Combined Readings for Banking & Fundraising (PDF)

Catalog 1. EMTN programmes overview···················································································· 1 2. Equity Capital Markets in Singapore Regulatory Overview······································· 4 3. Fountain Global Law Report on security interests in Singapore (Asia) - Mar...

Catalog 1. EMTN programmes overview···················································································· 1 2. Equity Capital Markets in Singapore Regulatory Overview······································· 4 3. Fountain Global Law Report on security interests in Singapore (Asia) - March 2022 ···································································································································· 39 4. Methods of raising debt finance··············································································· 59 5. Syndication·············································································································· 62 6. Types of lending and facilities················································································· 71 7. Venture capital investment in Singapore market and regulatory overview·············· 80 8. Bond issues documents·························································································104 9. Bond issues overview···························································································· 114 10. Bond issues step-by-step guide·········································································· 121 11. Corporate loan facilities Cross-border································································· 130 12. Debt Capital Markets in Singapore Regulatory Overview··································· 139  Note to students: PRACTICE NOTE 1. Certain portions of this text have been redacted as they are not included in your course and you are not expected to know them. 2. Use your lecture as a guide as to what is important to focus on in this reading material EMTN programmes: overview by Practical Law Finance Status: Maintained | Jurisdiction: England, International, Wales This document is published by Practical Law and can be found at: uk.practicallaw.tr.com/3-201-6446 Request a free trial and demonstration at: uk.practicallaw.tr.com/about/freetrial An overview of raising debt finance by issuing notes under a euro medium-term note (EMTN) programme, including the structure of the programme and terminology used. What is an EMTN programme? issuer borrowing from foreign lenders in a foreign currency, rather than from domestic lenders in its A euro medium-term note programme (EMTN domestic currency (a domestic issue), subject to certain programme), also called a debt issuance programme, is selling restrictions. The terms medium term note (MTN) a way of issuing bonds quickly and easily. and euro medium term note (EMTN) are also often It is a set of master documents containing standard used interchangeably. In this note, EMTN will be used terms and conditions and other contractual provisions throughout. that can be used to do any number of bond issues in the Final terms and pricing supplements. The pricing future, subject to a maximum programme limit. supplement is a supplement of the specific terms of a The bonds issued under an EMTN programme are drawdown. For notes listed on a regulated exchange called “notes” but are the same in substance and form under the Prospectus Regulation, the document is as stand-alone bond issues. For more information on called a final terms supplement. This note will use the bonds (or eurobonds), see Practice note, Bond issues: expression final terms supplement throughout (but this overview. can be substituted for either of the two terms). Issuer and noteholder. In a note issue, the borrower is EMTN terminology called the issuer and the investor is called the noteholder. The terminology surrounding EMTN programmes, bond Medium term. The phrase “medium term” is issues and the bond market in general can be confusing misleading, as notes issued under a programme can and many terms are used interchangeably with others. have a maturity of any length (usually stated in the The following are the most common terms used but programme documents to be between one month and others, not defined here, can be found in the Practical 30 years). The name originates from notes historically Law Glossary. having a maturity of under 7 years (usually between three and seven years) and bonds having maturities of Base prospectus and offering circular. The prospectus over seven years, but this is no longer the case and the is the offering document for the notes. It can also be terms are used interchangeably. Notes issued under an called an offering circular or information memorandum, EMTN programme are nearly always called notes rather and all three terms are used interchangeably. For notes than bonds, regardless of their maturity. listed on a regulated exchange under the Prospectus Regulation (2017/1129), the document is called a base Programme limit. When the programme is established, prospectus and this term will be used throughout this no notes will have been issued. The programme limit note (but can be substituted for the other two terms). indicated on the front of the programme documents is the maximum nominal value of notes that can be issued Drawdowns. These are the individual issues of notes and be outstanding under the programme. under the programme. They can also be called issues, take-downs or trades. Stand-alone bond. This is a bond that is not issued under a programme. It will require a full set of ”Euro” medium term note. The “euro” part of the term documents to be produced for each issue, rather than “euro medium-term note” (EMTN) has nothing to do having a set of master documents to cover multiple with the single currency adopted by some EU countries issues, as is the case for an EMTN programme (see (the Euro (EUR)). In a eurobond or EMTN context, it Practice note, Bond issues: overview). essentially means “international” and relates to an Reproduced from Practical Law, with the permission of the publishers. For further information visit uk.practicallaw.thomsonreuters.com or call +44 20 7542 6664. Copyright ©Thomson Reuters 2021. All Rights Reserved.  EMTN programmes: overview Syndicated issue. Dealers will be appointed on each issue; an EMTN drawdown requires fewer and smaller drawdown to subscribe the notes that are being issued. documents than a stand-alone bond issue. This group of dealers (called managers on a stand-alone bond issue) is called a syndicate and a syndicated issue Disadvantages is an issue that is sold through the use of more than one of these syndicate banks acting as dealers (or managers) The disadvantages of an EMTN programme are: under the programme. This relationship is documented Cost-effectiveness. A programme is only cost- in a subscription agreement. Some issues only have one effective if the issuer intends to do several bond issues dealer; these are called single-dealer drawdowns. In over the following year or so, otherwise it will not be these issues, there will be no subscription agreement, worth the cost of establishing the programme. but the dealer will sign a dealer confirmation agreeing Unusual or complex terms. If the issuer proposes to the terms of the issue. Single-dealer drawdowns also issue notes with very unusual or complex terms that settle differently to syndicated issues (see Practice are not contemplated by the programme documents, note, EMTN programmes: drawdowns for more on the the changes required to be made to the programme settlement of drawdowns). in order to do each issue may be so numerous that a Stock exchange and listing authority. In this note, stand-alone issue from scratch would be preferable. the terms stock exchange and listing authority will be used throughout and are intended to include Structure of an EMTN programme the terms securities exchange, regulated exchange, competent authority and any other similar term, where applicable. The life of an EMTN programme There are three stages to the life of an EMTN programme: Why issue notes using an EMTN Establishment. The programme documents are programme? created. See Practice note, EMTN programmes: establishment. Advantages Drawdowns. Notes are issued under the programme. The advantages of setting up an EMTN programme See Practice note, EMTN programmes: drawdowns. (rather than doing a stand-alone bond issue) are: Updates and amendments. The programme is To save cost and time. Once the programme updated periodically to reflect changes in: documents are in place (which can be costly and time –– the issuer or other parties; consuming in itself), each issue of notes involves the production of small supplemental documents –– the law; or that identify the relevant provisions of the master documents and set out the specific commercial –– the terms and conditions. terms of the particular issue. The negotiation of the See Practice note, EMTN programmes: updates and principal terms will already have been done when amendments. the programme was initially established, and the necessary disclosure by the issuer will already have been made and have been verified by the dealers’ due ICMA recommendations - omitted - diligence. This often means that, for single-dealer The International Capital Market Association (ICMA) is drawdowns, the documents can be produced in-house the trade association for investment banks and securities without the need to instruct external lawyers. In firms in the international capital markets. It makes contrast, for a stand-alone bond issue, the principal recommendations and produces guidance notes for terms of each issue will need to be produced in full issuers, arrangers and dealers (or managers) to follow every time the issuer issues bonds. when establishing, updating or doing a drawdown under Flexibility. The issuer will be able to issue almost any an EMTN programme. These recommendations are kind of note at short notice because the provisions for market standard and should be followed, where possible. different types of issues and the relevant documents The recommendations and guidance notes are contained are already in place. in the ICMA Primary Market Handbook (formerly known as the IPMA Handbook), which is available to ICMA Size and number of documents. For practical members and subscribers from the ICMA Primary Market purposes, establishing an EMTN programme reduces Handbook webpage. the number and size of documents needed for each Reproduced from Practical Law, with the permission of the publishers. For further information visit uk.practicallaw.thomsonreuters.com 2 Practical Law or call +44 20 7542 6664. Copyright ©Thomson Reuters 2021. All Rights Reserved.  EMTN programmes: overview Tax issues - omitted - For a summary of the tax issues to be considered when issuing bonds using a programme, see Practice note, Bond issues: tax. Medium-term notes in the Unites States For information on medium-term notes in the United States and an examination of the process by which they are issued, see Practical Law US, Practice note, Medium-term Note Programs (US): Overview. Legal solutions from Thomson Reuters Thomson Reuters is the world’s leading source of news and information for professional markets. Our customers rely on us to deliver the intelligence, technology and expertise they need to find trusted answers. The business has operated in more than 100 countries for more than 100 years. For more information, visit www.thomsonreuters.com Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Equity Capital Markets in Singapore: Regulatory Overview by Tan Tze Gay, Wu Zhaoqi and Kern Wong, Allen & Gledhill LLP Country Q&A | Law stated as at 01-Feb-2022 | Singapore A Q&A guide to equity capital markets law in Singapore. The Q&A gives an overview of main equity markets/exchanges, regulators and legislation, listing requirements, offering structures, advisers, prospectus/offer document, marketing, bookbuilding, underwriting, timetables, stabilisation, tax, continuing obligations and de-listing. Note to students: Main Equity Markets/Exchanges and Market Activity 1. Certain portions of this text have been Joining a Market/Exchange redacted as they are not included in your Equity Offerings: Public course and you are not expected to know them. Advisers and Documents: Public Equity Offering 2. Use your lecture as a guide as to what Equity Prospectus/Main Offering Document is important to focus on in this reading Marketing: Public Equity Offerings material Bookbuilding: Public Equity Offerings Underwriting: Public Equity Offerings Timetable: Public Equity Offerings Stabilisation: Public Equity Offerings Tax: Equity Issues Continuing Obligations Market Abuse and Insider Dealing De-Listing Equity Offerings: Private Reform Contributor Profiles Tan Tze Gay, Head of Equity Capital Markets Practice Wu Zhaoqi, Partner Kern Wong, Counsel Main Equity Markets/Exchanges and Market Activity © 2023 Thomson Reuters. All rights reserved. 1 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... 1. What are the main public equity markets/exchanges in your jurisdiction? Outline the main market activity and deals in the past year. Main Equity Markets/Exchanges The Singapore Exchange Limited (SGX) is Asia's most international exchange with about 35% of the over 670 issuers listed on the SGX originating from jurisdictions outside of Singapore, including: Malaysia (IHH Healthcare Berhad). Thailand (Thai Beverage Public Company Limited). China (China Everbright Water Limited). Australia (AusGroup Limited). The Singapore Exchange Securities Trading Limited (SGX-ST), a wholly-owned subsidiary of the SGX, is currently the only approved securities exchange in Singapore. Securities that can be listed on the SGX-ST include shares of a company and, in the case of main board listings, units of a business trust, shares/units of an investment fund and units of a real estate investment trust. An issuer (whether foreign or local) can opt to list on the mainboard or Catalist of the SGX-ST: The main board caters to the needs of more established issuers, with higher entry and listing requirements (such as minimum profit and market capitalisation levels). A main board listing can be a primary or secondary listing, and a foreign issuer seeking dual primary listings in Singapore and on its home exchange must ensure full compliance with the listing rules of both the SGX-ST and its home exchange. Catalist caters to the needs of smaller or fast-growing issuers, and has a different model where approved sponsors assess whether an issuer is suitable for listing. A listing on Catalist must be a primary listing, and there are no minimum quantitative entry criteria for a listing on Catalist. Market Activity and Deals - omitted - In 2021, there were eight initial public offerings (IPOs) on the SGX-ST: Three on the main board. Five on Catalist. These raised a total of about SGD1.4 billion. In 2020, there were 11 IPOs on the SGX-ST: © 2023 Thomson Reuters. All rights reserved. 2 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Five on the main board. - omitted - Six on Catalist. These raised a total of about SGD1.4 billion. Despite the COVID-19 pandemic, the Singapore IPO market has continued to hold steady. In October 2020, Nanofilm Technologies International Limited's IPO raised about SGD470 million, making it one of the largest non-real estate investment trust (non-REIT) mainboard listings in recent years. As at the end of January 2022, there were four IPOs on the SGX-ST for the year, comprising three special purpose acquisition compnaies (SPACs) listed on the main board (Vertex Technology Acquisition Corporation Ltd, Pegasus Asia and Novo Tellus Alpha Acquisition) and one (Alpina Holdings Limited) on Catalist. The total market capitalisation of listed issuers on the SGX-ST stood at about SGD896.9 billion as at the end of December 2021. 2. What are the main regulators and legislation that applies to each of the main public equity markets/exchanges in your jurisdiction? Regulatory Bodies The Monetary Authority of Singapore (MAS) is the primary regulatory authority for the offering of shares/units to the public in Singapore. The SGX-ST undertakes the day-to-day regulation of the securities market and administers a number of rulebooks that, among others, govern the listing of securities on the SGX-ST. Legislative Framework The Securities and Futures Act 2001 of Singapore (SFA) regulates the offering of shares and units in Singapore, together with the following regulations (together, the Securities and Futures Regulations (SFR)): Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018. Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2005. The SFA and the SFR are administered by the MAS. For issuers seeking a listing on the main board or Catalist, the listing rules set out in the SGX-ST listing manual or the Catalist listing manual, respectively, will apply. Joining a Market/Exchange © 2023 Thomson Reuters. All rights reserved. 3 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... 3. What are the main requirements for a primary listing on the main public equity markets/exchanges? Main Requirements The requirements under the SFA and the underlying regulations and the listing rules of the SGX-ST are generally applicable to all issuers seeking an IPO and listing on the SGX-ST unless specific waivers have been granted by the MAS and/or SGX- ST, although certain listing rules do not apply to issuers seeking a secondary listing (see below and Question 4 and Question 24 for more information). Issue Manager and Sponsor An issuer seeking a main board listing must appoint an accredited issue manager, who is responsible for preparing the issuer for listing and must be satisfied that the issuer: Is suitable to be listed. Meets the admission requirements. Is sufficiently set up to comply with the continuing listing requirements. Has directors that appreciate the nature of their responsibilities and can be expected to honour their obligations under the listing rules. At least one issue manager must be independent of the issuer. For more information on the role of an issue manager, see Question 10. An issuer seeking a Catalist listing must do so through an approved full sponsor. While the full sponsor takes on a similar role to the issue manager in a main board listing, the full sponsor is also responsible for assessing whether the issuer is suitable to be listed on Catalist and must act as the continuing sponsor for the issuer for at least three years after listing. Minimum Size Requirements For main board listings, there are certain market capitalisation thresholds related to the admission criteria (see below, Track Record). For Catalist listings, there is no minimum market capitalisation requirement. Track Record Issuers seeking a main board listing must have a minimum one-year track record to satisfy one of the following requirements: Profitability test A. Minimum consolidated pre-tax profit (based on full year consolidated audited accounts) of at least SGD30 million for the latest financial year and operating track record of at least three years. © 2023 Thomson Reuters. All rights reserved. 4 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Profitability test B. Profitable in the latest financial year (pre-tax profit based on the latest full year consolidated audited accounts), operating track record of at least three years and market capitalisation at listing of at least SGD150 million. Market capitalisation test. Operating revenue (actual or pro forma) in the latest completed financial year and market capitalisation at listing of at least SGD300 million. Real estate investment trusts and business trusts which can meet the SGD300 million market capitalisation test but do not have historical financial information can apply under this test if they can demonstrate that they will generate operating revenue immediately on listing. In seeking a listing under profitability test A or B, the issuer must have been engaged in substantially the same business, and have been under substantially the same management, throughout the period for which the three-year operating track record applies. In addition, the issuer and its subsidiaries (group) must be in a healthy financial position having regard to whether it has a positive cashflow from operating activities. In contrast, issuers seeking a Catalist listing are not required to satisfy any minimum operating track record, profit or share capital requirements. Repayment of Debts For both mainboard and Catalist listings, all debts owing to the group by its directors, substantial shareholders/unitholders and companies controlled by the directors and substantial shareholders/unitholders must be settled before listing. Accounts The prospectus to be issued for the purposes of a public offer of shares/units in Singapore must include the annual audited financial statements of the group for the three most recent completed financial years. Such financial statements must be prepared/ restated and audited in accordance with the accepted accounting and auditing standards prescribed by the SFR. Generally, interim financial information is required if the date of lodgement of the preliminary prospectus with the MAS is more than six months after the end of the most recent completed financial year. Accounting Standards and Auditors For primary listings, the financial statements submitted to the SGX-ST with the listing application and included in the prospectus, as well as future periodic financial reports, must be prepared in accordance with Singapore Financial Reporting Standards (International) (SFRS(I)s), International Financial Reporting Standards (IFRS) or US Generally Accepted Accounting Principles (US GAAP). For secondary listings, if these financial statements are prepared in accordance with other financial standards, they need only be reconciled with SFRS(I)s, IFRS or US GAAP. The annual financial statements must be audited by certified public accountants in accordance with Singapore Standards on Auditing, International Standards on Auditing, or US Generally Accepted Auditing Standards, as the case may be. The auditors appointed by the issuer must be either: Approved under the Accountants Act 2004 of Singapore (Accountants Act), while the audit partner-in-charge assigned to the audit must be a public accountant under the Accountants Act. Approved by, registered with and/or regulated by an independent audit oversight body acceptable to the SGX-ST and be a member of the International Forum of Independent Audit Regulators, and where applicable, the audit partner-in- © 2023 Thomson Reuters. All rights reserved. 5 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... charge should be approved by, registered with or regulated by a relevant audit oversight body acceptable to the SGX- ST. Any other auditing firm acceptable to the SGX-ST. Working Capital An issuer's directors must confirm in the prospectus that the working capital available to the group is sufficient for at least the next 12 months from the date of lodgement of the prospectus. An issuer must also disclose to the SGX-ST: Any shortfall in working capital or negative cashflow from operating activities, and the reasons for the shortfall. The issue manager's views on the issuer's viability, and the basis for these views. Directors and Management The directors and executive officers of the issuer should have appropriate experience and expertise to manage the group's business, as well as the character and integrity expected of a listed issuer. The Code of Corporate Governance 2018 (Governance Code) guides that the board of directors and its board committees should comprise directors who as a group provide an appropriate balance and diversity of skills, experience, gender and knowledge of the issuer. They should also provide core competencies such as accounting or finance, business or management experience, industry knowledge, strategic planning experience and customer-based experience or knowledge. See Question 23 for more information on the "comply or explain" nature of the Governance Code. The issuer's board must have at least two non-executive directors who are independent and free of any material business or financial connection with the issuer, in accordance with the listing rules and the Governance Code. Issuers should also ensure that independent directors make up at least one-third of their board of directors, or a majority of the board where the Chairman is not independent. A foreign issuer must have at least two independent directors who are resident in Singapore. With effect from 1 January 2022, a director will not be independent if they have been a director for an aggregate period of more than nine years (whether before or after listing) and their continued appointment as an independent director has not been approved by shareholders/unitholders in accordance with the listing rules. Minimum Shares/Units in Public Hands (Free Float) For main board listings, a minimum of between 12% to 25% of the issuer's shares/units must be in public hands (that is, held by persons other than the directors, chief executive officer, substantial shareholders/unitholders or controlling shareholders/ unitholders of the issuer or its subsidiaries, or their respective associates) at the time of listing, depending on the market capitalisation of the issuer (for example, larger issuers that have a market capitalisation at listing that is at least SGD1 billion are required to meet a free float of only 12%). Post-listing, there is a free float requirement of 10%. In addition, all issuers are required to have a minimum of 500 shareholders/ unitholders on listing. Existing public shareholders/unitholders immediately before the IPO can be included in the calculation © 2023 Thomson Reuters. All rights reserved. 6 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... of the percentage of shares/units to be held by the public, subject to an aggregate limit of 5% of the issuer's post-IPO issued shares/units, provided that such shares/units are not under a moratorium. For Catalist listings, at least 15% of the post-IPO issued share capital of the applicant must be held by the public at the time of listing. In addition, there must be at least 200 public shareholders. For a main board IPO, an offering of shares/units must include a public subscription tranche, to which a minimum of 5% of the number, or SGD50 million in value, of the shares/units offered (whichever is lower) is to be allocated. The minimum subscription and allocation value of the shares/units at IPO for each investor is SGD500 for a mainboard listing and SGD200 for a Catalist listing, based on a minimum offer price of SGD0.50 and SGD0.20 per share/unit for the main board and Catalist, respectively. Listing Framework for Special Purpose Acquisition Companies - omitted - In September 2021, the SGX-ST introduced new rules that enable SPACs to list on the main board. A SPAC is a company with no prior operating history, operating and revenue-generating business or assets at the point of its IPO, and which raises proceeds for the sole purpose of undertaking a business combination in accordance with the business strategy and acquisition mandate disclosed in the IPO prospectus. A listing on the SGX-ST under the SPAC framework is required to have the following key features: Minimum market capitalisation of SGD150 million. De-SPAC must take place within 24 months of IPO with an extension of up to 12 months subject to fulfilment of prescribed conditions. Moratorium on sponsors' shares from IPO to de-SPAC, a six-month moratorium after de-SPAC and for applicable resulting issuers, a further six-month moratorium thereafter on 50% of shareholdings. Sponsors must subscribe to a minimum of between 2.5% to 3.5% of the IPO shares/units/warrants depending on the market capitalisation of the SPAC. De-SPAC can proceed if more than 50% of independent directors approve the transaction and more than 50% of shareholders vote in support of the transaction. Warrants issued to shareholders will be detachable and maximum percentage dilution to shareholders arising from the conversion of warrants issued at IPO is capped at 50%. All independent shareholders are entitled to redemption rights. Sponsor's promote limit of up to 20% of issued share capital at IPO. 4. What are the main requirements for a secondary listing on the main public equity markets/exchanges? © 2023 Thomson Reuters. All rights reserved. 7 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Main Requirements - omitted - An issuer (usually a foreign issuer) with a primary listing on its home exchange can seek a secondary listing on the main board. The secondary listing on the SGX-ST can be undertaken concurrently with, or subsequent to, the primary listing on the home exchange, in conjunction with a public offer for subscription or sale of the issuer's shares/units, or otherwise by way of introduction. However, a listing by way of introduction is not permitted if the issuer has carried out any fundraising activities in Singapore within six months before the submission of its listing application. Further, fundraising activities in Singapore are not permitted within three months of a listing by introduction. An issuer seeking a secondary listing must meet the listing criteria prescribed in the listing rules, except those provisions relating to a moratorium of the promoters' shareholdings and shareholding distribution requirements. Where the secondary listing is undertaken in conjunction with a public offer of shares/units in Singapore, the SFA and the SFR regulate the offering of shares/ units in Singapore. Similar to a primary listing on the main board, an issuer seeking a secondary listing must appoint an accredited issue manager (see Question 3 and Question 10 for more information on the role of an issue manager). Minimum Size Requirements See Question 3. Track Record See Question 3 for companies seeking a main board listing. Directors and Management The directors and executive officers of the issuer should have appropriate experience and expertise to manage the group's business, as well as the character and integrity expected of a listed issuer. The issuer's board must also have at least two non- executive directors who are independent and free of any material business or financial connection with the issuer, in accordance with the listing rules and a foreign issuer must have at least two independent directors who are resident in Singapore. Minimum Shares/Units in Public Hands (Free Float) In the case of a secondary listing, the issuer is not required to comply with the shareholding/unitholding spread and distribution requirements that are applicable to a primary listing. However, the issuer must have at least 500 shareholders/unitholders worldwide following the listing. Where the SGX-ST and the issuer's home exchange do not have an established framework and arrangement to facilitate the movement of shares/units between the jurisdictions, the issuer seeking a secondary listing must have at least either: 500 shareholders/unitholders in Singapore. 1,000 shareholders/unitholders worldwide. © 2023 Thomson Reuters. All rights reserved. 8 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... 5. What are the main steps for a company applying for a primary listing of its shares? Is the procedure different for a foreign company and is a foreign company likely to seek a listing for shares or depository receipts? Procedure for a Primary Listing The key steps to be taken for an IPO and main board listing are as follows: Appointment of market professionals (including issue manager and other professionals, such as legal advisers and auditors). Pre-IPO restructuring (if required). Conduct due diligence. Prospectus drafting. Preparation of independent auditors' and expert reports. Submission of listing application (including the Listing Admissions Pack) to the SGX-ST and submission of the draft prospectus to the MAS for pre-lodgement review. Review by and responding to queries from the SGX-ST and the MAS. Negotiation of legal documentation, such as the underwriting agreement, bank comfort packages and cornerstone subscription agreements (if applicable). Lodgement of preliminary prospectus with the MAS. Marketing and bookbuilding. Registration of prospectus with the MAS. Pricing and allocation of shares/units. Settlement. Admission of issuer to the Official List of the SGX-ST and listing and quotation of shares/units. Exercise of any over-allotment option/stabilisation. Procedure for a Foreign Company - omitted - The procedure is the same for a foreign issuer. However, the SGX-ST will also give consideration to whether the laws and practices of the jurisdiction under which the foreign issuer is constituted and regulated afford sufficient protection to potential investors. Most (if not all) foreign issuers list their shares/units directly on the SGX-ST rather than through depository receipts. Separately, the SGX-ST also lists global depository receipts (GDRs) representing the equity securities of corporations that are listed on a foreign stock exchange. However, as such GDRs can only be offered to and traded by institutional and/or accredited © 2023 Thomson Reuters. All rights reserved. 9 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... investors, and retail investors are prohibited from participating in such offers or trades, such GDR listings are not covered in detail in this article. - omitted - 6. What are the main steps for a company applying for a secondary listing of its shares? Is the procedure different for a foreign company and is a foreign company likely to seek a secondary listing for shares or depository receipts? Procedure for a Secondary Listing The key steps to be taken for a secondary listing involving a public offer of shares are substantially the same as the procedure for a primary listing as set out in Question 5. If the secondary listing does not involve a public offer, an introductory document will be issued instead of a prospectus as further described in Question 7. Procedure for a Foreign Company The procedure is the same for a foreign issuer. Equity Offerings: Public 7.What are the main ways of structuring an IPO? An issuer can distribute its shares/units in conjunction with its IPO and listing on the main board or Catalist by way of a public offer and/or a placement. A main board IPO must be accompanied by a public offer. In either case, the shares/units offered can be either: New shares/units offered for subscription by the issuer. Existing shares/units offered by existing shareholders/unitholders (vendors). Public Offer In Singapore, a public offer is typically undertaken through electronic means (namely, the automated teller machines, internet banking websites and/or mobile banking platforms) of the participating local banks as well as by printed application forms, so enabling a large number of participants (in particular, members of the retail public) to take part in the IPO. © 2023 Thomson Reuters. All rights reserved. 10 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Placement A placement involves the offer of shares/units to institutional, high net-worth and other investors selected by the underwriters in conjunction with the issuer, typically following a bookbuilding process during which prospective investors can indicate the level of their interest in the IPO. As each such investor typically invests a larger amount for a larger number of shares/units as compared to retail investors, a placement often results in a narrower shareholder/unitholder base for the issuer than a public offer. Introduction A listing by introduction is only permitted for main board listings and is appropriate where the issuer does not need to raise capital and it already meets the shareholding/unitholding spread requirements for a main board listing. There is no public offer of shares/units in a listing by introduction. Typically, a listing by introduction is undertaken where either: The shares/units for which listing is sought are already listed on another stock exchange and the main board listing is intended to be either a dual primary or a secondary listing. The shares/units of the issuer are distributed to the shareholders/unitholders of its holding company, and that distribution enables the issuer to meet the shareholding/unitholding spread requirements for a main board listing. The main difference is that an introductory document (rather than a prospectus) is issued for a listing by introduction. While the contents of an introductory document are similar to that of a prospectus, an introductory document: Is not reviewed by the MAS. Is not lodged or registered as a prospectus with the MAS. Does not attract prospectus liability under the SFA (although the issuer and its directors can still incur liability in relation to the introductory document under other provisions of the SFA, other legislation and at common law). Underwriting Main board IPOs in Singapore are generally fully underwritten by one or more investment banks. This means that any shares/ units not subscribed for or purchased by investors in the IPO will be taken up by those underwriting investment banks for a fee. This provides the issuer and the vendors (if any) with certainty as to the success of the IPO. An issuer who proposes to undertake a main board IPO without underwriting must consult with the SGX-ST on such a proposal. - omitted - 8. What are the main ways of structuring a follow on equity offering? Subsequent equity offerings are often referred to as "secondary" offerings. There are generally three types of secondary offerings: © 2023 Thomson Reuters. All rights reserved. 11 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Rights issues, which can be either: - omitted - renounceable rights issues; or non-renounceable rights issues. Placements. A rights issue gives existing shareholders/unitholders the entitlement to subscribe for new shares/units (nil-paid rights) in proportion to their existing holdings. Holders can exercise the nil-paid rights to acquire new shares/units in the issuer, at the rights issue price (typically a discount to the market price). A rights issue can be either: Renounceable, where an entitled shareholder/unitholder who does not wish to exercise their nil-paid rights has the option to renounce their nil-paid rights in part or in whole to a third party or sell their nil-paid rights on the SGX-ST. Non-renounceable and made only to existing shareholders/unitholders. A non-renounceable rights issue is also known as a "preferential offering", and an entitled shareholder/unitholder who does not wish to exercise their nil-paid rights is not able to monetise their nil-paid rights. A placement is a sale of new shares/units to a small group of investors (new or existing investors) and, unlike a rights issue, it is not made pro rata to the issuer's existing shareholders/unitholders. A placement usually involves a sale of shares/units to institutional, accredited and/or other investors specified under the applicable securities offering exemption, or by private placement to not more than 50 offerees within any 12-month period. It can also be combined with a preferential offering. Regulatory Changes Arising from the COVID-19 Pandemic From May 2020, listed issuers undertaking rights issues have the option to electronically disseminate the offer information statement (OIS) through publication on the website of the SGX-ST and the issuer's corporate website, provided that the issuer sends to shareholders/unitholders the hardcopy application or acceptance forms and a hardcopy notification with instructions on how to access the electronic version of the OIS. This temporary measure will be in place until revoked or amended by the MAS and the SGX-ST. Also see Question 9 regarding the enhanced share issue limit under a general mandate. 9. What are the advantages and disadvantages of rights issues/other types of follow on equity offerings? Generally, a prospectus is required for all offers of securities in Singapore unless the offer falls within an exemption provided under the SFA. Renounceable rights issues, preferential offerings and placements can all be undertaken under various exemptions from the prospectus requirements under the SFA. An OIS (which is a much shorter disclosure document than a prospectus, but still attracts prospectus liability under the SFA) must be prepared for a renounceable rights issue. © 2023 Thomson Reuters. All rights reserved. 12 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... - omitted - However, preferential offerings (which are limited to existing shareholders/unitholders) and placements (which are made only to institutional, accredited and/or other specified investors or by way of private placement to not more than 50 offerees within any 12-month period) do not require the issue of an OIS and are often made on the basis of information on the issuer that is already publicly available, without any further disclosure document being prepared. Apart from the time taken to prepare an OIS in a renounceable rights issue, the SGX-ST prescribes a minimum offer period of: 13 market days from the record date for renounceable rights issues. Nine market days from the record date for preferential offerings. There is also a minimum trading period of nine market days from the record date for nil-paid rights in the case of renounceable rights issues. These requirements result in an extended transaction timeline for rights issues and preferential offerings. In contrast, a placement can be conducted much more quickly and is often done in just one day (by way of an accelerated bookbuild transaction). Listed issuers proposing to raise equity capital through a secondary offering typically seek to rely on the general mandate from shareholders/unitholders already obtained at their annual general meetings. Generally, for a main board listed issuer, any general mandate must limit the number of shares/units that can be issued under it to not more than 50% of the total number of issued shares/units, of which the number of shares/units that can be issued other than on a pro rata basis must not be more than 20%. As a result, when relying on the general mandate, a renounceable rights issue or a preferential offering can be used to raise up to 50% of the existing shares/units, while a placement cannot be used for larger capital raisings where the size of the issue is more than 20% of the existing shares/units. For Catalist listed issuers, the corresponding limit for a general mandate is 100% of the total issued shares/units (with a sub- limit of 50% for non-pro rata issues where the general mandate was passed by an ordinary resolution, and with no sub-limit for non-pro rata issues where the general mandate was passed by a special resolution). In April 2020, to enable the acceleration of fundraising efforts in view of the COVID-19 pandemic, the SGX-ST announced that it will provisionally allow main board issuers to seek a general mandate for pro rata issues of up to 100% of its total issued shares/units, versus 50% previously, subject to certain prescribed conditions (Enhanced Share Issue Limit). This was extended in March 2021 to allow issuers up to 31 December 2021 to seek or renew a general mandate for the Enhanced Share Issue Limit, which will expire at the conclusion of the next annual general meeting or on the date by which the next annual general meeting is required by law or the listing rules to be held, whichever is the earliest. For the avoidance of doubt, the sub-limit of 20% for non-pro rata issues remains. In terms of pricing, when relying on the general mandate: For renounceable rights issues, there is no limit to the discount to the prevailing market price. For preferential offerings and placements, the issue price is subject to a maximum discount of 10% to the prevailing market price. When undertaking a placement under a general mandate, the issuer cannot place any shares/units to any of the following: Its directors and substantial shareholders/unitholders. © 2023 Thomson Reuters. All rights reserved. 13 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... The immediate family members of its directors and substantial shareholders/unitholders. - omitted - The substantial shareholders, related companies, associated companies and sister companies of the issuer's substantial shareholders/unitholders. Corporations in whose shares the issuer's directors and substantial shareholders/unitholders have an aggregate interest of at least 10%. Any person who in the SGX-ST's opinion falls within the above categories. However, the following exceptions apply: In the case of a substantial shareholder/unitholder where the: substantial shareholder/unitholder is not represented on the board of the issuer and does not have control or influence over the issuer in connection with the day-to-day affairs of the issuer and the terms of the placement; placement is effected through an independent process such as bookbuilding; placement is made to more than one person/entity; and substantial shareholder's/unitholder's percentage holding in the issuer immediately after the placement is not more than that immediately before the placement. In the case of the following persons/entities where the SGX-ST is satisfied that the person or entity is independent and is not under the control or influence of any of the issuer's directors or substantial shareholders/unitholders: immediate family members of the issuer's directors or substantial shareholders/unitholders; substantial shareholders, related companies, associated companies and sister companies of the issuer's substantial shareholders/unitholders; or corporations in whose shares the issuer's directors and substantial shareholders/unitholders have an aggregate interest of at least 10%. Where the issuer is not able to rely on the general mandate, it must convene an extraordinary general meeting to seek specific approval from its shareholders/unitholders for the equity fundraising. For this purpose, it must first prepare a circular to shareholders/unitholders which must be reviewed by the SGX-ST (or its listing sponsor for Catalist issuers) before it can be issued and the extraordinary general meeting convened. This extends the timeline by another five weeks or so. Advisers and Documents: Public Equity Offering 10. Outline the role of advisers used and main documents produced in a public equity offering. Does it differ for an IPO? © 2023 Thomson Reuters. All rights reserved. 14 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Advisers The main advisers in an IPO are as follows. Issue manager. The issue manager acts as the sponsor for the issuer's listing on the main board of the SGX-ST. It manages the IPO for the issuer and advises it on all aspects relating to the IPO, from preparing the issuer for listing and ensuring that it meets the SGX-ST admission requirements to submitting the listing application and dealing with the SGX-ST on all matters relating to the listing application. Underwriters. The issuer can also engage financial institutions (known as underwriters) to underwrite the IPO. In the event that investors do not fully subscribe for the shares/units offered, the underwriter will be obliged to subscribe for the shares/units that are not taken up by investors. If the IPO is large, there will be a syndicate of underwriters, with one or more acting as the lead underwriter (often known as the global co-ordinator). Legal advisers. The legal advisers involved in an IPO advise the issuer, vendors (if any) and the underwriters. In general, the issuer's legal advisers are responsible for: advising the issuer on the legal aspects of preparing the issuer for listing; assisting the issuer in the preparation of the prospectus; and negotiating the legal agreements which the issuer enters into with the underwriters and others. The underwriters' legal advisers are responsible for: advising on any legal agreements to which the underwriters are parties; assisting the underwriters in the preparation of the prospectus; and advising the underwriters in relation to their obligations. Both sets of legal advisers conduct legal due diligence and issue legal opinions. Auditors. The independent auditors prepare the financial statements (audited, interim and/or pro forma, as applicable) for inclusion in the prospectus. They will issue an audit report in respect of the annual financial statements to be included in the prospectus. The auditors also provide various comfort letters to the underwriters. Internal controls consultant. The issuer is typically expected to appoint an internal controls consultant to review the internal controls and risk management systems of the issuer group, as well as advise the issuer on remediation of any non-compliance and/or control deficiencies. Public relations (PR) consultants. PR consultants can generate press interest and publicity for the issuer before the IPO (in compliance with applicable publicity restrictions), as well as help to monitor public statements and press releases during the IPO process. After the IPO, ongoing press interest in the issuer can help sustain awareness of the issuer and liquidity in its shares/units. Registrar and depository. The registrar deals with the setting up and maintaining of the issuer's share/unit register. The depository deals with arrangements relating to the scripless book-entry settlement system of the Central Depository (Pte) Limited (Central Depository). Receiving bank. A receiving bank is appointed to receive funds from the offering. © 2023 Thomson Reuters. All rights reserved. 15 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Experts. Depending on the nature of the issuer, valuers, industry consultants or other experts may need to be involved in the IPO process, and can produce reports for inclusion in the prospectus. Main Documents The main documents produced in an equity offering are as follows: Offering document (prospectus or OIS), unless there is an exemption (see Question 13). Audited financial statements. Auditors' audit report (in the case of a prospectus). Underwriting agreement (if underwritten). Lock-up agreements. Bank comfort package, including auditors' comfort letters, due diligence reports and legal opinions from the issuer's and underwriters' legal advisers. Ancillary issuer documents, such as its constitution (in the case of an IPO), board and shareholder/unitholder resolutions. Circular to shareholders/unitholders for secondary offerings (if required). Equity Prospectus/Main Offering Document 11. When is a prospectus (or other main offering document) required? What are the main publication, regulatory filing or delivery requirements for a public offering? Prospectus (or Other Main Offering Document) Required Under the SFA, an offer of shares/units in Singapore must be accompanied by a prospectus unless it falls within an exemption under the SFA (see Question 13). Main Publication, Regulatory Filing or Delivery Requirements The SFA requires an issuer making a public offer of shares/units in Singapore to lodge a prospectus with the MAS. A prospectus lodged with the MAS is posted on the MAS website under OPERA (Offers and Prospectuses Electronic Repository and Access) for seven to 21 days for public viewing and review by the MAS (unless a draft has previously been submitted to the MAS for pre-lodgement review). The MAS can register the prospectus between the seventh and 21st day (both days inclusive) from the © 2023 Thomson Reuters. All rights reserved. 16 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... date of lodgement of the prospectus. The MAS can extend the date for registration of the prospectus. Once the prospectus is registered, the issuer can commence the IPO. 12. Are there any circumstances in which reduced disclosure obligations apply in respect of the prospectus (or other main offering document)? There are no reduced disclosure regimes under the SFA for an IPO of shares/units. 13. What are the main exemptions from the requirements for publication or delivery of a prospectus (or other main offering document) for a public offering? Under the SFA, an offer of shares/units in Singapore must be accompanied by a prospectus unless it falls within an exemption provided under the SFA. There are exemptions for certain types of offers such as the following, which are commonly relied on for secondary offerings: Offer made to no more than 50 persons within any 12-month period. Offer made to existing members of an entity whose shares/units are listed for quotation on the SGX-ST. Offer made to institutional, accredited and other specified investors. Offer made using an OIS by an SGX-ST listed issuer. 14. What are the main content or disclosure requirements for a prospectus (or other main offering document) for a public offering? What main categories of information are included? The requirements governing the information that needs to be disclosed in the prospectus are set out in the SFA and the SFR. The SFA requires a prospectus to contain all the information that is reasonably required by the investors and their professional advisers to make an informed assessment of the: Rights and liabilities of the shares/units being offered. © 2023 Thomson Reuters. All rights reserved. 17 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Assets and liabilities, profits and losses, financial position and performance, and prospects of the issuer. Assets and liabilities, profits and losses, financial position and performance, and prospects of the underlying entity if it is controlled by the offeror and/or its related parties (together or alone). The SFA also requires the prospectus to contain the matters prescribed in the SFR, including: Details of the issuer, its directors, its executive officers and the vendors (if any). Details of the underwriters, independent auditors and other experts. The issuer's share capital and its substantial shareholders/unitholders. The issuer's business operations. The operating and financial review (which is a description of the issuer's financial position, changes in financial condition and results of operations for each financial year and interim period reported on in the prospectus). Recent developments and prospects. Risk factors. Interested person transactions and conflicts of interest. Financial statements prepared or restated in accordance with the SFRS(I)s, IFRS or US GAAP. A supplementary or replacement prospectus must also be lodged with the MAS if, after the prospectus is registered with the MAS but before the close of the offer, the issuer is made aware that the prospectus is defective (for example, where the prospectus contains a false or misleading statement). In addition, the prospectus must include the additional information mandated by the listing rules of the Singapore Exchange Securities Trading Limited (for example, a responsibility statement by the directors and vendors (if any)). 15. How is the prospectus (or other main offering document) prepared for a public offering? Who is responsible and/or may be liable for its contents, and what are the main sources of liability in respect of the prospectus (or other main offering document)? The prospectus is prepared by the issuer and its advisers, including its legal advisers, auditors and the various experts, with input from the banks and their legal advisers. Before the issue of the prospectus, verification exercises are conducted with the issuer to confirm the accuracy of key statements in the prospectus. The following persons will have criminal liability as well as civil liability if there is a false or misleading statement in the prospectus, or there is an omission to state any information that must be included in the prospectus: The person making the offer and, where that person is an entity, each director or equivalent person of the entity. © 2023 Thomson Reuters. All rights reserved. 18 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Where the person making the offer is the issuer, each person who has consented to be named in the prospectus as a proposed director or an equivalent person of the issuer. Where the issuer is controlled by the offeror and/or its related parties, the issuer, each director or equivalent person, and each person who has consented to be named in the prospectus as a proposed director or an equivalent person of the issuer. An issue manager to the offer of the shares/units who has consented to be named in the prospectus. An underwriter (but not a sub-underwriter) to the issue or sale of the shares/units who has consented to be named in the prospectus. A person named in the prospectus with their consent who either: made the false or misleading statement in the prospectus; or made a statement on which the false or misleading statement made in the prospectus is based. Any other person who made the false or misleading statement, or omitted to state the information or circumstance, but only in respect of the inclusion of the false or misleading statement, or the omission to state the information or circumstances. There are certain statutory defences available to such statutory criminal and civil liability. One of the more important statutory defences contained in the SFA applies in the case where the relevant person can prove that they both: Made all inquiries (if any) that were reasonable in the circumstances. After doing so, believed on reasonable grounds that the statement was not false or misleading. A similar defence also applies in respect of omissions. In addition to liability under the SFA, there are potential liabilities under: Common law (for example, liability in tort for negligent misstatements). Misrepresentation Act 1967 of Singapore (which could also cover innocent misrepresentations). Provisions in the Penal Code 1871 of Singapore relating to obtaining money by deception and to fraud involving deliberate false statements. Foreign securities laws, to the extent that the offer is extended or marketed to investors outside Singapore. Marketing: Public Equity Offerings © 2023 Thomson Reuters. All rights reserved. 19 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... 16. How are offered equity securities marketed? What are the main legal/regulatory restrictions on marketing activities? IPOs are marketed at various stages through the following methods: Pre-IPO placements. Pre-IPO placements to early investors can serve the purpose of increasing the issuer's credentials and incentivising the pre-IPO investors to persuade other investors to subscribe for the issuer's securities. Cornerstone investors. Placements to investors concurrent with, but separate from, the IPO (at the offer price) also serve a purpose similar to pre-IPO placements. Roadshows. Roadshow presentations can be held for institutional and accredited investors after the prospectus is lodged with the MAS. Advertising/other publicity. Advertising is only relevant for retail offers and can be an effective means of generating additional demand. Advertisement of the IPO before lodgement of the prospectus with the MAS is prohibited (subject to certain exceptions, including an exception allowing the publication of research reports subject to applicable conditions). - omitted - 17. Outline any potential liability for publishing research reports by participating brokers/dealers and ways used to avoid such liability. Participating brokers/dealers can be liable to investors under the following laws: Contract law. There can be liability under established contractual principles if there is a contract between the investor and the broker. Tort. The investor can claim tortious damages against the broker if they can prove that the broker owed them a duty of care and they suffered loss as a result of a breach of that duty. Financial Advisers Act 2001 of Singapore. A licensed financial adviser can be liable, among other things, for: making false or misleading statements (where they do not care whether the statement is true or false, or know or ought reasonably to have known that the statement is false or misleading) about any amount payable in respect of a proposed contract in respect of any investment product, the effect of any provision of a contract in respect of any investment product, or in the provision of any financial advisory service; employing any device, scheme or artifice to defraud, or engaging in any act, practice or course of business which operates (or is likely to operate) as a fraud or deception on any person; and making a recommendation with respect to any investment product to a person who may reasonably be expected to rely on the recommendation where they did not have a reasonable basis for making the recommendation. © 2023 Thomson Reuters. All rights reserved. 20 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Brokers/dealers can minimise their liability in the following- ways: omitted - Forecasts and projections. Avoid including these in research reports. Verification. Ensure research reports only contain information from the prospectus and which is verified by the issuer. Management of conflicts of interest. Put in place internal conflict management policies that are commensurate with the scale and complexity of the broker/dealer's business to ensure effective controls and segregation of duties to mitigate potential conflicts of interest that may arise from the publication of research reports. Independence. Put in place information barriers between research analysts and corporate finance teams involved in the management and underwriting of the offering. Exercise confidentiality. Take reasonable steps to prevent leakage of information to any person who is not an institutional investor. Disclaimers. Use disclaimers (for example, that the research report does not constitute an offer). Bookbuilding: Public Equity Offerings 18. Is the bookbuilding procedure used and in what circumstances? How is any related retail offer dealt with? How are orders confirmed? The bookbuilding procedure is used in IPOs and secondary offerings, such as placements, to get a better sense of the size of the demand and to determine the exact offer price. Main board IPOs tend to adopt a sequential offering structure, where bookbuilding for the placement tranche takes place and the offer price and allocation to investors in the placement tranche are fixed in the period between lodgement and registration of the prospectus with the MAS. In a placement, the bookbuilding by the placement agent typically takes just one day (via an accelerated bookbuild transaction). The bookbuilding typically takes place overnight and the placement is announced after pricing takes place. The sequential offering structure of main board IPOs means that the public offer will only open after registration of the final prospectus (that is, the allocation to placement investors and the offer price will have been firmed up by the time the public offer opens). Unlike the placement tranche, there is no process for sounding out retail investors for the public offer. Underwriting: Public Equity Offerings © 2023 Thomson Reuters. All rights reserved. 21 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... - omitted - 19. How is the underwriting for an equity offering typically structured? What are the key terms of the underwriting agreement and what is a typical underwriting fee and/or commission? Underwriting an Equity Offering. Mainboard IPOs are generally fully underwritten, while rights issues may or may not be underwritten. Underwriters typically enter into an underwriting agreement under which they agree to procure subscribers for the shares/units of the issuer being offered, and in the event that any shares/units are not taken up, the underwriters will subscribe for those shares/units themselves in agreed proportions. In the case of placements, the issuer typically appoints a placement agent to assist with the issue of shares/units who can also agree to underwrite the issue, in which case that placement agent will be referred to as an underwriter. Key Terms of an Underwriting Agreement. Key terms of the underwriting agreement include: Underwriting obligations. Representations, warranties and undertakings from the issuer and the banks. Lock-up. Conditions precedent/termination rights. Indemnities from the issuer to the banks. Over-allotment and stabilisation (in the case of a main board IPO). Fees and commissions. Timetable: Public Equity Offerings 20. What is the timetable for a typical equity offering? Does it differ for an IPO? Timetable for Mainboard Listing © 2023 Thomson Reuters. All rights reserved. 22 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... The indicative timetable for a main board listing is as follows: Start of IPO process. Appoint issue manager, legal advisers, auditors and other experts. Conduct due diligence, restructure the issuer group (if required), draft prospectus. Prepare listing application, consult the SGX-ST about ambiguities concerning compliance with listing criteria (if required). Lodgement date minus two to four months. Submit Listing Admissions Pack to the SGX-ST (together with the draft prospectus). Review period of approximately two to four months. Submit draft prospectus to the MAS for pre- lodgement review (optional). Lodgement date. Preliminary prospectus lodged with the MAS and published on OPERA (Offers and Prospectuses Electronic Repository and Access). The MAS reviews the prospectus (if not already reviewed pre-lodgement). Commence roadshows. Registration date (lodgement date plus seven to 21 days). The MAS registers the prospectus if it has no comments. If the MAS so requires, consider whether to amend the prospectus or make pre-quotation disclosure. The MAS can extend the date for registration of a prospectus. Commencement of public offer (lodgement date plus approximately 28 days). Public offer of three to five days. Closing date (lodgement date plus approximately 33 days). Announce the outcome of the offer, subscription rate and so on. The issuer is listed and trading in its shares/units commences. Timetable for Secondary Offerings The timetable for a secondary offering by way of a rights issue or placement will differ from an IPO as, among other things: There is no MAS review process. There is a shorter and less extensive SGX-ST review process. It may be necessary to convene a shareholder/unitholder meeting to obtain approval for the issue of new shares/units (unless there is an existing general mandate). Stabilisation: Public Equity Offerings - omitted - 21. Are there rules on price stabilisation and market manipulation in connection with a public equity offering? Price stabilisation of securities that are the subject of an IPO and listing on the SGX-ST may contravene the false trading and market rigging, securities market manipulation and insider trading prohibitions contained in the SFA. © 2023 Thomson Reuters. All rights reserved. 23 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... To facilitate price stabilisation, the Securities and Futures (Market Conduct) (Exemptions) Regulations 2006 (Market Conduct - omitted - Regulations) provide for an exemption to the prohibitions for stabilising actions taken during an IPO, provided that the actions have been taken in accordance with the conditions prescribed in the Market Conduct Regulations. Such conditions include, but are not limited to, the following: Terms of the offer. The total value of the securities being offered under the IPO (calculated on the basis of the offer price) is not less than SGD25 million (or its equivalent in a foreign currency). Maximum number of securities. The total number/nominal value of the securities that the stabilising manager can buy to undertake stabilising action must not exceed 20% of the total number/nominal value of securities offered in the IPO, before any over-allotment (if applicable). Time limits. Stabilising actions can commence from the date of commencement of trading of the issuer's securities and must end on the earlier of either: 30 calendar days after the commencement of trading; or the date that the stabilising manager has bought the total number of those securities to undertake stabilising action as stated under the prospectus. Price limits. The maximum price at which the stabilising manager can purchase the relevant securities under the IPO is its offer price where the initial stabilising action is taken. After the initial stabilising action, where there has been an independent transaction on the SGX-ST in the relevant securities at a price above the initial stabilisation price, the maximum price is the lower of the highest independently transacted price after the initial stabilising action, or the offer price of the relevant securities under the IPO. In the absence of such independent transaction after the initial stabilising action, the maximum price is the lower of the initial stabilisation price and the offer price of the relevant securities under the IPO. Disclosures. Adequate prospectus disclosure and other notification and public announcement requirements. Tax: Equity Issues 22. What are the main tax issues when issuing and listing publicly traded equity securities? The following are relevant tax issues to consider with respect to an equity issue of shares from a Singapore perspective. Taxation of Sale of Shareholding Singapore does not impose tax on capital gains but imposes tax on income. There are no specific laws or regulations which deal with the characterisation of whether a gain is income or capital in nature. Gains arising from the disposal of assets may be construed to be of an income nature and subject to Singapore income tax, especially if they arise from activities which the Inland Revenue Authority of Singapore (IRAS) regards as the carrying on of a trade or business in Singapore. © 2023 Thomson Reuters. All rights reserved. 24 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Case law has generally held that the most significant factor is-the omitted - intention on acquisition of the asset, that is, whether taxpayer's the asset was acquired for investment or trading purposes (and assuming there is no subsequent change of intention). The test to determine if gains derived on the disposal of assets are revenue or capital in nature is also an objective one, as opposed to the stated intention of the taxpayer, and is arrived at after having considered the activities of the taxpayer and all the circumstances relating to the purchase and sale of the securities in question. The Singapore courts have also endorsed the six badges of trade (as evolved from the UK) as relevant in determining whether a transaction of purchase and sale is, or is not, to be regarded as a trading transaction. Such badges of trade include the: Length of period of ownership. Frequency of similar transactions. Circumstances responsible for the disposal. Motive for acquisition. In this regard, the pertinent issue is whether the taxpayer is regarded as having acquired the shares for subsequent disposal at a profit or pursuant to a trade or business in Singapore (in which case, the gains on disposal will be income in nature and taxable), or whether such shares are held for long-term investment purposes since acquisition (in which case, the gains are treated as capital in nature and not taxable). However, tax exemption is generally available (subject to certain exceptions) on any gains or profits derived by a divesting company from the disposal of ordinary shares during the period from 1 June 2012 to 31 December 2027 in another company where the divesting company has held the legal and beneficial ownership of at least 20% of the ordinary shares in that company for at least 24 months before the disposal. From 1 June 2022, this exemption will not apply to disposals of unlisted shares in an investee company in the business of trading, holding or developing immovable properties in Singapore or outside Singapore. Dividends The taxation in Singapore of dividends paid by the listing vehicle depends on the tax residence of the listing vehicle (that is, whether or not the listing vehicle is resident in Singapore or elsewhere). Where the listing vehicle is a Singapore-resident company. All Singapore-resident companies come under the one-tier corporate tax system (one-tier system). Under the one-tier system, the tax on corporate profits is final and dividends paid by a Singapore-resident company are tax exempt in the hands of a shareholder, regardless of whether the shareholder is a company or an individual, and whether or not the shareholder is a Singapore tax resident. Correspondingly, no Singapore withholding tax will be imposed on such dividends. Where the listing vehicle is not a Singapore-resident company. In Singapore, income tax is chargeable on both: Income accruing in, or derived from, Singapore. Foreign-sourced income which is received (or deemed received) in Singapore from outside Singapore. Foreign-sourced income in the form of dividends, branch profits and service income (specified foreign income) received, or deemed to be received, in Singapore by Singapore-resident companies are exempt from tax provided certain conditions are met, including the following: © 2023 Thomson Reuters. All rights reserved. 25 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Such income is subject to tax of a similar character to income tax under the laws of the jurisdiction from which such income is received. - omitted - At the time the income is received in Singapore, the highest rate of tax of a similar character to income tax (by whatever name called) levied under the laws of the territory from which the income is received on any gains or profits from any trade or business carried on by any company in that territory at that time is not less than 15%. In the case of dividends paid by a company resident in a territory from which the dividends are received, the "subject to tax" condition above is considered met where either: Tax is paid in that territory by that company in respect of its income out of which such dividends are paid. Tax is paid on such dividends in that territory from which such dividends are received. Certain concessions and clarifications have also been announced by the IRAS with respect to the above conditions. Goods and Services Tax (GST) The sale of shares by a GST-registered investor belonging in Singapore for GST purposes to another person belonging in Singapore is an exempt supply not subject to GST. Any input GST incurred by the GST-registered investor in making an exempt supply is generally not recoverable from the Singapore Comptroller of GST. Where the shares are sold by a GST-registered investor in the course of, or furtherance of, a business carried on by that investor contractually to, and for the direct benefit of, a person belonging outside Singapore, the sale should generally (subject to the satisfaction of certain conditions) be considered a taxable supply subject to GST at 0%. Any input GST incurred by the GST- registered investor in making such a supply in the course of, or furtherance of, a business will generally (subject to certain conditions) be fully recoverable from the Singapore Comptroller of GST. Services consisting of arranging, brokering, underwriting or advising on the issue, allotment or transfer of ownership of the shares rendered by a GST-registered person to an investor belonging in Singapore for GST purposes in connection with the investor's purchase, sale or holding of the shares are subject to GST at the standard rate of 7%. Similar services rendered by a GST-registered person contractually to, and for the direct benefit of, an investor belonging outside Singapore are generally (subject to the satisfaction of certain conditions) subject to GST at 0%. Stamp Duty Stamp duty is not payable on the subscription of shares. Where shares of a Singapore-incorporated company (or a foreign-incorporated company which maintains its share register in Singapore) evidenced in certificated form are acquired in Singapore, stamp duty is payable on the instrument of transfer of the shares at the rate of 0.2% of the consideration for, or market value of, the shares (whichever is higher). Where an instrument of transfer is executed outside Singapore or no instrument of transfer (including an electronic instrument) is executed, no stamp duty is payable on the acquisition of the shares. However, stamp duty may be payable if the instrument of transfer is executed outside Singapore and is received in Singapore. In this regard, an electronic instrument that is executed outside Singapore is received in Singapore if: It is retrieved or accessed by a person in Singapore. © 2023 Thomson Reuters. All rights reserved. 26 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... An electronic copy of it is stored on a device (including a computer) and brought into Singapor.e; or - omitted - An electronic copy of it is stored on a computer in Singapore. Stamp duty is not applicable to electronic transfers of the shares through the scripless trading system operated by the Central Depository. Continuing Obligations 23. What are the main areas of continuing obligations applicable to listed companies and the legislation that applies? The main areas of continuing obligations set out in the listing rules are as follows: Disclosure of material information. Subject to limited exceptions and in accordance with the Corporate Disclosure Policy of the SGX-ST, issuers must disclose any information necessary to avoid the establishment of a false market in its securities, or in circumstances where such information would likely materially affect the price of its securities. Issuers must, among other things, promptly clarify or confirm rumours which have not been substantiated by the issuer and which are likely to have, or have had, an effect on the price of its securities. Other disclosure obligations. Disclosure of certain specified information (such as appointment or cessation of service of key personnel, breach of loan covenants, and so on). Periodic financial reporting. Announce financial statements for the first half of the financial year and the full financial year immediately after the figures are available, and in any event not later than 45 days after the first half or 60 days after the financial year. However, issuers with an adverse or qualified audit opinion or a disclaimer of opinion on its financial statements, going concern uncertainty, or regulatory concerns will additionally need to announce their quarterly financial statements. Interested person transactions (IPTs). Immediately announce any IPTs of a value equal to, or more than, 3% of the group's latest audited net tangible assets. If the aggregate value of all transactions entered into with the same interested person during the same financial year amounts to 3% or more of the group's latest audited net tangible assets, an immediate announcement must be made of the latest transaction and all future transactions entered into with that same interested person during that financial year. Shareholders'/unitholders' approval is required for any IPT which (itself or when aggregated with other transactions) was entered into with the same interested person during the same financial year that is of a value equal to, or more than, 5% of the group's latest audited net tangible assets (save that a transaction which has been approved by shareholders/ unitholders, or is the subject to aggregation with another transaction that has been approved by shareholders/ unitholders, need not be included in any subsequent aggregation). In a meeting to obtain shareholder/unitholder approval, the interested person and its associates must not vote on the resolution, or accept appointments as proxies, unless specific instructions as to voting are given. IPTs which are below SGD100,000 are not subject to announcement or shareholder/unitholder approval requirements. © 2023 Thomson Reuters. All rights reserved. 27 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... Acquisitions and realisations. Immediate announcement is required if the acquisitions or disposals of assets by an issuer or a subsidiary that is not listed on the SGX-ST or an approved exchange exceeds 5% of the relative figures calculated on the bases set out in the listing rules, subject to further conditions (including shareholder/unitholder approval requirements) that will be imposed on the issuer for transactions that exceed 20% or 100% of those relative figures. Corporate governance. Expected to "comply or explain" in relation to the Governance Code (which is given effect to by the listing rules), to describe their corporate governance practices with specific reference to the principles of the Governance Code in their annual report, and to disclose any deviation from any provision of the Governance Code together with an appropriate explanation for such deviation. - omitted - 24. Do the continuing obligations apply to listed foreign companies and to issuers of depositary receipts? Listed Foreign Companies Primary listing on the SGX-ST. A foreign issuer with a primary listing on the SGX-ST must comply with the continuing obligations under the listing rules. Secondary listing on the SGX-ST. A foreign issuer with a primary listing in what the SGX-ST considers to be developed markets and which is secondarily listed on the SGX-ST does not have to comply with additional continuing obligations (except for Rule 217 and Rule 751 of the main board listing rules), subject to its continued primary listing on its home exchange and compliance with all the relevant rules of its home exchange. However, issuers with a primary listing in jurisdictions other than developed markets are subject to a full review by the SGX-ST of the home exchange's legal and regulatory requirements, particularly in relation to shareholder/unitholder protection and corporate governance standards. Where areas related to interested person transactions (IPTs), acquisitions and realisations, and de-listings are found to require enhancements, the continuing obligations in Chapters 9, 10 and 13 of the main board listing rules (relating to IPTs, significant transactions, and de-listings, respectively) will be imposed. Issuers of Depository Receipts A foreign issuer whose equity securities are listed on the SGX-ST in the form of depository receipts are subject to similar disclosure obligations. However, the issuer of equity securities represented by global depository receipts listed on the SGX-ST is only subject to limited continuing disclosure obligations set out in Part XI of Chapter 2 of the mainboard listing rules. 25. What are the penalties for breaching the continuing obligations? Penalties under the Listing Rules © 2023 Thomson Reuters. All rights reserved. 28 Equity Capital Markets in Singapore: Regulatory Overview, Practical Law Country Q&A... The listing rules give the SGX-ST the power to deal with -anomitted issuer's non-compliance - with the continuing obligations. Where an issuer is unable or unwilling to comply with, or contravenes, its continuing obligations, the SGX-ST can suspend trading of the securities of the issuer, or remove the issuer from the Official List of the SGX-ST without the issuer's agreement. The SGX-ST can also exercise investigative and enforcement powers for the purposes of enforcing its listing rules, including the powers to initiate disciplinary action or take enforcement action against a person who is deemed to have contravened a provision of the listing rules. The listing rules are also given effect by the SFA, which provides that where any person who is under an obligation to comply with, observe, enforce or give effect to the listing rules fails to do so, the court can, on the application of, among others, the MAS or the SGX-ST, make an order directing the person to comply with, observe, enforce or give effect to the listing rules. Penalties under the SFA The SFA provides that an issuer must not intentionally, recklessly or negligently fail to notify the SGX-ST of information that is required to be disclosed by the SGX-ST under the listing rules or any other requirement of the SGX-ST, and that intentional or reckless contravention of this requirement is an offence. A breach of continuing obligations can attract criminal liability or civil penalty under the SFA. Market Abuse and Inside