SGX RegCo Sets Out Potential Scenarios Where General Offers Lead to Loss of Public Float Scenarios

16 July 2024

On 15 July 2024, the Singapore Exchange Regulation (“SGX RegCo“) issued a Regulator’s Column titled “Potential scenarios when general offers lead to loss of public float” (“Column“).

Under the SGX Listing Rules (“Listing Rules“), SGX RegCo may agree to an application by an issuer to delist if:

(a) the issuer convenes a general meeting to obtain shareholders’ approval for the delisting, and the resolution has been approved by at least 75% of the total number of issued shares held by independent shareholders (excluding shares held by the offeror and parties acting in concert with it) (“75% Independent Approval Requirement“); and

(b) an independent financial adviser (“IFA“) has opined that the exit offer (which must include a cash alternative as the default alternative) offered to shareholders is fair and reasonable (“Fair and Reasonable Requirement“),

(collectively, “Voluntary Delisting Requirements“).

The Column clarified that where an offeror has made a general offer (“General Offer“) under the Singapore Code on Take-overs and Mergers (“Take-over Code“) with an intention to privatise an issuer, unless the offeror is exercising its right of compulsory acquisition, SGX RegCo will require both the Voluntary Delisting Requirements to be adhered to in principle before it will allow the issuer to be delisted. In particular, SGX RegCo will consider the 75% Independent Approval Requirement to be satisfied where, as at the close of the General Offer, the offeror has received acceptances from independent shareholders that represent at least 75% of the total number of issued shares held by independent shareholders, and the Fair and Reasonable Requirement to be satisfied if the IFA has opined that the General Offer is fair and reasonable.

Under the Listing Rules, issuers must ensure that at least 10% of the total number of issued shares excluding treasury shares (excluding preference shares and convertible equity securities) in a class that is listed is at all times held by the public (“Public Float“).

Should an issuer lose its Public Float pursuant to the General Offer, SGX RegCo may suspend the trading of the issuer’s securities as at close of the General Offer. Thereafter, the scenarios that may occur will differ depending on whether the Voluntary Delisting Requirements have been met, as follows:

Both the 75% Independent Approval Requirement and the Fair and Reasonable Requirement are met
Issuer permitted to delist
Where the 75% Independent Approval Requirement is met, but the Fair and Reasonable Requirement is not met
Offeror may make another General Offer that meets the Fair and Reasonable Requirement. However, under the Take-over Code, if the offeror and its concert parties together hold more than 50% of the voting rights in the issuer (except with the consent of the Securities Industry Council), within six months from the closure of any previous offer, neither the offeror nor any person acting in concert with the offeror may make a second offer on terms better than those available under the previous General Offer (“Second Offer Restriction“)).	Issuer or controlling shareholder to restore its Public Float through private placement or otherwise (within three months or such longer period as SGX-ST may agree)	Explore other privatisation mechanisms (such as an exit offer that complies with the Listing Rules)
The 75% Independent Approval Requirement is not met, but the Fair and Reasonable Requirement is met
Issuer to meet the 75% Independent Approval Requirement	Issuer or controlling shareholder to restore its Public Float through private placement or otherwise (within three months or such longer period as SGX-ST may agree)	Explore other privatisation mechanisms (such as an exit offer that complies with the Listing Rules)
Both the 75% Independent Approval Requirement and the Fair and Reasonable Requirement are not met
Offeror may make another General Offer that meets both the Voluntary Delisting Requirements (however, note the Second Offer Restriction)	Issuer or controlling shareholder to restore its Public Float through private placement or otherwise (within three months or such longer period as SGX-ST may agree)	Explore other privatisation mechanisms (such as an exit offer that complies with the Listing Rules)

Issuers should note that SGX RegCo will not permit trading in an issuer’s securities to be suspended for a prolonged period. Should the issuer (and the controlling shareholder, where applicable) fail to comply with the requirements in the Listing Rules, including the requirement to restore the Public Float, SGX RegCo may utilise its enforcement powers under the Listing Rules.