The Takeover Code has been amended to provide that where changes in the number of votes of multiple vote shares in a dual class shares company results in a shareholder coming under an obligation to make a general offer for the company, the obligation will not apply if, among other things, the shareholder is independent of the change. It also sets out how the offer price is to be determined in such cases.

The Singapore Code on Take-overs and Mergers (Takeover Code) has been amended to set out how it will apply to a company with dual classes of shares (a DCS company), that is, a company with shares carrying multiple votes (MV Shares) as well as shares carrying one vote (OV Shares). DCS companies have been able to be listed on the Main Board of the Singapore Exchange since 26 June 2018.

The obligation to make a general offer

Under Rule 14 of the Takeover Code, a shareholder must make a general offer for the company if its percentage of voting rights (taken together with those of the persons acting in concert with it) increases past the specified thresholds. In a DCS company, a shareholder’s percentage of voting rights may increase not as a result of any acquisition of shares by it or by persons acting in concert with it but as a result of changes in the number of votes carried by MV Shares. For example, a holder of MV Shares may voluntary seek to reduce the number of votes per MV Share. An MV Share would also automatically convert to an OV Share upon the occurrence of certain events (such as the death of the holder of MV Shares or the sale of the MV Shares).

The following example shows how this would impact the percentage of voting rights of a holder of OV Shares. In this example, a reduction in the number of votes per MV Share from 5 to 3 results in an increase in Shareholder A’s percentage of voting rights to 36%, while a reduction from 5 to 1 results in an increase Shareholder A’s percentage of voting rights to 48%.

Example of Company A with Shareholder A

Total number of MV Shares in Company A: 1,000

Total number of OV Shares in Company A: 5,000

Number of OV shares held by Shareholder A: 2,900

Obligation to make a general offer will not apply under certain circumstances

 Ordinarily, an increase past the threshold of 30% would, under Rule 14, result in a shareholder coming under an obligation to make a general offer for the shares of the company. The amended Takeover Code incorporates a new Note 18 on Rule 14.1. This states that if a change in the votes per MV share results in a shareholder (a Triggering Shareholder) coming under such an obligation, the Triggering Shareholder will not be required to make a general offer for the company if:

  • The change occurred independently of it;
  • It does not acquire any additional voting rights in the company from the date it becomes aware that the change is imminent; and
  • It does not exercise its voting rights in excess of the relevant mandatory offer threshold from the date of the change.

The Securities Industry Council (SIC) clarified in its response to feedback that a Triggering Shareholder would not be deemed not independent of the change solely because it voted in favour of the change.

If any of the three conditions are not met, the Triggering Shareholder must make a general offer for the company. The offer must be made:

  • Within six months of the date the change occurred; or
  • Immediately upon the acquisition of the additional voting rights or upon the exercise of its voting rights in excess of the relevant mandatory offer threshold.

The exceptions to the requirement to make a general offer are if:

  • The independent shareholders of the company, within three months of the date of the change, approve a resolution waiving the requirement to make a general offer; or
  • The Triggering Shareholder disposes of a sufficient quantity of shares as to bring its total percentage of votes below the specified thresholds.

Offer price for the shares if the Triggering Shareholder makes a general offer

A new Note 8 on Rule 14.3 has been added. It states that if the Triggering Shareholder proceeds to make a general offer, it must offer to buy the shares of the company at the highest price that it (or its concert parties) paid for voting rights in the company in the six months prior to the earlier of either of the following dates:

  • The date of the initial announcement of the change; or
  • The date of the change.

If there had not been any purchases, the SIC will generally require the offer price to be the simple average of the daily volume weighted average traded prices of the company on either the latest 20 trading days or whatever number of trading days there were within the 30 calendar days prior to the earlier of either of the following dates:

  • The date of the initial announcement of the change; or
  • The date of the change.

The date of the initial announcement of the change was added as an alternative reference date following the consultation. It was accepted that where there is an announcement of a proposed change, trading in the shares of the company following such an announcement would include trades done in speculation that a general offer would be made as a result of the change.

Offer price for MV Shares and OV Share to be comparable

Where a shareholder comes under an obligation to make a general offer for a company, Rule 18 of the Takeover Code states that, “Where a company has more than one class of equity share capital, a comparable offer must be made for each class”. Note 1 on Rule 18 has been amended to state that where an offer is made for MV Shares and OV Shares and the shares differ only in their voting rights, the offer will be comparable if the ratio of the offer values is equal to one.