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SGX Amends the Voluntary Delisting Regime in Favour of Minority Shareholders

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Wee Teck Lim

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23 July 2019

The SGX has amended the voluntary delisting regime. Among other things, exit offers must be both fair and reasonable and the offeror and parties acting in concert with it may not vote. The changes are intended to afford greater protection to minority shareholders.

With effect from 11 July 2019, the voluntary delisting regime has been amended to be more protective of minority shareholders. The amendments were made by the Singapore Exchange (SGX) to the Mainboard and the Catalist listing rules following a public consultation on 9 November 2018.

The main changes are as follows:

Exit offers must be both fair and reasonable. The issuer must appoint an independent financial adviser who must opine that the exit offer is fair and reasonable. Previously, exit offers only had to be reasonable.

  • The SGX is retaining the shareholder approval threshold at 75% but in ascertaining whether the threshold has been met, the Offeror Concert Party Group (offeror and parties acting in concert with it) must abstain from voting on the delisting resolution. Previously, the Offeror Concert Party Group could vote on a delisting resolution; no abstention was required. 

The blocking threshold for a delisting resolution has been removed. Previously, if 10% of the shareholders voted against the delisting resolution, the resolution could not pass. 

As to what is "fair", the SGX stated an offer is "fair" if the offer price is equal to, or greater than, the value of the securities which are subject to the offer. In considering whether an offer is "reasonable", other matters, including, the existing voting rights in the offeree company held by the Offeror Concert Party Group and the market liquidity of the relevant securities would be considered. (This explanation was set out in the Consultation Paper on the Proposed Amendments to the Voluntary Delisting Regime dated 9 November 2018, and is based on the statement by the Securities Industry Council in the Practice Statement on the Opinion Issued by an IFA in relation to Offers, Whitewash Waivers and Disposal of Assets under the Takeover Code as to what is "fair and reasonable".)

In addition to the above changes, the following existing practices have been codified:

  • The exit offer must include a cash alternative as the default alternative. 
  • Delistings pursuant to schemes of arrangement must also be fair and reasonable. However, the rule on voting requirements will not apply to delistings pursuant to a scheme of arrangement as schemes are already subject to the requirements of the Companies Act. 
  • In the context of a general offer, delistings following a compulsory acquisition will not be subject to the exit offer requirements and the shareholders’ approval requirements.

Proposed delistings where the offeror has made a general offer but cannot exercise a right of compulsory acquisition will be subject to the SGX’s consultation on the applicability of the delisting requirements. Its Regulator’s Column dated 11 July 2019 sets out the SGX’s expectations in this event:

  • It will generally consider waiving compliance from the voluntary delisting requirements if the general offer is fair and reasonable (and the independent financial adviser has so opined), and as at the close of the general offer, the offeror has received acceptances from independent shareholders that represent a majority of least 75% of the total number of issued shares held by independent shareholders. 
  • If these waiver conditions are not met, the issuer will remain listed. If the issuer has lost its public float, the SGX may suspend the trading of the issuer’s securities, in which case, the issuer is obliged to comply with the SGX Listing Rules, including the requirement to restore its public float (through private placement or otherwise). 
  • Takeover documents (including any announcements released by the offeror when a conditional general offer turns unconditional) should contain appropriate disclosures to shareholders highlighting the risk that the issuer may be subject to prolonged suspension should free float be lost but the requisite conditions for delisting are not met.