An extract from The Initial Public Offerings Law Review, 4th Edition

The offering process

i General overview of the IPO processMainboardCommencement

The IPO process typically begins with the appointment of an issue manager, lawyers and auditors. It can take up to 12 weeks (in some cases longer) for the due diligence process to be completed, the prospectus to be drafted and the accompanying documentation (as prescribed by the Listing Rules) to be prepared. The issue manager may, on behalf of the issuer, consult the SGX-ST to resolve key fundamental issues prior to the submission of an application.

Submission of listing application

Once all necessary documentation has been prepared in compliance with the Listing Rules, the SFA and regulations thereunder, the issue manager will submit to the SGX-ST, on behalf of the issuer, the listing application, including the Listing Admissions Pack and prescribed accompanying documents, in particular the draft prospectus.

The Listing Admissions Pack sets out the key issues for listing, and, additionally, the issue manager must confirm that, after making due and careful enquiry, it is satisfied that the issuer has met all the requirements of the Listing Rules relevant to the submission and all relevant information relating to the listing application has been disclosed in writing to the SGX-ST.

The issuer may also submit the draft prospectus to the MAS for pre-lodgement review at the same time as the submission of the listing application to the SGX-ST.

Review by the SGX-ST and MAS

The SGX-ST will review the listing application and assess whether the key issues identified in the Listing Admissions Pack have been adequately resolved to decide whether the issuer is suitable for admission. The issue manager will liaise with the designated SGX-ST officers on queries they may have on the documents submitted. Once the review is completed, the listing application will be tabled before the listings committee of the SGX-ST for consideration. Assuming that the listings committee has no further queries, the SGX-ST will issue an ETL letter, which will contain conditions. The SGX-ST may take up to eight weeks to complete its review of the listing application. If the issuer had submitted the draft prospectus to the MAS for pre-lodgement review, during the review period, the issuer's lawyers will liaise with the designated MAS officers on queries they may have on the draft prospectus. Once the MAS completes its review and queries are addressed to its satisfaction, it will grant the issuer clearance to proceed with lodgement of the preliminary prospectus.

MAS lodgement and registration

Once the ETL letter is issued and pre-lodgement clearance from the MAS is obtained, the issuer can lodge the preliminary prospectus with the MAS, together with the prescribed accompanying documents. The MAS will upload the preliminary prospectus on its website under the Offers and Prospectuses Electronic Repository and Access, where it will be subject to public comment for seven to 21 days.

The MAS may register the prospectus between the seventh and the 21st day of the date of lodgement of the preliminary prospectus (which may be extended to a maximum of 28 days if the MAS gives notice of such extension under the SFA). Once the prospectus is registered, the IPO can commence. The offer period for an IPO must not be shorter than two market days (excluding the date of commencement of the offer period) and normally lasts for three to five days.

Listing

Once the SGX-ST is satisfied that an issuer has met all conditions stipulated in the ETL letter, the issuer will be admitted to the Mainboard and the listing and quotation of its shares or units may then commence.

Catalist

The listing process for a Catalist listing could be significantly shorter than a Mainboard listing.

Following the preparation of the necessary documentation to be submitted to the SGX-ST, the sponsor will submit a pre-admission notification containing the prescribed documents, and after receiving clearance from the SGX-ST, will lodge a preliminary offer document with the SGX-ST for posting on its Catalodge website.

The preliminary offer document will be exposed for public comments for a minimum of 14 days. Provided that any queries from the public and the SGX-ST are addressed to the SGX-ST's satisfaction, the final offer document will be registered by the SGX-ST and posted on Catalodge. The IPO can commence only after the final offer document is registered. The offer document is not required to be lodged with or registered by the MAS.

Key partiesIssue manager or sponsor

An issuer applying for a Mainboard listing must appoint an accredited issue manager who will act as the sponsor for the listing. The issue manager must be a member company of the SGX-ST, a bank, a merchant or an investment bank, or another similar person who is acceptable to the SGX-ST. The issue manager will typically also be an underwriter.

The issue manager is responsible for preparing the issuer for listing and for the accuracy of the information submitted to the SGX-ST, and is expected to exercise due care and diligence in ensuring accuracy and completeness of the information in the listing application. The issue manager must be satisfied that the issuer is suitable to be listed; meets the admission requirements; is sufficiently set up to comply with the continuing listing requirements; and has directors that appreciate the nature of their responsibilities and can be expected to honour their obligations under the Mainboard Listing Rules.

The requirement to have an issue manager ends once the issuer is admitted to the Mainboard, although the Mainboard Listing Rules recommend that the issuer retain the services of the issue manager for at least one year following listing.

In the case of a Catalist listing, an approved full sponsor will be appointed, who is responsible for assessing and determining whether the issuer is suitable to be listed on Catalist, and will continue to supervise the issuer's compliance with the continuing listing requirements under the Catalist Listing Rules for at least three years after listing.

Lawyers

An issuer will normally appoint lawyers to advise on the legal aspects of the listing process, conduct legal due diligence, draft the prospectus, prepare all the legal documentation necessary for the listing process (including the Listing Admissions Pack) and negotiate the legal agreements the issuer enters into.

Lawyers appointed by the underwriter will advise on any legal agreements entered into, assist in the preparation of the prospectus, advise the underwriter on its obligations, conduct legal due diligence and assist with the preparation of the legal documentation necessary for the listing process.

Underwriters

The issuer will normally appoint an underwriter for the offering, who will be obliged to subscribe for or purchase the shares or units that are not taken up by investors. If the IPO is large, there will likely be a syndicate of underwriters.

Auditors

The issuer's auditors will normally be appointed as the reporting accountants who will prepare the auditors' report for inclusion in the prospectus. Auditors are typically required to provide comfort letters to the underwriters and confirmations to the SGX-ST regarding the internal controls of the issuer.

Independent valuer

An issuer that is a property investment or development company must also appoint an independent external valuer to conduct a valuation of all its principal freehold and leasehold properties. The independent valuer will prepare a valuation report for inclusion in the prospectus.

Documentation

Some of the main documents required in an IPO include:

  1. a prospectus containing the prescribed information under the SFA and regulations thereunder, and the Listing Rules;
  2. a product highlights sheet;
  3. an underwriting agreement to be entered into between the issuer, the underwriter or underwriters, and the selling shareholders or unitholders (other than the issuer), if any;
  4. lock-up agreements;
  5. comfort letters by the auditors; and
  6. disclosure letters and legal opinions by the lawyers.
ii Pitfalls and considerationsConflicts of interest

Under the Listing Rules, conflicts of interest should be resolved or mitigated prior to listing. Conflicts of interest situations include situations in which interested persons (such as the directors, chief executive officer and controlling shareholder of the issuer and their associates) (1) carry on business transactions with the issuer or provide services to or receive services from the issuer or the issuer and its subsidiaries (the Group); (2) lend to or borrow from the issuer or the Group; (3) lease property to or from the issuer or the Group; or (4) have an interest in businesses that are competitors, suppliers or customers of the issuer or the Group.

The SGX-ST may accept a proposal to resolve or mitigate conflicts of interest within a reasonable period after listing.

Moratorium

Promoters of an issuer (namely its controlling shareholders and their associates and its executive directors with an interest in 5 per cent or more of the issuer's issued share capital (excluding subsidiary holdings) at the time of listing) seeking a Mainboard listing are required to give a contractual undertaking to the issue manager to observe a moratorium on the transfer or disposal of their interests in the shares of the issuer. The purpose of a moratorium is to maintain the promoters' commitment to the issuer and align their interests with that of public shareholders.

The moratorium period varies depending on whether the issuer satisfies the profit tests or the market capitalisation test.

Moratorium period
Profit testsMarket capitalisation test
Promoters' 100 per cent shareholdings at the time of listing for at least six months after listing.Promoters' 100 per cent shareholdings at the time of listing for at least six months after listing, and at least 50 per cent of their original shareholdings at the time of listing (adjusted for any bonus issue, subdivision or consolidation) for the next six months.

A promoter who has an indirect shareholding in the issuer must also provide an undertaking to maintain its effective interest in the shares under moratorium during the moratorium period, except that where an indirect shareholding is held through a listed company, the promoter's holding in that listed company is excluded from the moratorium.

Further moratorium requirements apply under the Mainboard Listing Rules to investors that acquired and paid for their shares less than 12 months before the date of the listing application, and investors connected to the issue manager.

If the issuer is seeking a Mainboard listing with a DCS structure, holders of the multiple voting shares are required to give contractual undertakings to the issue manager to observe a moratorium on the transfer or disposal of their entire shareholdings in the issuer, in respect of their interests in both the multiple voting shares and ordinary voting shares at the time of listing, for at least 12 months after listing.

In a Catalist listing, promoters are to give moratorium undertakings in respect of their entire shareholding at the time of listing for at least six months after listing, and no less than 50 per cent of their original shareholding at the time of listing (adjusted for any bonus issue, subdivision or consolidation) for the next six months.

Listing application (for Mainboard listings)

The issue manager is required to highlight in the listing application the key issues for listing, including whether:

  1. there is any non-compliance with laws and regulations that may cast doubt on the character and integrity of the directors, key executive officers or controlling shareholders of the issuer;
  2. there is any non-traditional or complex shareholding structure, such as those resulting from legal restrictions;
  3. the issuer has not obtained any key approval or licence, or the application for renewal is pending approval or the remaining validity is less than 12 months;
  4. there has been any non-compliance with laws and regulations by the issuer; and
  5. the issuer has rectified all material internal control weaknesses.
iii Considerations for foreign issuers

Additional requirements apply to a foreign issuer seeking a listing on the SGX-ST:

  1. a foreign issuer must have a minimum number of independent directors who are resident in Singapore (two for a Mainboard listing and one for a Catalist listing);
  2. a foreign issuer must make arrangements satisfactory to the SGX-ST to enable shareholders in Singapore to register their shareholdings promptly; and
  3. any change in law in the foreign issuer's place of incorporation that may affect or change shareholders' rights or obligations over its securities must be announced on SGXNET immediately.

The constitutive documents of the foreign issuer must also contain the requisite provisions stipulated by the Listing Rules.