There have been a growing number of Singapore-listed companies taking the dual listing route, i.e. where the company is allowed to be listed and traded on the Singapore Exchange Securities Trading Limited ("SGX"), as well as on the stock exchange of another country.
This article discusses why a Singapore-listed company would seek a dual listing and the main steps involved, and several key considerations, in a dual listing.
Why a Singapore-listed company would seek a dual listing
Various jurisdictions have different pull factors to attract a Singapore-listed company to list its shares on its stock exchange.
Gateway to neighbouring economies with professional expertise
Some foreign jurisdictions are strategically located in regions with close trading and business links to neighbouring economies. If these jurisdictions are also internationally recognised financial centres abundant with professional financial expertise, a Singapore-listed company may opt to list its shares there to take advantage of fundraising opportunities.
Strong legal system and sound regulatory framework
A Singapore-listed company may choose to list its shares in a jurisdiction with a well established legal system because this provides a strong and attractive foundation for the company to raise funds and inspire confidence among its investors. Further, the foreign jurisdiction's listing rules may be similar to the SGX's listing manual, which is on par with international standards, demands a high level of disclosure from issuers, and contains stringent corporate governance requirements to give investors access to timely and transparent information so they can appraise the position and prospect of the listed companies.
Free flow of capital and information
A Singapore-listed company may choose to list in a foreign jurisdiction which provides benefits such as zero capital flow restrictions, numerous tax advantages, currency convertibility and the free transferability of securities. Such benefits offer an attractive market for both issuers and investors alike.
Main steps of dual listing
Generally, depending on the foreign jurisdiction's stock exchange governing body, the entire corporate exercise would typically take approximately nine to 12 months to complete. The process would generally involve the following steps (but please note that this is a non-exhaustive list as each foreign jurisdiction may have its own additional specific requirements):
- appointing various professional parties and allocating responsibilities;
- legal and finance due diligence on the issuer and its group of companies;
- drafting the prospectus;
- amending the Singapore-listed company’s memorandum and articles of association ("M&AA");
- drafting the extraordinary general meeting ("EGM") circular;
- verification meetings and board meetings;
- announcement to SGX;
- filing the preliminary prospectus with the foreign jurisdiction’' stock exchange governing body and the relevant securities and futures commission;
- preparing road show materials;
- obtaining clearance of amendments to the Singapore-listed company’s M&AA and draft EGM circular from the foreign jurisdiction's stock exchange governing body and the relevant securities and futures commission;
- submitting the amended M&AA and draft EGM circular to SGX for vetting and clearance;
- despatching the EGM notice and circular to shareholders in Singapore;
- conducting the EGM to approve the dual listing and amended M&AA;
- announcement of share transfer from Singapore to the foreign stock exchange in batches;
- receipt of approval in principle from the foreign jurisdiction’s stock exchange governing body for prospectus printing;
- board meeting to approve board listing and other relevant matters;
- issuance of prospectus and other listing documents;
- road show and press conference;
- arrival of first batch of transferred shares from Singapore; and
- commencement of trading.
Role of Singapore Counsel
The responsibilities of the Singapore counsel in the dual listing process would generally include the following (but please note that this is a non-exhaustive list as each jurisdiction may have its own additional specific requirements):
- drafting the relevant Singapore law aspects of the prospectus;
- drafting the EGM circular;
- drafting various board resolutions for the issuer;
- reviewing and amending the issuer's M&AA;
- conducting verification meetings and board meetings;
- drafting the announcements to be made to SGX; and
- submitting the draft EGM circular and draft M&AA to SGX for approval;
Some key considerations which an issuer should bear in mind include the following:
Offering structure considerations
Depending on the requirements of the foreign stock exchange, there may be "lock-up periods" imposed on the controlling shareholders, which restrict their ability to deal freely with their shares.
The Singapore-listed company should also consider the offering structure. Typically, there are two main structures – the issuance of new shares or the sale of existing shares.
Depending on the requirements of the foreign stock exchange, the Singapore-listed company should consider the number of executive directors, non-executive directors and independent non-executive directors as well as the composition of the audit committee, remuneration committee and the nomination committee.
Accounting and financial reporting
Depending on the financial criteria of the foreign stock exchange for listing, the Singapore-listed company may have to conduct tests involving its profits, market capitalisation, revenue, cash flow, etc. to assess whether it meets the relevant criteria for listing. It may also have to prepare a profit forecast and a cash flow forecast.
As mentioned above, the Singapore-listed company has to ensure that its M&AA are amended for compliance with the listing manual of the foreign stock exchange's governing body.
It may have to consider issues such as land title, land use rights and construction rights in addition to the preparation of property valuations.
Where necessary, the Singapore-listed company may have to enlist the help of foreign counsel to provide legal opinions on any legal issues which might arise in a foreign jurisdiction which the issuer has operations in.
More often than not, a Singapore-listed company will tend to reap the benefits of listing its shares on a foreign stock exchange. However, it should take note of the main steps that are involved as well as the key considerations that should be taken into account before it embarks on this corporate exercise.