Mergers and Acquisitions

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Questions and Answers

What is the primary purpose of providing warranties in a sale and purchase agreement?

To offer contractual protections due to lack of statutory protections (correct)

To ensure statutory protection for buyers

To serve as a substitute for due diligence

To guarantee successful acquisition

Which of the following statements accurately describes indemnities in the context of due diligence?

Indemnities are designed to address positive disclosures.

Indemnities are irrelevant if warranties are provided.

Indemnities can be used in place of warranties.

Indemnities relate to non-compliance found during due diligence. (correct)

What does the Singapore Code on Take-overs and Mergers require from the board of directors of the target company?

To accept all offers without review

To disclose confidential corporate information

To recommend whether to accept or reject the takeover offer (correct)

To prepare a due diligence report promptly

Which aspect differentiates warranties from disclosures in contracts?

Warranties are contractual statements of fact, while disclosures provide context. Signup and view all the answers

What is the effect of the s160 Companies Act in relation to acquisitions?

It requires shareholder approval for disposal of the entire company. Signup and view all the answers

What is the requirement for shareholder approval in a General Offer?

Approval is not required unless the offeror is acquiring more than 50% of target shares. Signup and view all the answers

Which of the following types of transactions requires court sanction?

Scheme of Arrangement Signup and view all the answers

Which entity's approval is required for all types of public take-over transactions?

Singapore Industry Council (SIC) Signup and view all the answers

What is a characteristic of a General Offer in relation to its conditions?

It can be conditional on acquiring more than 50% of shares. Signup and view all the answers

What must a voluntary offer specify regarding offer conditions?

An acquisition threshold higher than 50%. Signup and view all the answers

In the context of public take-over transactions, which of the following statements about amalgamation is correct?

Requires court sanction. Signup and view all the answers

Which of the following is true regarding voluntary delistings?

Requires shareholder approval and may need clearance from the SIC. Signup and view all the answers

For a General Offer, which statement regarding the court's involvement is true?

Court approval is not required. Signup and view all the answers

What type of approval is specifically mentioned as necessary for a Scheme of Arrangement?

Court sanction and shareholder approval. Signup and view all the answers

In the context of public take-over transactions, which of the following attributes applies to all types mentioned?

All require clearance from the SIC. Signup and view all the answers

Study Notes

Share Acquisition:
- Minimal or no approval required
- Directly to shareholders
- Potential avoidance of GST, depending on circumstances
- No change to employer-employee relationship
Business Acquisition:
- Directly to the company
- Potentially avoids GST (excluded transactions order)
- Exemptions depend on the nature of assets

Disposal of Undertaking or Property

If a sale involves the majority of the target company's business or property, the company must first secure shareholder approval (section 160 of the company act)

Goods and Services Tax (GST)

GST exemption for business acquisition in Singapore depends on the acquisition of assets:
- Charge Applies only to interests in Singapore and movable properties, shares held in Singapore companies or companies with a Singapore share register.

Employees

If only selected assets and employees are acquired, Section 18A of the Employment Act might not apply (and employees would be required to be re-employed with the acquiring business post transaction completion).

Questions Affecting Acquisition Structure

Desire of buyer to acquire specific assets
Liability assumption by buyer (all, none, or some liabilities)
Nature of target liabilities
Target's corporate structure
Necessary approvals

Warranties

No statutory or common-law protection for buyers
- Must ensure adequate contractual protections (warranties and indemnities)
- Contractual statements for target's business, affairs.
- Discovery – prompt disclosures
- Risk allocation – pre-closing issues – lower purchase price
- Materiality thresholds – limit risk exposure.

Due Diligence

Involves gathering, organizing, analyzing, and verifying relevant information for a transaction
Includes legal, business / operational, financial / tax, environmental aspects
Seller perspective: preparation of information memoranda for competitive sales processes. Disclosure in warranty contexts
Buyer perspective: evaluation, negotiation conditions, and post-deal integration.

Public Takeovers and Mergers

Applies to corporations, registered business trusts listed on SGX-ST
Types of transactions: general offers
- Offeror offers shares directly to all target company shareholders
- Target board recommends to shareholders

Timetable for General Offers

Indicative timetable based on Rule 22 of the Takeover Code
- Offeror announces intent, shares holding details, and IFA selection
- Offer issued, offer document distribution and offer circular issuance.
Earliest closing date (possible extensions).
- Latest date for unconditional offer acceptance.

Concert Parties

Defined by the Singapore Takeover Code as parties cooperating to obtain or consolidate control of a target company.
Determining factors include: agreements or understandings, shared intentions.
Includes individuals and companies cooperating through share acquisition.

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Description

This quiz explores key concepts related to mergers and acquisitions, focusing on share versus business acquisitions, GST implications, and the requirement of shareholder approval for certain transactions. Learn how these factors impact the strategic decisions within companies, especially in the context of Singapore's regulatory environment.