On 9 January 2020, SGX announced new amendments to both the Mainboard and Catalist Rules. This marks a shift towards a more targeted, risk-based approach for governance of listed issuers.

The 5 key amendments are:

1.     Most companies can stop quarterly reporting

2. New continuous disclosure requirements, including immediate disclosures for directors’ conduct and deviations from financial information

3.     More disclosure required if “general working capital” is the reason for a rights issue

4.     SGX will have discretionary powers to designate “interested persons” and aggregate Interested Person Transactions (IPTs). An interested person covered by an IPT mandate must be disclosed on a named basis.

5.     New rules for financial assistance, ordinary course of business transactions, and transactions which present “negative” computations under Listing Rule 1006.

#1: Quarterly reporting

Most issuers will only have to announce half and full year financial results. An issuer will no longer be required to report its financial results on a quarterly basis, unless its auditor (i) issues an adverse, qualified or disclaimer of opinion based on the financial statements; or (ii) states that there is material uncertainty relating to going concern in the financial statements. 

Where an adverse, qualified or disclaimer of opinion is issued, the issuer must announce (i) the efforts taken to resolve each outstanding audit issue; and (ii) a confirmation from the Board’s directors that the impact of all outstanding audit issues have been adequately disclosed.

Periodic announcements regarding performance must be balanced and fair, should avoid selective presentation of information, and sufficiently compare financial data across periods. SGX also encourages issuers to provide voluntary disclosures as appropriate.

#2: Enhanced disclosure

Issuers must announce information necessary to avoid the establishment of a false market in its securities (trade-sensitive information) or which would likely materially affect the price or value of its securities (materially price-sensitive information).

SGX has provided the following guidelines, amongst others, on continuous disclosures:

1.     “trade-sensitive information” is wider than “materially price-sensitive information”. Trade-sensitive information may not necessarily have a material impact on an issuer’s share price.

2.     Immediate disclosure is required if a director’s action or conduct would (i) materially affect information previously disclosed about him/ her (under Appendix 7.4.1 of the Mainboard Rules or Appendix 7F of the Catalist Rules); or (ii) bring into question such director’s character and integrity. The issuer should not wait until re-appointment of such director.

3.     Immediate disclosure is also required if an issuer becomes aware of information that significantly deviates from its previous reported financial results. The issuer should not wait until the subsequent scheduled release of its financial results.

4.     Announcements must disclose, without bias, both positive and negative aspects of the issuer’s development or prospects. Issuers should not emphasise favourable information or omit unfavourable information.

#3: rights issues

For a rights issue, issuers must, in addition to announcing the price terms and purpose, also announce the following:

1.     if the proceeds will be used mainly for general working capital, the reasons for such use, taking into account the issuer’s present working capital position;

2.     whether the issuer’s directors are of the opinion that the issuer’s available working capital is sufficient to meet its present requirements after taking into consideration the issuer’s present bank facilities, and if yes, the reasons for the issue;

3.     a statement from the issuer’s directors as to (i) why the rights issue is in the issuer’s interest; (ii) the bases for the directors’ views; and (iii) the factors considered in arriving at the discount, if any;

4.     details of each equity fund-raising exercise undertaken by the issuer in the past 12 months, or a negative statement that there has not been any equity fund-raising exercise in the past 12 months.

#4: Interested person transactions

SGX will have the discretion to (i) designate any person or entity as an interested person if such person or entity enters into, or proposes to enter into, a transaction with an entity at risk; and (ii) aggregate any exempted IPTs (even if less than S$100,000) within a financial year.

An issuer must disclose in the annual report the nature of the relationship between the issuer and the interested person in respect of each IPT. An interested person covered by an IPT mandate must be disclosed on a named basis.

#5: Mergers and acquisitions, financial assistance, and valuations

Financial assistance transactions by an issuer will be subject to Chapter 10, unless such transaction (i) is part of the issuer’s ordinary course of business or of a revenue nature; (ii) is provided to the issuer, its subsidiaries or associated companies; or (iii) relates to insurance coverage, indemnities and defence funding for directors and CEOs of the issuer in relation to their duties as issuer officers.

Independent valuations will be required for asset disposals and acquisitions which constitute major transactions, failing which the issuer will be required to provide an explanation as to why the valuation was not conducted.

Ordinary course of business transactions are transactions where (i) the asset to be acquired is part of the issuer’s existing principal business; and (ii) the acquisition does not change the issuer’s risk profile (e.g. an acquisition that reduces an issuer’s net profits/ NAV by more than 20% would change its risk profile).

Finally, an exemption may be sought from announcing/ seeking shareholder approval for transactions which result in a negative computation result under Listing Rule 1006 if (i) the issuer has a negative asset value or is loss-making; and/ or (ii) the asset has negative NAV or is loss-making.

Amendments to the SGX rules can be accessed here.

To all our valued clients, business partners and friends, here’s wishing you a Year of the Metal Rat filled with abundance, peace, and good health.

Looking forward to catching up with each of you in the year ahead!

Jaslyn Heng, a second year law student at the Singapore Management University, shares her experience as an intern with AEI Legal in December 2019.

1. What were some of the challenges you faced?

The initial challenges that I faced included, inter alia, learning to be concise and understanding the transaction from a wider perspective. Prior to the internship, I was accustomed to mostly identifying drafting and formatting errors in a document.

I was given constructive feedback to analyse a transaction by understanding (1) what the client’s business model is; (2) who the people in the client’s organisation are; and (3) what the deal is about.  

2. What was the highlight of your internship experience?

It would definitely be the personalised touch of handwriting one hundred personalised cards for the clients. I witnessed first-hand how the Director, Andrea as well as the Associate Director, Cheryl, invested time and effort into building relationships by delivering thoughtful gifts during the festive Christmas season.

In my capacity as a legal intern in a boutique firm, I was blessed with mentors such as Zhi Tian and Yuho who would allocate time to run through the mechanics of a deal with me, give instructions, which would be followed up with a post-mortem review of my completed task.

I drafted an announcement for a Catalist-listed company and reviewed it for compliance with the Companies Act, the SGX Catalist Rules as well as the client’s constitution. In addition, I revised a directors’ confirmation statement in respect of a capital reduction exercise conducted pursuant to Sections 78A - Section 78K of the Companies Act.

3.      What did you learn?

I observed that in order to function as a team which can deliver cutting-edge knowledge and expertise in the commercial domain, self-motivation is crucial. This was demonstrated when I saw how the legal secretaries stayed beyond their working hours during the festive period to deliver the documents required for a client’s upcoming Annual General Meeting.

I also assessed the investor-friendliness of certain provisions relating to liquidity risk in a trust, including the conditions precedent, dispute resolution clause and the pay-out clause. My drafting skills were also sharpened when I had the opportunity to review and comment on a term sheet.

4.      What advice would you provide to future interns?

Applying for a winter internship in December might seem intense, but Christmas and the New Year holidays allowed for an opportune window of celebration amidst the hustle. Be bold and be brave. Don’t be afraid to approach the partners or associates to ask for advice or feedback for work-related matters – a little initiative will go a long way!

Our opinions were valued. AEI Legal had sought the interns’ views on ideas for charity events that the firm could undertake. One recommendation which I proposed was granting bursary awards to underprivileged students studying law in SMU or NUS. In addition, I suggested that the partners and associates could consider giving pro bono legal advice at the SMU Pro Bono Centre, which is located within the vicinity.

5.      Did you enjoy your time?

AEI Legal was founded by directors with over 20 years of combined legal experience at Magic Circle and leading law firms in Singapore and Hong Kong, and are experienced in cross-border and domestic M&A transactions.

As a result, I was exposed to a variety of transactions and assisted in reviewing a wide range of transaction documents, such as a sale and purchase agreement, an Energy Performance Contract, a put and call option agreement and security documents.

I was privileged to have the opportunity of volunteering together with the firm at Willing Hearts, a soup kitchen that provides meals to the underprivileged, such as the elderly, the disabled and low income families. Our firm reported at 6.00am on a Friday morning, where we were tasked with packing food into tetra packets and ensuring that each box of food was carefully loaded into the delivery vans. This would then be distributed island-wide for the relevant beneficiaries. 

Li Zhengxi shares his experience as an intern with AEI Legal in December 2019. He is currently a second year law student at the National University of Singapore.

1.     What were some of the challenges you faced?

First, the firm specialises in M&A which I had absolutely no idea about. Everyday was a challenge because I had to look up most of the legal and financial jargon that I came across; terms like “convertible preference shares” and “convertible notes” were completely alien to me.

Second, I have never reviewed a contract, much less a shareholders’ agreement, share subscription agreement or an employment/service agreement. I did not know what to look out for at all, and everything seemed so foreign to me.

Third, I was (and am largely still) unfamiliar with many of the processes involved in a merger or acquisition deal. As a result, I had to seek clarifications for most of the documents that I worked on.

2. What was the highlight of your internship experience?

The entire internship was a huge learning experience, but I would recount 3 incidents that are the most memorable to me.

The first of which was when Andrea, the Director of the firm, called all the lawyers and myself into the meeting room to explain a deal that the firm was working on. She first gave us a big picture idea of the transaction, such as the various parties involved the deal and their respective interests, before going into the more important details that the client would be concerned about. She entertained all the questions that we raised just to make sure that everyone was on the same page.

That session was one of the most memorable moments during the internship because it showed me that the people in the firm were not just good at what they do, but good mentors as well.

The second was when I was given the task of working on a file involving Chinese counterparties. While working on the file, I saw how responsive the lawyers were to clients: they responded to emails within a few hours, and always seemed ready to pick up the phone. It did not help that one of the contracts was completely in Mandarin and thus was a lot harder to review. That episode was a display of exemplary work ethic.

The last highlight was when the entire firm celebrated Christmas over a buffet lunch.

Everyone seemed comfortable with one another outside of the workplace, and this reinforced my impression that the firm was like a family.

3.     What did you learn?

Generally, this internship gave me a flavour of M&A transactions and exposure to the processes of legal work and the requirements expected of lawyers. I was fortunate to be involved in files involving clients from different industries, and this helped me to understand some of the concerns that clients may have in general.

The lawyers from AEI were also very patient and helpful when guiding me throughout my three weeks here; from them, I learned more about myself and what kind of lawyer I would want to be in the future.

4.     What advice would you provide to future interns?

a.     Be a sponge and don’t be afraid to ask questions. Come in with an open and curious mind.

b.     When looking at any transaction, try to imagine yourself in the shoes of all the transacting parties to better understand their concerns.

c.     Make a log of everything that you have learned at the end of every day.

5.     Did you enjoy your time?

I enjoyed learning something new every day of the internship. The learning process was just as comfortable because everyone was very patient and willing to impart their knowledge. If there was something I was unsure of at any point in time, I could always turn to ask any of the lawyers. Overall, my stint here has taught me about the need for both technical competencies and work ethic; it has truly been an enriching experience. 

AEI Legal is part of the inaugural Monetary Authority of Singapore (MAS) x Singapore Academy of Law (SAL) Payment Regulatory Evaluation Program (PREP), designed to help connect the payments industry with specialised legal service providers.

As a technology law-focused firm, we are delighted to be part of such a forward-thinking initiative. Singapore’s new Payment Services Act is the springboard to many opportunities.

If you are a payments service provider with questions, we’d love to talk to you.