On 7 February 2014, the Singapore Exchange Ltd. (“SGX”) announced that it has introduced new notification requirements in Practice Note 7.2 of the Singapore Exchange Securities Trading Limited (“SGX-ST”) Listing Rules for Mainboard issuers (“Listing Manual”). Corresponding amendments have also been made to Practice Note 7B of the Catalist Rules for issuers listed on the Catalist. The overall aim of the amendment is to facilitate closer monitoring of an issuer’s trading activities and to better manage circumstances under which unusual trading activities have arisen.
NOTIFICATION TO SGX
Presently, when SGX detects unusual trading activity in an issuer’s securities, SGX will issue either a verbal or a written query to the issuer (depending on the extent of the unusual trading activity) requiring the issuer to inform the public whether it is aware of any material information that might reasonably be expected to have a significant effect on the trading volume or price of its securities.
However, with effect from 3 March 2014, there is a new requirement to notify SGX without delay where there are discussions or negotiations that are likely to result in any one of the following transactions:
- a takeover of the issuer, which includes a scheme of arrangement or delisting;
- a reverse takeover of the issuer; or
- a very substantial acquisition by the issuer.
PERSONS WHO NEED TO NOTIFY
The amendments set out the circumstances under which the issuer (or a controlling shareholder, depending on the situation) has an obligation to notify SGX of the potential transactions listed above.
The issuer is required to notify SGX of a potential transaction listed above if it is:
- made aware of discussions or negotiations on a potential proposal; or
- in discussion or negotiation on an agreement or document, whether binding or not.
On the other hand, a controlling shareholder is required to notify SGX of a potential transaction listed above where:
- discussions or negotiations are carried out by a controlling shareholder of the issuer, and without the knowledge of the issuer; and
- the discussions or negotiations are likely to result in any of the potential transactions listed above.
Additionally, SGX must also be notified by the issuer or controlling shareholder if any of the above discussions or negotiations cease.
FORM OF NOTIFICATION
Those required to notify SGX will have to adhere to a prescribed format containing the following information:
- name of the listed company;
- type of transaction;
- name of the target company (if applicable); and
- details of the contact person.
There is no obligation to disclose the identity or particulars of the counterparty, nor is there a requirement to make any public announcement of the potential transaction. The new obligation under Practice Note 7.2 only requires the issuer or controlling shareholder to notify SGX of a potential transaction. Notwithstanding the above, issuers should still be mindful of the disclosure requirements set out in Rule 703 of the Listing Manual, and as described in further detail in Appendix 7.1 and Practice Notes 7.1 to 7.3 of the Listing Manual. Where the Singapore Code on Take-overs and Mergers (“Take-over Code”) applies, issuers should also note the disclosure obligations under Rule 3 of the Take-over Code.
In addition, issuers or controlling shareholders are also expected to maintain a list of individuals who are privy to the transaction, in a prescribed format. The list must be submitted to SGX whenever requested.
PARTIES AFFECTED AND ACTIONS NEEDED
These new requirements will apply to issuers and controlling shareholders of issuers who are currently involved (or have plans to become involved) in one of the transactions listed above. Parties will need to consider whether an obligation to notify has been triggered, and are encouraged to comply with the changes set out even before they become effective on 3 March 2014.
Overall, these changes introduced are set to enhance procedures undertaken by SGX when querying issuers on unusual trading activities and monitoring their compliance with the relevant rules and regulations. However, these amendments do not present a catch-all set of instructions, and there may be certain situations that warrant a different approach as decided by SGX.