On 2 June 2011, the Singapore Exchange Ltd. (“SGX”) issued a Consultation Paper on Proposed Rule Changes on General Meetings to Increase Shareholder Engagement and Enhance Corporate Governance Practice (“Consultation Paper”). The Consultation Paper proposed amendments to the continuing listing obligations to require: (i) a primary-listed issuer to hold its annual general meetings in Singapore, unless prohibited by relevant laws and regulations in the jurisdiction of its incorporation; (ii) an issuer to conduct poll voting on all resolutions; and (iii) an issuer to announce certain information such as results of the polls, including details such as the total number of shares voted for and against each resolution, immediately after each general meeting (“Proposed Amendments”). The Proposed Amendments were to apply to issuers listed on both the Main Board and the Catalist.
THE NEW RULES
On 31 July 2013, SGX announced that it has introduced new listing rules of the Singapore Exchange Securities Trading Limited (“SGX-ST”) Listing Manual (“New Rules”) to promote greater transparency in general meetings and enhance shareholder engagement, with the overall aim of strengthening corporate governance.
The Proposed Amendments were adopted by SGX, with some changes to the implementation deadlines, some adjustments to the wordings and some refinement to the details of the Proposed Amendments after taking into consideration constructive feedback received from the public and consultations with the Monetary Authority of Singapore.
The New Rules stipulate that, in general, (i) all SGX-ST primary-listed companies and trusts should hold all their general meetings in Singapore; (ii) all resolutions at general meetings should be voted by poll; and (iii) there should be prompt disclosure of voting decisions and outcomes.
The New Rules apply to both Singaporeincorporated and foreign-incorporated companies and real estate investment trusts and registered business trusts listed on both the Mainboard and Catalist.
For companies and trusts listed on the Mainboard, the New Rules can be found in Rule 704(16), Rule 730A and Practice Note 7.5 of the Mainboard Rules. For companies and trusts listed on the Catalist, there is a similar set of rules found in Rule 704(15), Rule 730A and Practice Note 7E of the Catalist Rules.
The details of the New Rules as set out below are made with reference to the Mainboard Rules and Practice Notes.
HOLDING OF GENERAL MEETINGS IN SINGAPORE
With effect from 1 January 2014, an issuer primary-listed on the SGX-ST should hold all its general meetings in Singapore, unless prohibited by relevant laws and regulations in the jurisdiction of its incorporation.
Issuers who are required by the laws and regulations of their country of incorporation to hold general meetings within their jurisdictions will be required to demonstrate to the SGX-ST the restrictions in their jurisdictions that prohibit general meetings from being held outside their country of incorporation. In the event that the issuer is unable to hold its general meetings in Singapore due to other circumstances such as to
reach a larger public shareholder base, the issuer should consult the SGX-ST which will consider these circumstances on a case-by-case basis.
In the event that an issuer holds its general meetings outside Singapore, it should make arrangements such as video conference or webcast to enable the shareholders based in Singapore to follow the proceedings simultaneously. Such issuers should also hold information meetings for its shareholders in Singapore so that they can have the opportunity to interact directly with the board and management.
An issuer is also required to disclose the circumstances under which its general meetings are convened outside Singapore in its initial public offering prospectus if the arrangement to hold general meetings outside Singapore is known at the time of listing or in a SGXNET announcement when the arrangement to hold general meetings outside Singapore is approved by the SGX-ST after listing.
The intent of the New Rules was stated in the Consultation Paper. The SGX considered that general meetings are important avenues for shareholders to voice their opinions on affairs relating to an issuer and that an issuer should make it possible for the majority, if not all, of its shareholders to participate in its general meetings.
It was noted that the Corporate Governance Code encourages active engagement of shareholders. An effective means of doing so is for issuers to hold their general meetings in Singapore. For primary-listed issuers, the Singapore market is normally the primary pool of liquidity for their shares and it was considered that such issuers should hold their general meetings in Singapore.
With effect from 1 August 2015, all resolutions at general meetings should be voted by poll. In addition, at least one scrutineer should be appointed for each general meeting. The duties of the appointed scrutineer are to ensure that satisfactory procedures of the voting process are in place before the general meeting and to direct and supervise the count of the votes cast through proxy and in person.
The appointed scrutineer(s) should be independent of the persons undertaking the polling process. In the event that the appointed scrutineer is interested in the resolution(s) to be passed at the general meeting, it should refrain from acting as the scrutineer for such resolution(s).
If shareholders are unable to attend the general meeting in person, they should be allowed to appoint proxies to represent them.
The intent of these provisions on poll voting was similarly set out in the Consultation Paper. It was noted that voting on resolutions at a general meeting is a fundamental right of shareholders. The current practice in Singapore, as provided in the Companies Act is to conduct voting at a general meeting by a show of hands, unless a poll is demanded for. Voting by a show of hands does not accord shareholders with rights based on their respective shareholding.
It was noted that while voting by poll would give a stronger voice to major shareholders over minority shareholders, this should not override the fundamental premise that shareholders should be accorded rights proportionate to their shareholding and economic interest at stake. Furthermore, voting by poll also encourages higher levels of shareholder participation as institutional investors and overseas investors will be able to actively participate in general meetings via their proxies.
PROMPT DISCLOSURE OF VOTING DECISIONS AND OUTCOMES
With effect from 1 August 2015, listed companies and trusts will have to announce, immediately after each general meeting and before the commencement of the pre-opening session on the market day following the general meeting, whether the resolutions put to a general meeting of an issuer were passed.
The announcement should include, amongst others, the breakdown of all valid votes cast at the general meeting (including information such as the total number of shares represented by votes for and against the relevant resolution and the total number of shares for a resolution), the details of parties who are required to abstain from voting on any resolution(s) (including the number of shares held and the individual resolution(s) on which they are required to abstain from voting) and the name of the firm and/or person appointed as scrutineer.
In order to comply with the New Rules, issuers will be required to review their articles of association or constituent documents and to obtain shareholders’ approval to amend relevant provisions such as those on general meetings, voting and proxies to align them with the requirements of the New Rules (if they are not already aligned).
Compliance with the New Rules is also expected to bring about increase costs in holding general meetings because issuers may have to arrange for alternative modes of engagement such as video conference or webcast (if they are unable to hold their general meetings in Singapore), appoint scrutineers for each general meeting, deploy manpower to count the polling slips (if the poll is conducted manually) or set up electronic polling systems (if the poll is conducted electronically).
Issuers who are unable to hold general meetings in Singapore should also be mindful of the practical challenges present in the use of alternative modes of engagement to engage its shareholders in Singapore. These practical challenges include keeping track of which shareholders attended, devising a forum that allows the local shareholders to engage in a meaningful two-way real time communication with the board and management and ensuring that local shareholders can cast their votes in real-time.
Nevertheless, the New Rules are a step in the right direction in encouraging shareholder participation and they are also in line with the general sentiments on corporate governance practices in the United Kingdom which also seek to enhance better interaction between the board and shareholders by, amongst others, encouraging shareholders to attend general meetings and similarly in Australia where companies are encouraged to respect the rights of shareholders and to empower their shareholders by, amongst others, making it easier for shareholders to participate in general meetings so they can have more opportunities to ask questions and seek accountability from the board.
Please click on the links below to refer to the relevant documents.
- SGX Consultation Paper dated 2 June 2011 on Proposed Rule Changes on General Meetings to Increase Shareholder Engagement and Enhance Corporate Governance Practice
- SGX News Release dated 31 July 2013 titled “SGX introduces new rules on poll voting and general meetings in Singapore”
- Rule 704(16) of the Mainboard Rules
- Rule 730A of the Mainboard Rules
- Practice Note 7.5 (General Meetings) of the Mainboard Rules