On 18 April 2023, the Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Bill 2023 (“Bill“) was tabled for first reading in Parliament, and is expected to be tabled for second reading in May 2023. Among other key changes, the Bill seeks to revise the exclusion criteria for the computation of the 90% threshold requirement for compulsory acquisition under section 215 of the Companies Act 1967 (“CA“).
The compulsory acquisition provision under section 215 of the CA allows an acquiror (“acquiror“) in a takeover offer who has acquired a very substantial number of shares in the target company (the “target company“) to compulsorily acquire the shares of the minority dissenting shareholders. This allows the acquiror to convert the target company into a wholly-owned subsidiary, an important right if the objective of the takeover is to delist the target company.
Section 215 of the CA provides that the acquiror is entitled to exercise the right to compulsorily acquire the shares of any dissenting shareholders in the target company when the takeover offer for all the shares in the target company has been approved by shareholders who hold at least 90% of the shares of the target company (“90% threshold requirement“).
The proposed amendment to section 215 of the CA will expand the scope of shareholders whose shares will be excluded from the computation of the 90% threshold requirement to, in broad terms, also cover shares owned by related parties who are controlled by the acquiror and shares owned by related parties who control the acquiror (as elaborated further within this Update).
This Update covers (a) the background to the proposed amendment to section 215 of the CA; and (b) the proposed amended 90% threshold requirement.
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