3. Corporate Governance Part 3 - SGX Listing Manual Chapter 9: IPTs

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Questions and Answers

What is the primary objective of Interested Person Transactions (IPTs) as outlined in the SGX Listing Manual?

To safeguard transactions to protect the issuer's interests. (correct)

To regulate the financial reporting of listed companies.

To promote transparency in public company offerings.

To encourage investment from controlling shareholders.

Under the definition provided for 'associate' in the Listing Rules, which of the following would NOT be considered an associate of a director?

An unrelated business partner of the director. (correct)

The director's spouse.

The director's sibling.

The director's child.

What defines a 'controlling shareholder' as per the provided guidelines?

Any investor who has invested in the company for three years or more.

An individual who manages day-to-day operations of the issuer.

Someone who influences company decisions without holding voting shares.

A person holding at least 15% of voting shares or exercising control. (correct)

Under what condition can the Exchange deem a person as an interested person according to Listing Rule 904(4A)?

If the person proposes to enter a transaction with an entity at risk. Signup and view all the answers

What is the requirement for announcing Interested Person Transactions (IPTs) when the value is equal to or exceeds 3% of the latest audited net tangible assets (NTA)?

Immediate announcement is required. Signup and view all the answers

Which of the following transactions does NOT fall under the definition of a 'transaction' as per the provided content?

The appointment of a new CEO by the issuer. Signup and view all the answers

Which scenario would potentially create a conflict of interest as defined by Interested Person Transactions?

A CEO leasing property to the company they manage. Signup and view all the answers

Under which condition must shareholders approve an Interested Person Transaction (IPT)?

If the transaction value is equal to or exceeds 5% of the latest audited NTA. Signup and view all the answers

Which of the following statements is NOT true concerning Interested Person Transactions?

IPTs only apply to companies with public trading status. Signup and view all the answers

What is the aggregation rule for transactions below S$100,000 entered into during the same financial year?

They are treated as a single transaction for compliance purposes. Signup and view all the answers

What information must an issuer disclose regarding Interested Person Transactions (IPTs) in its annual report?

The nature of the relationship and the aggregate value of IPTs during the financial year. Signup and view all the answers

What constitutes an 'immediate family' member under the Listing Rules?

Spouse, children, siblings, and parents. Signup and view all the answers

Which transactions are exempt from announcement, shareholder approval, and annual report disclosure requirements under Listing Rule 915?

Payment of dividends to shareholders. Signup and view all the answers

What must a company do when disclosing IPTs under Listing Rule 907?

Report the aggregate value of all IPTs, except those below S$100,000. Signup and view all the answers

What remains unaffected by the aggregation rules for transactions below S$100,000?

Transactions conducted under shareholders' mandate. Signup and view all the answers

Which of the following correctly describes the purpose of the aggregation of IPTs below S$100,000?

To address the economic and commercial substance of the IPT. Signup and view all the answers

What is the maximum interest a person can hold in an investee company for it to be considered a transaction with an interested person?

5% Signup and view all the answers

Which of the following is NOT a condition for exceptions under Listing Rule 915 for the provision of goods or services?

The prices are subject to discounts. Signup and view all the answers

What type of financial assistance qualifies for exemptions under the interested person transactions regulations?

Financial assistance from a licensed financial institution on normal commercial terms. Signup and view all the answers

Under which rule are the exceptions for shareholder approval outlined when entering into a lease of real property?

Listing Rule 916 Signup and view all the answers

Which of the following transactions does not require shareholder approval according to Listing Rule 916?

Receiving a contract awarded by public tender. Signup and view all the answers

What is one condition under which a loan can be provided to a joint venture with an interested person?

The loan is extended by all joint venture partners in proportion to their equity. Signup and view all the answers

What does not constitute an interested person transaction when it comes to remuneration?

Golden parachute payments. Signup and view all the answers

Which of the following is NOT a requirement for investment in a joint venture with an interested person?

The interested person must already be part of the joint venture. Signup and view all the answers

What is a condition for the award of a contract by way of public tender to an interested person?

Certain conditions specified must be adhered to. Signup and view all the answers

What is the purpose of obtaining a general mandate from shareholders under Listing Rule 920?

To authorize recurrent transactions of a trading nature. Signup and view all the answers

Under what circumstance can services be provided to an interested person without compliance with announcement and approval requirements?

If the provision of services is based on a publicly quoted graduated scale. Signup and view all the answers

What must be included in the circular issued to shareholders for a general mandate?

Prescribed information regarding the transactions. Signup and view all the answers

What happens to the general shareholders mandate after a year?

It must be renewed annually. Signup and view all the answers

In which scenario can an interested person's existing equity interest negatively impact a joint venture?

When it leads to a prejudicial arrangement. Signup and view all the answers

What is a potential disadvantage of a joint venture arrangement with an interested person?

Risks of prejudicial effects on minority shareholders. Signup and view all the answers

What role does the issuer's audit committee play in joint ventures involving interested persons?

They assess and confirm the fairness of arrangements. Signup and view all the answers

What is the nature of the rules established by the Code of Corporate Governance?

They are applied on a 'comply or explain' basis. Signup and view all the answers

Which of the following is a benefit of the 'Comply-or-Explain' regime?

It avoids a one-size-fits-all approach to governance. Signup and view all the answers

What must an issuer do if its practices vary from provisions of the Code?

Explain the reason for variation in its annual report. Signup and view all the answers

What distinguishes the Practice Guidance from the Code of Corporate Governance?

Practice Guidance is non-binding and sets out best practices. Signup and view all the answers

How many principles are encapsulated in the 2018 Code of Corporate Governance?

13 Principles Signup and view all the answers

What type of statements does the amended Listing Rules contain?

Mandatory and non-disputable statements. Signup and view all the answers

What is the primary purpose of the 'Comply-or-Explain' framework in corporate governance?

To encourage flexibility and innovation in governance practices. Signup and view all the answers

What is meant by the term 'Listing Rule 710' in the context of corporate governance?

A provision requiring issuers to report governance practices. Signup and view all the answers

Study Notes

Interested Person Transactions (IPTs)

Chapter 9 of the SGX Listing Manual aims to protect transactions with interested persons to ensure that the interests of the issuer and its shareholders are not harmed.
IPTs deal with conflicts of interest between a listed issuer, its subsidiaries and associated companies over which the listed group has control, and a director, CEO or controlling shareholder or an “associate” thereof.
An “associate” is defined as an individual's immediate family, trustees who benefit from the individual's family, and any companies where the individual or their immediate family holds a 30% or greater interest.
A “controlling shareholder” is a person who holds 15% or more of the voting shares in the issuer directly or indirectly, or who exercises control over the issuer.
The Exchange may deem any person or entity to be an interested person if the person or entity has entered into, or proposes to enter into: a transaction with an entity at risk; and an agreement or arrangement with an interested person in connection with that transaction.
A “transaction” includes financial assistance, the acquisition, disposal or leasing of assets, the provision or receipt of goods or services, the issuance or subscription of securities, the granting of options, and the establishment of joint ventures or joint investments, whether or not in the ordinary course of business, and whether or not entered into directly or indirectly.
IPTs require immediate announcement if the transaction value is equal to or exceeds 3% of the latest audited net tangible assets (“NTA”).
IPTs require shareholder approval if the transaction value is equal to or exceeds 5% of the latest audited NTA.
Transactions with a value less than S$100,000 are disregarded for IPT purposes.
Aggregation of all transactions with the same interested person made in the same financial year is required.
The Exchange is empowered to aggregate transactions below S$100,000 entered into during the same financial year and treat them as if they were one transaction.
The issuer must disclose the aggregate value of IPTs entered into during the financial year in its annual report, including the name of the interested person, the nature of the relationship, and the aggregate value of all IPTs during the financial year, excluding transactions less than S$100,000 and transactions conducted under shareholders' mandate.

Exceptions to IPT Requirements

Some transactions are exempt from announcement, shareholder approval, and annual report disclosure requirements.
These exceptions include: payment of dividends, subdivision or consolidation of shares, issue of securities by way of bonus issue, preferential offer, off-market acquisition of shares made to all shareholders on a pro-rata basis, grant of options under an approved employees' share option scheme, transactions between an entity at risk and an investee company where the interested person has less than 5% interest in the investee company, transactions between an entity at risk and an interested person for the provision of goods or services that are sold or rendered based on a fixed or graduated, publicly quoted scale, and receipt of financial assistance or services from a licensed financial institution on normal commercial terms, director's fees and remuneration, and employment remuneration.
Some transactions are exempt from the shareholder approval requirement, but the announcement and annual report disclosure requirements still apply.
These exceptions include: entering into or renewing a lease of real property for no more than 3 years that is supported by a property valuer, awarding contracts through public tender, receiving contracts awarded through public tender, investing in a joint venture with an interested person where the risks and rewards are proportionate to equity, and providing loans to joint ventures where the loan is extended by all joint venture partners proportionately and on the same terms.

Shareholder Mandates for IPTs

Issuers can obtain a general mandate from shareholders for recurrent transactions of a revenue or trading nature, or those necessary for day-to-day operations.
Issuers must issue a circular to shareholders containing the prescribed information.
A general shareholders mandate is subject to annual renewal.

Code of Corporate Governance

The Code of Corporate Governance sets out the bedrock of corporate governance principles in Singapore.
The latest Code of Corporate Governance and the Practice Guidance were issued in August 2018.
The Code is not law and is applied on a "comply or explain" basis.

The “Comply-or-Explain” Regime

The "comply or explain" regime is a middle ground between mandatory prescriptive rules and voluntary best practices.
Benefits of this regime include:
- Avoiding burdensome and costly mandatory rules.
- Avoiding a "one-size-fits-all" solution.
- Enabling the setup of aspirational principles and guidelines.
- Providing flexibility for innovation.
- Allowing companies to internalize good corporate governance principles.
Issuers must describe their corporate governance practices in their annual report, including specific references to the principles and provisions of the Code.
Issuers must comply with the principles of theCode and explain any deviations from the provisions.

Code 2018 Principles and Provisions

Code 2018 contains 13 principles that embody the fundamentals of good corporate governance and 52 provisions that provide guidance on compliance with the principles.
The Practice Guidance complements the Code but is non-binding.

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Description

This quiz covers Chapter 9 of the SGX Listing Manual, focusing on Interested Person Transactions (IPTs) and their implications for issuers and shareholders. Learn how IPTs address conflicts of interest and the definitions of key roles such as controlling shareholders and associates. Test your understanding of these essential regulatory concepts.