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Singapore Exchange Regulation (SGX RegCo) is consulting the market on rule changes to two aspects of voluntary delistings, namely the voluntary delisting resolution and the exit offer.
SGX RegCo is proposing that only minority shareholders, and directors and controlling shareholders who are not the party making the offer (the offeror) or who are not acting in concert with it, can vote on the voluntary delisting resolution at the shareholder meeting. This means the offeror and the parties acting in concert with it cannot participate in the vote.
Accordingly, the approval threshold for the voluntary delisting to proceed is proposed to be amended to a majority from 75%. Also proposed is the removal of the block provision where the delisting will not proceed if it is voted against by holders of more than 10% of the total number of issued shares present and voting.
SGX RegCo intends to require that the exit offer made in conjunction with a voluntary delisting be reasonable1 and fair2 in order for the voluntary delisting to proceed. The appointed independent financial adviser (IFA) must opine that the offer meets both criteria. The Listing Rules currently require an exit offer to be reasonable but does not require it to be fair. SGX RegCo is also proposing to codify the existing practice that the exit offer must include a cash alternative as the default alternative.
“Different parties will have different interests when it comes to listings and delistings and we need to constantly balance the various interests. The changes we are proposing today aim to align, as much as possible, the interests of the offeror and the shareholders particularly the minorities. We are therefore proposing that the delisting offer must be both reasonable and fair, and that the majority of the independent shareholders find it attractive enough to vote in favour of the delisting,” said Tan Boon Gin, CEO of SGX RegCo.
The public consultation is here and will close on 7 December 2018. Subject to the feedback received, SGX RegCo expects to implement the new rules in 2019.
[1] In considering whether an offer is “reasonable”, the IFA should consider other matters as well as the value of the securities subject to the offer (the “Offeree Securities”). Such matters include, but are not limited to, the existing voting rights in the offeree company held by the offeror and its concert parties and the market liquidity of the Offeree Securities. [Source: Securities Industry Council]
[2] The term “fair” relates to an opinion on the value of the offer price or consideration compared against the value of the Offeree Securities. An offer is “fair” if the price offered is equal to or greater than the value of the Offeree Securities. [Source: Securities Industry Council]
