sustainable manner, including:
      1. the issuer's policy with regards to environmental and social issues;
      2. the impact of the issuer's business practices on the environment and the communities in which it operates; and
      3. environmental and social risks faced by the issuer.
  • In relation to an issuer whose principal activities consist of exploration for minerals, oil or gas, a clear and prominent statement on the front cover highlighting that fact, that the listing applicant may not progress to the next stage of development or to a stage where it is able to generate revenue and industry-specific risks.

Under the SFA, the issuer must lodge a prospectus with the MAS. A prospectus lodged with the MAS is posted on the MAS website for 7 to 21 days (extendable by the MAS) for public viewing and review by the MAS (where the issuer had not previously submitted a draft prospectus for review).

The MAS can register the prospectus between days 7 to 21 from the date of the prospectus' lodgement. After the prospectus is registered, the issuer can commence the IPO process.

The MAS may exempt a person from any requirements of the SFA with regards to the form or content of a prospectus if compliance with the requirement is unduly burdensome.

The MAS also has power to dispense with the issue of a prospectus altogether in the case of an offer or invitation, or a class of offers or invitations to which that offer or invitation belongs.

As mentioned above, all offers of securities or securities-based derivatives contracts must be accompanied by a prospectus unless the offer is excluded or exempted from the prospectus requirement. The exemptions below are commonly relied on:

  • an issue or transfer of securities or securities-based derivatives contracts for no consideration;
  • an offer to no more than 50 persons within any period of twelve months and under certain conditions (private placement);
  • an offer to institutional investors;
  • an offer to specified persons, including accredited investors; and
  • an offer of securities or securities-based derivatives contracts by a company whose securities or securities-based derivatives contracts are already listed for quotation, whether by means of a rights issue or otherwise. 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 has to be lodged with the MAS. This statement is treated as a prospectus for the purposes of liability under the SFA.

Advertisements calling attention to an offer of shares or debentures or units in a business trust are prohibited unless they contain only very restricted information or unless permitted by the relevant provisions of the SFA. These provide the conditions under which there can be publicity concerning the offer before and after the prospectus has been registered, and specific exceptions for bookbuilding, roadshows and research reports.

  • Pre-marketing – carried out in the early stages of a pre-IPO in informal and confidential meetings with prospective investors.
  • Pre-IPO placements – targeted for early investors who usually enjoy a significant discount. Designed to incentivise the early investors to market the IPO further and influence other investors to subscribe.
  • Cornerstone investors – placements to investors that are separated from the IPO but occur simultaneously, at market price.
  • Roadshows – presentations made after the lodgement of the prospectus with the MAS to institutional and accredited investors.

Advertising Restrictions

No documents or materials (save for a prospectus registered with the MAS) in connection with the offer or sale or invitation for subscription or any shares or debentures or units in a business trust may 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.

Research reports are prepared by the underwriters or brokers participating in an equity offering. The participating brokers and underwriters can be held liable under several sources, such as the following:

  • Financial Advisers Act (Chapter 110) – a licensed financial adviser can be held liable for making false or misleading statements as to any amount payable in respect of a proposed contract in respect of any investment product, as to the effect of any provision of a contract in respect of any investment product, or in connection with the provision of any financial advisory service; employing any device, scheme or artifice to defraud, or engaging in any act, practice or course of business that operates as a fraud or deception to any person; and making a recommendation with respect to any investment product to a person who may reasonably be expected to rely on the recommendation where he did not have a reasonable basis for making the recommendation;
  • contract law – in cases where there is a contract between the investors and the broker/underwriter; and
  • tort – brokers/underwriters can be held liable for damages if the investor proves that he suffered losses due to the broker's/underwriter's breach of a duty of care owed to the investor.

It is not common for analysts outside the syndicate advising on a specific transaction to prepare the research reports. Nonetheless, if such analysts prepare the research reports, they are subject to the same potential liabilities as outlined above.

A bookbuilding process is used for equity offerings in Singapore, both in IPOs and secondary/subsequent offerings.

In Mainboard IPOs, the trend is to adopt a sequential offering structure. In this sequential offering structure, the public offer will only open after registration of the final prospectus with MAS. However, the bookbuilding for the placement tranche takes place and the offer price and allocation to investors in the placement tranche are fixed in the period between lodgement and registration of the prospectus with the MAS.

In placements, the placement agent will carry out bookbuilding through an accelerated bookbuilding transaction in the course of one day, usually overnight which is followed by the announcement of the placement.

Rights issues may or may not be underwritten; however, the majority of Mainboard IPOs are fully underwritten. An underwriting agreement obliges the underwriter to subscribe for the offered shares in the event that these shares are purchased by investors.

In placements, the placement agent sometimes covenants to underwrite the offered shares in a commitment to subscribe backed by its major shareholders. Thus, the placement agent will occasionally be referred to as the underwriter.

Key Terms of an Underwriting Agreement

The main terms of an underwriting agreement are:

  • the underwriting obligations:
  • termination rights;
  • representations, warranties and undertakings of the issuer and the banks;
  • conditions precedent;
  • lock-up;
  • issuer's indemnities to the banks;
  • over-allotment and stabilisation (in the case of a Mainboard IPO); and
  • fees and commissions, usually between 2% and 3.5% of the gross proceeds of the issue (for an IPO).

Stabilisation

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

An exemption to the prohibition of price stabilisation exists under the Securities and Futures (Market Conduct) (Exemptions) Regulations 2006 (Market Conduct Regulations). Actions taken to stabilise a security's price in an IPO will be allowed if they were taken in compliance with the conditions set out in the Market Conduct Regulations.

Market Manipulation

Market manipulation is prohibited in Singapore. Chapter 289 of 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 maximum fine of SGD250,000, or both. Corporations may also be convicted and punished by fines.

In addition, civil penalties can be imposed on an individual who is also exposed to civil liability for claims made by investors under the SFA.

There are no specific rules governing block trades. However, it should be noted that block trades are subject to the mandatory trading obligations stipulated under the Securities and Futures (Trading of Derivatives Contracts) Regulations 2019 (effective from 1 April 2020). In summary, other than block trade agreements, a list of specific derivatives contracts executed on or after 1 April 2020 will be subject to mandatory trading obligations, such as compliance requirements, including the keeping of books and other information relating to the transactions.

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

It is common to have English or New York law-governed underwriting agreements in Singapore securities offerings.

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 only enforceable through the applicable statutory schemes (below) in addition to the common law regime (ie, commencing an action afresh in Singapore as a judgment debt).

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, etc); 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, in order for a foreign judgment to be enforceable, the foreign judgment must be (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 its claim is for the 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.

The response will depend on the place of incorporation/domicile of the shareholder.

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

Mainboard Listing

A typical listing timeline for an IPO in Singapore is set out below:

  • pre-IPO – appoint advisers and restructuring;
  • IPO begins – conduct due diligence and draft prospectus;
  • two to four months before lodgement – submit Section A to the SGX-ST;
  • four weeks before lodgement – submit Section B to the SGX-ST and submit the draft prospectus with the MAS (optional);
  • lodgement date – lodge prospectus with the MAS and start roadshows;
  • registration date – 7 to 21 days after lodgement (extendable by the MAS);
  • public offer begins – approximately 28 days after lodgement; open for three to five days; and
  • closing date – approximately 33 days after lodgement; the company is listed.

Secondary/Subsequent Offering

A secondary offering timetable is different when compared to an IPO in several ways. For example, the MAS does not review the offer, only the SGX-ST reviews the offer; the review process is shorter and less extensive; and approval by the shareholders might be necessary for the issuance of new shares.

Several jurisdictional-specific tax considerations include:

  • stamp duty for the transfer of shares;
  • income tax that may arise from an acquisition or disposal of shareholding;
  • tax regarding dividends; and
  • goods and services tax (GST).

Dividends Tax

The taxation in Singapore of dividends paid by the issuer will depend on the tax residence of the issuer (ie, whether the issuer is resident in Singapore).

Singapore-resident issuers are subject to the one-tier corporate tax system (one-tier system). Under the one-tier system, tax on corporate profits is final and dividends paid by a Singapore-resident company are tax exempt in the hands of a shareholder, regardless of whether the shareholder is a company or an individual and whether the shareholder is a Singapore tax resident. Therefore, such dividends will not be subject to Singapore withholding tax.

Stamp Duty for the Conveyance of Shares

The purchaser (unless set out otherwise in the agreement), is subject to the stamp duty for the transfer of shares. The stamp duty rate is 0.2% of the consideration or the net asset value of the shares, whichever is higher.

The transfer of scripless shares that are book-entry securities defined under Section 81SF of the SFA are not subject to the stamp duty regime.

Capital Gains Tax

Singapore currently does not impose tax on capital gains. However, gains arising from the disposal of listed shares that are considered gains derived from any trade, business, vocation or profession carried on by that person, if accruing in or derived from Singapore, may be taxable as such gains are considered revenue in nature. Gains derived from the sale of listed shares may also be taxable if they constitute any gains or profits of any income nature under Section 10(1)(g) of the Income Tax Act (Chapter 134).

The main continuing obligations set out in the listing rules are set out as follows.

  • Ongoing material disclosure – as a general rule, an issuer must (i) disclose any information necessary to avoid the establishment of a false market in its securities, or in circumstances where such information would likely materially affect the price of its securities; and (ii) promptly clarify or confirm rumours that have not been substantiated by the issuer and that are likely to have, or have had, an effect on the price of its securities, etc.
  • Other disclosure obligations – certain specified information shall be disclosed regularly, such as:
      1. financial performance of the issuer (announcement of financial statements);
      2. appointment and cessation of key personnel; and
      3. breach of loan covenants.
  • Interested person transactions (IPTs) – IPTs are subject to the following disclosure/approval requirements unless exempted: (i) announcement is required if the size of the IPT is at least 3% of the issuer group's audited net tangible assets or (ii) shareholders'/unitholders' approval is required if the size of the IPT is at least 5% of the issuer group's audited net tangible assets.        
  • Acquisitions and realisations – a disposal or acquisition by the issuer or its subsidiary is subject to the following disclosure/approval requirements unless exempted: (i) announcement if the size of the acquisition/disposal is more than 5% of the relevant figures, which under the listing rules include the net asset value of the asset, net profits attributable to the assets, aggregate value of the consideration; or (ii) shareholders'/unitholders' approval and further conditions if the size of the acquisition/disposal is greater than 20% or 100% of  the relevant figures.
  • Corporate governance – the Code of Corporate Governance (empowered under the listing rules) sets out the default corporate governance requirements. The issuers are expected to comply with the position or to provide an explanation to the contrary.

With respect to a foreign-incorporated issuer that has undertaken a primary listing on the SGX-ST, it must comply with the continuing obligations under the listing rules as set out above.

For a foreign-incorporated issuer that is seeking a secondary listing in Singapore, it must maintain its primary listing on its home exchange and ensure compliance at all times at its home jurisdiction. Nonetheless, the issuer is still subject to the approval/disclosure requirements with respect to the IPTs, acquisitions and realisations, and delistings as set out in the listing rules above.

A foreign issuer whose equity securities are listed on the SGX-ST in the form of depository receipts will be subject to similar disclosure obligations. However, the issuer of equity securities represented by global depository receipts listed on the SGX-ST is only subject to limited continuing disclosure obligations set out in Part XI of Chapter 2 of the Listing Manual (eg, substantial shareholders' interests in the issuer's securities).

Penalties Under the Listing Rules

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

Contravention (whether it is unable or unwilling to comply) with 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 any person who is deemed to have contravened the listing rules).

The 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 and/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.

DLA Piper Singapore Pte. Ltd.

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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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