The Singapore Exchange (SGX) has amended the Listing Rules to enhance disclosures in relation to various transactions. The transactions affected include the provision of loans, guarantees and other forms of financial assistance; the acquisition and disposal of assets; changes in capital; and interested person transactions. The amendments took effect from 7 February 2020.
Loans, guarantees and other forms of financial assistance
Under the amended Listing Rules, an issuer or a subsidiary of an issuer that provides a loan, guarantee, security or other form of financial assistance to a third party should consider whether it amounts to a significant transaction requiring approval under Chapter 10 of the Listing Rules. The exceptions are if:
- The transaction is in, or in connection with, the ordinary course of business or of a revenue nature;
- The financial assistance is provided to the issuer, its subsidiary or its associated company (i.e., it is an intragroup transaction); or
- It is the provision of insurance coverage or defence funding to a director of the issuer, an unlisted subsidiary of the issuer, or an unlisted associated company of the issuer.
The issuer or subsidiary should work out the value of the financial assistance, which is defined as the monetary value of the relevant loan, guarantee, debt, indemnity, security provided or obligation. Based on this, it will need to determine the value of the relative bases under rule 1006(a) and 1006(c) of the Listing Rules. These require the comparison of the aggregate value of the financial assistance:
- With the group’s net asset value; or
- With the issuer’s market capitalization based on the total number of issued shares excluding treasury shares.
If either relative figure exceeds 5%, it will be a discloseable transaction and an announcement must be made. The announcement must state the aggregate value of the financial assistance and any interest payable. If either relative figure exceeds 20%, it will be a major transaction and shareholders’ approval must be obtained. Note that if the relative figure is below 5%, the issuer will still need to consider whether disclosure is required under any other rule:
- Disclosure must be made if the information is either price-sensitive or trade-sensitive; or
- Disclosure must be made if the financial assistance is an interested person transaction.
Acquisitions or disposals
Various changes have been made to the Listing Rules in relation to acquisitions and disposals. The following are noteworthy:
- Previously, immediate disclosure was required for all acquisitions or sales of shares resulting in a company becoming or ceasing to be a subsidiary or associated company of the issuer. Immediate disclosure was also required if the acquisition or sale increased or reduced the issuer’s percentage of shareholding in a subsidiary or associated company. With the amendment, immediate disclosure is no longer required unless the acquisition or sale of shares is material to the issuer. For such non-material acquisitions or sales, disclosure may instead be made together with the financial statements.
- Where an acquisition or disposal is not material, if the securities are quoted securities in companies that are not listed subsidiaries and associated companies, immediate disclosure is required if the acquisition results in the issuer’s aggregate cost of investment in quoted securities exceeding each multiple of 5% of the issuer’s latest audited consolidated net tangible assets. The issuer should no longer include its holdings in its subsidiaries and associated companies that are listed in computing its investment in quoted securities.
- Where an acquisition or disposal of assets other than shares is a major transaction and the issuer / subsidiary has not commissioned a valuation of the asset, it must explain why it did not do so in its circular to shareholders seeking approval for the transaction.
- In a disposal of assets, if the disposal is a major transaction and the value of the relative figure under rule 1006 is more than 75%, the issuer must appoint a competent and independent valuer to value the assets to be disposed.
Changes in capital
Announcements for rights issues must now include the following information, previously not required:
- If there is a discount, the issuer must state the amount of the discount, specifying the benchmarks and periods used to determine the amount of the discount, as well as the factors taken into account in arriving at the discount.
- If the proceeds of the issue are to be used mainly for general working capital purposes, the issuer must state the reason for such use taking into account its working capital position.
- The issuer's directors must state their opinion as to whether the working capital available to the group is sufficient to meet its present requirements after taking into account its present bank facilities. If their view is that it is insufficient, they must provide a further opinion on the sufficiency of the group's working capital after taking into account the issuer’s present bank facilities and the net proceeds of the issue.
- The issuer’s directors must state why the issue in the interest of the issuer and their basis for this view.
- If the rights issue is within 12 months from its previous equity fund raising, the issuer must set out the particulars specified in the Listing Rules as to the fund raising exercises held in those past 12 months, including how the money was utilized.
Where a rights issue is undertaken for general working capital purposes, in addition to the disclosures required as set out above, a status report on the use of the proceeds must be included in the issuer’s annual report. The report must provide a breakdown with specific details on the use of the proceeds for working capital.
Company warrants and other convertible securities
The SGX has provided that an issuer must announce any adjustment or amendment made to the terms of an issue of company warrants or other convertible securities. In addition, while an issuer could previously extend the exercise period of an existing company warrant or issue a new company warrant to replace an existing company warrant if this was done pursuant to the terms of the issue, the Listing Rules now expressly prohibit this.
Interested Person Transactions
The SGX had proposed removing the de minimis threshold of interested person transactions below SGD100,000. Following feedback, it has decided to keep the threshold but it has amended the Listing Rules to expressly allow it to aggregate transactions if it is of the view that this is needed. It may also deem a person or entity to be an interested person. The Listing Rules have also been amended to provide that, in aggregating transactions, an associate of an interested person is to be deemed to be the same person as the interested person for aggregation purposes. The intention of these changes is to prevent the structuring and splitting up of interested person transactions to artificially fall below the de minimis threshold.
For continuing interested person transactions, the names of the interested persons must be listed in the general mandate and not just the class of interested persons as was previously the case. If a new interested person is to be added to the general mandate, the circular must include an independent financial adviser’s opinion on whether the methods or procedures for determining transaction prices are sufficient to ensure that the transactions will be carried out on normal commercial terms and will not be prejudicial to the interests of the issuer and its minority shareholders.
The following are also noteworthy:
- Announcements of interested person transactions must now include (where available) the book value, net profits attributable to the assets and latest available open market value.
- The report on interested person transactions set out in an issuer’s annual reports must now also set out the nature of the relationship for the relevant interested person transaction (e.g., associate of the director).
The Listing Rules have also been amended to make clear that disclosure must be made of information that is trade-sensitive and to require quarterly financial reporting only for companies that meet specified requirements. These are covered in "Information to Be Disclosed if It Would Influence an Investor to Trade Even if It Is Not Price-Sensitive" and "Companies to Carry Out Semi-Annual Reporting Unless Special Circumstances Exist" respectively.