On 9 January 2024, the Significant Investments Review Bill (“Bill“) was read for a second time and passed. The Bill sets out a new investment management regime that applies to both local and foreign investors, for entities that are critical to Singapore’s national security interests.
The term “national security” is not defined within the Bill. During Minister Gan Kim Yong’s (“Minister Gan“) Second Reading Speech, he highlighted the rationale for this was to ensure sufficient flexibility to quickly address emerging threats. Minister Gan did provide guidance by stating that in the context of the Bill, national security will cover areas critical to Singapore’s sovereignty and security, including its economic security and the continued delivery of essential services.
Salient aspects of the Bill are briefly summarised below.
Provisions which Apply Only to Designated Entities
Entities that are critical to the national security interests of Singapore but are not caught by the existing sectoral legislation may be designated under the new regime (“Designated Entities“). The entities must be (i) incorporated, formed, or established in Singapore; (iii) carry out activities in Singapore; or (iii) provide goods and services to persons in Singapore.
Designated Entities will be subject to, among others, the following ownership and control requirements:
(a) A person who becomes a 5% controller of the Designated Entity must notify the Minister for Trade and Industry (“Minister“) within seven days.
(b) A person must seek the Minister’s approval before becoming a 12%, 25%, or 50% controller, an indirect controller, or acquiring as a going concern (parts of) the business or undertaking of the Designated Entity.
(c) A person who intends to sell his/her stakes in the Designated Entity which would result in him/her ceasing to be a 50% or 75% controller of the Designated Entity must seek the Minister’s approval before doing so.
(d) Designated Entities need to notify the Minister of the above-mentioned changes in ownership and control of the Designated Entities within seven days of becoming aware of the events.
(e) Designated Entities must seek approval for the appointment of key personnel.
(f) Designated Entities must not, among others, be voluntarily wound up or dissolved without the Minister’s consent.
(g) If national security issues arise or if the delivery of essential services is disrupted, to ensure the continuity of the Designated Entities, Special Administration Orders can be given to direct the assumption of control of the Designated Entities’ affairs, business and property.
The requirements will not apply retrospectively, but to new transactions or control changes after designation of the entity. Transactions that occur without the necessary approvals will be rendered void, but materially affected parties can apply for validation notices.
During Minister Gan’s Second Reading Speech, he highlighted that in deciding which entities should be considered for designation, factors to be considered will include whether the entity provides a critical function in relation to Singapore’s national security interests, especially where there are few or no alternatives, and whether it is adequately covered by existing sectoral legislation. Entities that are currently being considered for designation have been contacted. The list of Designated Entities will be published in the Government Gazette once the law comes into force.
Entities that have Acted Against Singapore’s National Security Interests
The Bill also allows for “call-in” powers. The Minister can review ownership or control transactions involving an entity, even if the entity has not been designated, when two conditions are satisfied: (i) the entity has acted against Singapore’s national security interests; and (ii) the ownership or control transaction occurred within the two-year period prior to the act against national security.
Reconsideration, Appeals and Assistance
Parties can seek reconsideration for decisions by the Minister and make further appeals to an independent Reviewing Tribunal.
An Office of Significant Investments Review will be set up under the Ministry of Trade and Industry as a dedicated one-stop touchpoint to engage affected stakeholders and provide them with guidance and clarifications.
Click on the following links for more information:
- Significant Investments Review Bill (available on the Parliament of Singapore website at www.parliament.gov.sg)
- Significant Investment Review Bill Second Reading Speech (available on the Parliament of Singapore website at www.parliament.gov.sg)
- Rajah & Tann Legal Update titled “Significant Investments Review Bill Tabled in Parliament – New Investment Management Regime for Entities Critical to Singapore”
