On October 15 2005, the Securities and Futures Act of Singapore was amended to introduce changes to the securities offering regime that have clarified the position on public offers. The aim of the amendments is to make fundraising easier and less cost-prohibitive for small and medium-sized enterprises (SMEs) by dispensing with the need for a prospectus. The clarity in the definition of what amounts to an offer to the public is achieved by classifying all offers of securities (shares, debentures or units of shares and debentures) as a public offer unless the offer docks within a safe harbour.
The two notable safe harbours are the small offers and private placement exemptions. A small offer must satisfy the personal offer test and the total amount raised through the offer must not exceed S$5 million (US$2.97 million) during any 12-month period, while private placements are offers of securities made to not more than 50 investors within any 12-month period. Neither exemption can be accompanied by an advertisement and no selling or promotional expenses can be paid in connection with the offer. To avoid creative circumvention by issuers, the exemptions provide that closely related offers must be aggregated when considering whether the prescribed capital threshold or the number of investors offered to has been observed.
What is useful to note is that these amendments allow market-makers (that is, licensed capital markets service providers) to effectively create a tradeable market for these securities, hence adding the attraction of liquidity for offerees considering investment in these securities. This significantly changes the dynamics of the capital fundraising activities of SMEs. But whether market-makers and issuers will seize upon these amendments still remains to be seen.