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SGX Consults on Voluntary Delistings, the Listings Review Process and Responsibilities of Issue Managers

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28 December 2018

The SGX is proposing various amendments to the voluntary delisting regime. In a separate consultation, it is also proposing removing the power of the Listings Advisory Committee to look into applications not referred to it. That consultation also proposes requiring issue managers to be independent from the listing applicant.

The Singapore Exchange (SGX) recently published two consultation papers:
  • ​A Consultation Paper on proposed amendments to the voluntary delisting regime (Delisting Regime Consultation); and 
  • A Consultation Paper on proposed changes to the listings review process and regulation of issue managers (Listings Consultation). 

Proposed amendments to the voluntary delisting regime

The Delisting Regime Consultation released on 9 November 2018 proposed the following amendments to the voluntary delisting regime:
  • Exit offers must be both fair and reasonable. Currently, exit offers are only required to be reasonable. 

  • The Offeror Concert Party Group (offeror and parties acting in concert with it) must abstain from voting on the delisting resolution. Currently, the Offeror Concert Party Group can vote on a delisting resolution; no abstaining is required for a delisting resolution. 

  • The approval threshold for the delisting resolution should be reduced to 50% from the current threshold of 75%. 

  • The blocking threshold for a delisting resolution should be removed. Currently, if 10% of shareholders vote against the delisting resolution, the resolution will not pass. 

In addition to the proposed changes, the following existing practices are proposed to be 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. 

  • In a general offer context:

    • ​​​​Delistings following a compulsory acquisition will not be subject to the exit offer requirements and the shareholders’ approval requirements. 

    • ​Delistings where the offeror cannot exercise a right of compulsory acquisition but the free float falls below 10% and the offeror does not intend to take steps to restore the public float will be subject to the SGX’s consultation on the applicability of the shareholders’ approval requirements. 

Proposed amendments to the listings review process and regulation of issue managers

The Listings Consultation was issued on 29 November 2018. It proposes removing the power of the Listings Advisory Committee (LAC) to look into applications not referred to it and regulating issue managers more strictly.

Listings review process

Under the current Mainboard Rules, only listing applications that fulfil the criteria for referral to the LAC are referred to it. However, where an application has not been referred to the LAC (because the SGX was of the view that the referral criteria were not fulfilled), the LAC may still look into the application if it is of the view that the referral criteria were in fact fulfilled.

Due to feedback that this has lengthened the time to listing, the SGX has proposed to remove the power of the LAC to look into an application that was not referred to it. Instead, the LAC may only review and advise on non-referral cases on an ex post basis and their advice will only apply prospectively to similar cases but not to the application that was not referred.

To implement this, the list of non-referral applications provided to the LAC will only comprise applications that have already received the eligibility-to-list letter.

Regulation of issue managers

To tighten the regulatory framework for issue managers, the SGX has proposed two main changes to the Listing Manual.

The responsibilities of issue managers will be clearly set out. The new rule will state that the issue manager must (among other things):
  • Discharge its obligations with due care, diligence and skill; 

  • Conduct due diligence, including, at a minimum, complying with the due diligence guidelines issued by The Association of Banks in Singapore (where applicable) or such other satisfactory and no less strict due diligence guidelines or processes; and 

  • Notify the SGX of relevant information in a timely manner, including significant changes to the corporate structure. 

An issue manager will also be required to be independent of a listing applicant. The factors for independence will be set out in new practice note. It is proposed that an issue manager will not be considered to be independent if:

  • Loans or guarantees issued by the issue manager group exceed certain percentage thresholds; or 

  • The issue manager group will have an interest in 5% or more in the equity securities of the applicant. 

An “issue manager group” will comprise the following persons:

  • The issue manager and its subsidiaries; 

  • The controlling shareholder(s) of the issue manager and their associates; 

  • The directors, chief executive officer and key officers of the issue manager who are directly involved in the decision-making with respect to a new listing application, and their associates; and 

  • Persons that the issue manager in fact exercises control over. 

Finally, it is proposed to clarify that the obligations of the directors and executive officers of a listing applicant or of an issuer following admission to ensure that information submitted to the SGX is complete, accurate and not misleading, would apply to all applications (including listing applications and pre-consultation applications) and SGXNet announcements.