Singapore - SGX RegCo Introduces Measures To Support SGX-Listed Companies Amidst COVID-19.
Legal News & Analysis - Asia Pacific - Singapore - Regulatory & Compliance
15 April, 2020
Singapore has introduced a slew of measures to cushion the impact of COVID-19 on businesses and the economy. In addition to three stimulus packages comprising more than S$60 billion dollars, the Singapore government had also passed the COVID-19 (Temporary Measures) Act 2020, which, amongst others, is intended to provide temporary and targeted relief to businesses and individuals who are unable to perform their contractual obligations as a result of COVID-19, to provide temporary cashflow relief, and to provide temporary relief for financially distressed individuals and businesses.
Details of the COVID-19 (Temporary Measures) Act 2020 has been discussed in our previous article, accessible here.
Following the Government's measures, having regard to the challenging economic climate, the drastic global deterioration in business condition and the significant losses of revenue and profitability experienced by businesses worldwide, the SGX RegCo has also followed suit. On 8 April 2020, the SGX RegCo announced two key measures to support issuers amidst COVID-19. These are (a) suspension of entry into the financial watch-list and (b) increasing the share issue limit for Mainboard issuers.
Suspension of entry into financial watchlist
SGX listed companies are typically placed on the watch-list after three years of losses and their market capitalisation falls below S$40 million. In addition to the challenging business climate, SGX has also noted that the share prices of companies have fallen quite significantly, with the STI closing at about S$2,500 on 8 April 2020, from approximately S$3,200 at the beginning of the year. As such, SGX RegCo will suspend the reviews it undertakes to place issuers on the financial watch-list, in hopes that this will allow issuers to focus on their current business and economic challenges, and to deal with any resultant liquidity crunch. This also ensures that issuers will not be placed under any undue prejudice in their operations and fulfilling their business obligations. The suspension of such reviews is currently for the year of 2020, but may be extended in due course of the SGX Regco determines it to be appropriate. Notwithstanding the review suspension, companies meeting the exit criteria under the listing rules will continue to be able to exit the watch-list.
Enhanced Share Issue Limit for Mainboard Issuers
Another measure implemented by SGX RegCo allows Mainboard Issuers to seek a general mandate ("Enhanced Mandate") either at the annual general meeting or through specific shareholders' approval by convening an extraordinary general meeting, for an issue of pro-rata shares and convertible securities (collectively, the "securities") of up to 100% of its share capital (excluding treasury shares and subsidiary holdings in each class) (“Enhanced Share Issue Limit”). The existing share issue limit that can be obtained from shareholders by way of general mandate for a pro-rata issue of securities is up to 50% of an issuer's share capital. The limit on the aggregate number of shares and convertible securities issued other than on a pro-rata basis remains at not more than 20%. The Enhanced Share Issue Limit will remain in force until 31 December 2021.
While clearance from the SGX is not required for the notice of general meeting ("Meeting Notice") and no circular is required in respect of the Enhanced Mandate, the Enhanced Share Issue Limit is still subject to certain conditions. Besides having to ensure compliance with any applicable legal requirements governing the issuer and its constitutive documents arising from the Enhanced Share Issue Limit, the issuer must also ensure that it does not issue more than 100% of its total number of issued shares (excluding treasury shares and subsidiary holdings) by the next AGM immediately following the passing of the Enhanced Mandate. The Board of Directors also has to provide a confirmation to SGX RegCo that the Enhanced Share Issue Limit is in the interest of the issuer and its shareholders.
In the Meeting Notice, the issuer must disclose the following:
(i) why the Board of Directors is of the view that the Enhanced Share Issue Limit is in the interest of the issuer and its shareholders and their basis for such views;
(ii) that the Enhanced Share Issue Limit may be reviewed annually during the issuer’s AGM but is only valid until 31 December 2021. By 31 December 2021, shares issued pursuant to the Enhanced Mandate must be issued and no further shares shall be issued under the Enhanced Mandate;
(iii) if the issuer is seeking shareholder’s approval via an extraordinary general meeting and has utilised any part of an existing share issue mandate, the issuer must disclose the remaining balance that would be available under the Enhanced Share Issue Limit after deducting the part already utilised; and
Following the passing of the Enhanced Mandate, the Company has to notify SGX RegCo by way of email the date on which the Enhanced Mandate is approved by shareholders. Additionally, in each issue of securities relying on the Enhanced Mandate, the issuer must state in its announcement of such issue that it is utilising the Enhanced Share Issue Limit granted by the Enhanced Mandate.
SGX RegCo has also committed in its announcement to work closely with issuers in effecting these measures and to provide issuers with expedited clearance to their fund-raising efforts.
(Special thanks to trainee Lim Neng Fang for her contribution to the article)
For further information, please contact:
Marcus Chow, Partner, Bird & Bird