The Singapore Exchange on July 11 announced immediately effective changes to the delisting rules for both the Mainboard Rules and the Catalist Rules in an effort to shift the balance in favor of minority shareholders.
The amendment to the Singapore Exchange’s delisting rules comes after a public consultation and the November 9, 2018 issuance of the Consultation Paper on the Proposed Amendments to Voluntary Delisting Regime following a series of buyout deals in Singapore. In the consultation paper, the Singapore Exchange recognized that in a voluntary delisting situation, controlling shareholders may be placed in a position that allows them to force minority shareholders to sell their shares against their wishes and at unattractive prices. As a result, minority shareholders may lose their chance to participate in the company in which they have invested. The July 11 changes make the delisting rules more favorable to minority shareholders.
Enhanced Exit Offer Requirements
The Singapore Exchange now requires “fair” exit offers to be made when companies decide to voluntarily delist from the stock exchange. The exit offer must be reasonable and fair in the opinion of the appointed independent financial adviser (IFA). The IFA’s opinion must be clear and unequivocal. According to the Securities Industries Council, the price offered to the minority shareholders should be at least as much as, or more than, the value of the securities they hold. This requirement of a “fair” offer is a new addition to provide greater protection to minority shareholders and requires the offeror to give shareholders a better exit value should the company opt for voluntary delisting.
Offeror and Concert Parties Shall Not Vote on the Voluntary Delisting Resolution
In the resolution approving a company’s decision to delist, the Singapore Exchange has ruled that the offeror together with the concert parties shall not cast their vote. Effectively, only the independent shareholders—minority shareholders and those not involved in the exit offer—may vote on the voluntary delisting resolution. The threshold required for approval of the delisting remains unchanged at 7% of the total number of shares held by independent shareholders present and voting.
The Singapore Exchange also removed a requirement stating that a voluntary delisting resolution must not be voted against by more than 10% of the issued shares held by shareholders present and voting, as it recognizes the challenges faced by minority shareholders in meeting this requirement.
The changes to the voluntary delisting regime accord greater protection to minority shareholders. The new rules effectively set a higher standard for controlling shareholders seeking to privatize their company to ensure that a “fair” offer has been obtained for the minority shareholders and to prevent the minority shareholders from being placed at a disadvantageous position in voluntary delisting situations.