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Key trends in shareholder activism

i Hedge fund activism

Given the continued drive for Singapore to be a finance hub, the corporate landscape in Singapore has been changing, with new hedge funds being set up with a focus on influencing the way local listed companies are run and maximising returns for its investors.

There have been successful activist actions in most recent annual general meetings; this signals a trend of increased appreciation by investors for board and management accountability to the governance of the company. One example is ComfortDelGro Corporation, whose shareholders, on the recommendation of proxy advisers, voted not to reappoint their auditors.2

Although such activist pressure on companies is generally welcomed by minority shareholders, these initiatives may not usually succeed as it is quite common for Singapore companies to have significant controlling blocks of shares.

ii Influential investor lobby groups

The Securities Investors Association (Singapore) (SIAS) is one of the biggest investor lobby groups in Asia and has mediated many high-profile shareholder issues involving SGX-listed companies, with a preference of taking a conciliatory approach to resolving investors' rights issues. On a regular basis, SIAS analysts compile relevant questions based on annual reports of the companies and query the relevant companies on strategy, financials and corporate governance. SIAS also conducts workshops on the analysis of annual reports for retail investors to help them ask relevant questions at AGMs, advocates progressive industry practices and organises investor education programmes through collaborative arrangements with financial institutions and listed companies interested in investor education as part of its corporate social responsibility agenda.

Further, SIAS takes an active frontline approach in monitoring SGX-listed companies, including querying such companies over their corporate actions. Two examples are given below.

Singapore Press Holdings Limited (SPH)

Pursuant to competing offer proposals by Keppel Corporation Limited (Keppel) and Cuscaden Peak Pte Ltd (a consortium comprising locally listed hotel and property owner Hotel Properties Limited, businessman Ong Beng Seng and two Temasek-linked entities) (Cuscaden), multiple queries were posed by SIAS3 in November 2021 to both Keppel and Cuscaden in relation to the terms and conditions of their offer proposals. Responses provided by the concerned parties assisted shareholders in their decision-making. SPH was ultimately delisted in May 2022, following the successful acquisition by Cuscaden.

Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT)

In December 2021, MCT and MNACT announced a merger to create a flagship commercial real estate investment trust (REIT), to be named Mapletree Pan Asia Commercial Trust (MPACT), where MCT will acquire all the issued and paid-up units of MNACT by way of a trust scheme of arrangement. In February 2021, SIAS issued queries to both MCT4 and MNACT5 in relation to the rationale, deal process and management fee structure, to provide more clarity and transparency to the unitholders. In May 2022, both sets of unitholders voted in favour of the merger, creating one of Asia's top 10 largest REITs.

iii Media and commentators

Corporate governance analysts and commentators are often the first to highlight shortfalls in corporate governance best practices, define issues and set the agenda for change. Shareholders may then be galvanised to hold the relevant boards and management to account. When such issues are highlighted, companies may be requested by regulatory bodies to publicly address its shareholders' concerns or may be compelled to make appropriate disclosure. Recently, corporate governance articles have raised awareness of the necessity for true quality of independence of independent directors in listed companies and called for reforms to focus on giving minority shareholders greater say in the appointment of independent directors, making the criteria for determining independence more prescriptive and stronger enforcement. In 2022, RegCo issued guidelines for duties of directors under the Listing Manual, to emphasise that their duties should be consistent with those expected under law, and that RegCo may take action where there are breaches of directors' duties under the Listing Manual.

Beyond traditional forms of media, shareholders may also reach out online through various social media and messaging platforms to air their grievances and to seek support for their positions.

Recent shareholder activism campaigns

i Sabana REIT

Activist fund manager Quarz Capital Management (Quarz), which is Sabana REIT's second-largest unitholder with a nearly 12 per cent stake, had called on more than one occasion for an extraordinary general meeting to be convened to vote on independent non-executive director Mr Chan Wai Kheong's (Mr Chan's) appointment, due to concerns over the independence of Mr Chan. The requests had been dismissed by Sabana REIT's manager as they were deemed to have lacked grounds. Mr Chan, a hedge fund founder and former Credit Suisse trader, was appointed to the board of Sabana REIT in June 2021. Quarz continued to rally for support from the other unitholders and in April 2022, at the AGM, unitholders had voted not to endorse the appointment of Mr Chan, and Mr Chan consequently stepped down from the board.6 In 2020, Quarz had also been instrumental in the scuppered merger between Sabana REIT and ESR-REIT – this was the first time a proposed merger for a Singapore REIT had been voted down by unitholders.

ii Hwa Hong

An example of a shareholding family dispute concerning a deceased founder and resulting in a tussle for control is Hwa Hong.7 In April 2022, the then acting managing director, Mr Ong Eng Yaw (Mr OEY), one of the grandsons of the founder, resigned for personal reasons and two of the independent directors were not re-elected to the company's board, leaving Mr Mak Lye Mun (Mr Mak) as the sole independent director. Mr Mak then resigned in May 2022. Hwa Hong disclosed that this resignation was due to 'a disagreement with certain board members on the selection and appointment process of the two new independent directors'. This attrition in independent directors led to RegCo issuing a notice of compliance to appoint an independent reviewer to review the internal controls, processes and practices relating to the board nomination process. SIAS also weighed in, with views on expediting those RegCo directives.8 The current management of Hwa Hong (being the other grandsons of the founder) clarified that the appointment of the two new independent directors was an urgent priority for the board, and therefore they proceeded speedily in the interests of reconstituting the board in order to comply with SGX rules.

Citing governance issues and the notice of compliance as one of the reasons, a privatisation offer was launched by Sanjuro United, comprising Mr Ong Choo Eng (who was the managing director from 1989 to 2021) and his son Mr OEY (who was the managing director from 2021 to 2022), together with their family and other substantial shareholders of Hwa Hong. On the same day, Hwa Hong appointed Evercore Asia as a financial adviser to solicit other potential offers.

Notwithstanding that the activism in Hwa Hong was triggered by an entrenched intergenerational family dispute, it has brought regulators' attention to the governance measures of Hwa Hong and will result in greater transparency for its minority shareholders.

iii Shareholder-initiated general meetings

Another indicator of growing shareholder activism in Singapore is the increasing number of shareholder-initiated meetings, where shareholders put forth proposals to remove existing directors and to appoint new directors on the board of the relevant companies.

REC is one example, where Mr Oei Hong Leong (Mr Oei) and his entity, Oei Hong Leong Art Museum Limited, as active shareholders,9 have requisitioned for general meetings. Historically, the requisitionists have been in various disputes with REC since a placement diluted the requisitionists' shareholding in 2017, including a discontinued action10 to oust Mr Chew Hua Seng (Mr Chew), the chair and founder of REC, and a failed injunction to stop REC from proceeding with increasing its stake in a Chinese property firm.11 Some activists set up website 'Save-Raffles-Education',12 which aimed to educate investors about issues surrounding REC, including criticism on the accounting treatments and allegations of family members of Mr Chew being in the employ of REC at high salaries.13 Amid the public scrutiny and regulatory attention arising from the interactions between Mr Oei and REC, after a request by RegCo, REC made a disclosure in relation to claims by Affin Bank Berhad against the REC group, the disclosure being approximately two months late. Five directors (including Mr Chew) were then arrested in February 202214 and continue to assist with the ongoing investigations of potential breaches under the SFA.