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Singapore revises Code on Takeovers and Mergers

Serene Sia Chen Shu

The Monetary Authority of Singapore, on the advice of the Securities Industry Council (SIC), has revised the Code on Takeovers and Mergers which came into force on April 9 2012.

The fundamental purpose of the Code is to ensure fair and unbiased treatment to all shareholders in any takeover or merger transaction. One of the primary requirements is that the shareholders must be provided with adequate information, advice and time to contemplate and decide on the offer in any takeover or merger transaction.

There are a number of key changes which amount to codification of existing practices. For example, in extreme cases, further actions may be taken by the SIC against an offender of the Code in addition to depriving him from the use of the facilities of the securities market. Professional advisers who breach the Code may be ordered by the SIC to abstain from Code-related work for a stipulated time period.

A list of rules, which if breached may result in the SIC to make an order for monetary compensation, is set out in the Code. Finally, a list of factors, which the SIC will consider in determining whether to permit an offeree company shareholder (not being part of management) to invest in the bid company to the exclusion of all other offeree company shareholders, is also set out in the Code.

In order to keep pace with product innovation and market developments, the application of the Code has been extended to real estate investment trusts and business trusts. Also, all acquisitions of long options or derivatives will be subject to the mandatory offer requirements under Rule 14 and any person who would breach the mandatory offer threshold is required to consult the SIC in advance.

  • To enhance disclosure, any person who holds 5% or more in the offeree company shares is required to disclose any dealing in long option and derivative during the offer period. An offeror is required to disclose the quantity and percentage of his shareholdings in the offeree company which have been charged as security, borrowed or lent. Also, the shareholding threshold for a person to be deemed an "associate" of a party to a take-over offer has been reduced from 10% to 5%.

In order to provide greater flexibility, a class of shareholders of a company is exempted from the requirement to make a mandatory offer in a share buy-back exercise.

  • Other changes to the Code include that, under certain circumstances, the shareholders voting together on a board control-seeking resolution will be considered as parties acting in concert and may trigger the general offer obligation. Finally, a list of factors, which the SIC will consider in determining whether a proposal is board control-seeking, is set out in the Code.

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Serene Sia and Chen Shu

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