The Singapore Exchange (SGX) is a regional capital markets hub, with a significant number of listings by foreign, primarily Asian, issuers. The Monetary Authority of Singapore (MAS) regulates the offering of shares to the public in Singapore, while the day-to-day regulation of the market along with administration of the listing rules is undertaken by the SGX itself. Issuers seeking a primary listing can choose between the more regulated Mainboard, or Catalist, which does not have any quantitative requirements and is more suitable for newer or smaller companies. The SGX Mainboard listing rules allow for transfers from Catalist to the Mainboard once the Catalist listed issuer meets the eligibility requirements.
In 2016, the three largest listings on the Mainboard were all real estate investment trusts (REITs) demonstrating the SGX’s continuing popularity with this category of issuer. Two of the REITs are Singapore-based and the other is US-based, with the initial public offerings (IPOs) raising around US$820 million between them. Applications for listings have declined over the past couple of years,2 and the strengthening of other Southeast Asian stock exchanges has had an impact on the number of South East Asian companies choosing the SGX over their home exchange.3 The SGX is currently considering proposals to widen issuer and investor participation in the market.
This chapter will cover the governing rules of the stock exchange, the offering process and continuing obligations following a successful IPO. The main focus will be on Mainboard equity listings but some of the key differences between Mainboard and Catalist will be highlighted.
II GOVERNING RULES
i Main stock exchanges
Within the SGX, issuers can opt to list on either the Mainboard or Catalist. While the Mainboard caters for large, well-established issuers, Catalist provides a market for smaller or less well-known issuers who would likely struggle with the entry and listing requirements imposed for listing on the Mainboard. In recent years, new listings on Catalist have outnumbered those on the Mainboard.4
The SGX is a particularly international stock exchange, with approximately 40 per cent of listed companies coming from outside Singapore. This figure is substantially higher than the percentage of foreign companies listed on both the Hong Kong Stock Exchange and the Tokyo Stock Exchange.5 In particular, the SGX is popular with Chinese, Hong Kong and other South East Asian companies looking for a listing.6 In terms of sectors, the SGX is popular with companies in the industrial, financial and consumer sectors.7 It is also popular with real estate companies, being the second-largest market for REITs in Asia.8 The SGX’s attraction for REITs within Asia stems from its early development of a market for REITs, being second only to Japan, as well as efforts by the Singapore government to introduce a favourable regulatory framework for these real estate vehicles.9
ii Overview of listing requirements
Issuers seeking a listing of equity securities on the SGX must comply with either the Mainboard listing rules (Mainboard Rules) or the Catalist listing rules (Catalist Rules) as applicable, each forming a rulebook administered by the SGX. The Mainboard Rules impose a number of requirements on issuers and this section provides a non-exhaustive overview of requirements imposed on issuers seeking a primary listing.
Shareholding spread and distribution
In respect of the spread of shareholdings, the proportion of shares that must be in public hands at the time of listing, and the distribution requirements, depend on the market capitalisation of the company and the offer size as follows in the table below.10
(S$ million: M)
Proportion of post-invitation share capital in public hands
Number of shareholders
Total offer size
(S$ million: O)
M < 300
25 per cent
O < 75
At least 40 per cent of the invitation shares or S$15 million, whichever is lower, must be distributed to investors that are each allotted not more than 0.8 per cent of the invitation shares or S$300,000 worth of shares, whichever is lower
300≤M < 400
20 per cent
75≤O < 120
At least 20 per cent of the invitation shares must be distributed to investors, each allotted not more than 0.4 per cent of the invitation shares
400≤M < 1,000
15 per cent
No requirement applicable
12 per cent
The shareholdings of an applicant and his or her associates must be aggregated and treated as one single holder
Preferential allotments made pursuant to Rule 234 must be excluded
There is a requirement for a minimum number of shareholders – 500 – which has implications for the structuring of the IPO, as discussed further below.
Shareholding and distribution requirements do not apply to issuers seeking a secondary listing; however, such issuer is still required to have at least 500 shareholders worldwide following the listing, or, where the SGX and the issuer’s home exchange do not have an established framework and arrangement to facilitate the movement of shares between the jurisdiction, the issuer should have at least 500 shareholders in Singapore or 1,000 worldwide.11
Issuers must also satisfy one of the following requirements:
- a they must have a minimum consolidated pre-tax profit (based on full-year consolidated audited accounts) of at least S$30 million for the latest financial year and an operating track record of at least three years;
- b they must have been profitable in the past financial year (pre-tax profit based on the latest full-year consolidated audited accounts), with an operating track record of at least three years and a market capitalisation of not less than S$150 million based on the issue price and post-invitation issued share capital; or
- c they must have operating revenue (actual or pro forma) in the latest completed financial year and a market capitalisation of not less than S$300 million based on the issue price and post-invitation issued share capital. REITs and business trusts that have met the S$300 million market capitalisation test but do not have historical financial information may apply under this rule if they are able to demonstrate that they will generate operating revenue immediately upon listing.12
In respect of the first two profitability tests, the issuer must have been engaged in substantially the same business and have been under substantially the same management throughout the period for which the three years’ operating track record applies.13
Group’s financial position and management
As regards the issuer’s group’s financial position, the group must be in a healthy financial position, with a positive cash flow from operating activities.14 All debts that are owed to the group by its directors, substantial shareholders and companies controlled by the directors and substantial shareholders must be settled prior to listing.15 Directors and executive officers must have appropriate experience and expertise to manage the group’s business, which must be disclosed prior to listing.16
Specific requirements for certain types of companies
Life sciences companies, mineral, oil and gas companies and property investment or development companies have further specific rules that must be complied with for listing on the Mainboard.17
Listings on Catalist must be primary listings.18 Issuers are not required to satisfy any quantitative entry criteria. Rather, it is a sponsor-led process. The sponsor is typically an investment bank or other finance company and has been approved by the SGX to provide sponsor services. An issuer will normally be admitted to listing on Catalist on receipt of conforming documents from the sponsor.19 It is the sponsor’s responsibility to determine whether an issuer is suitable to list on Catalist.
Issuers listing on Catalist must still meet certain other requirements. For example, 15 per cent of shares must be in public hands at the time of listing and there must be at least 200 public shareholders.20 In addition, unlike companies listing on the Mainboard, both the directors and the sponsor must be able to state that in their reasonable opinion, the working capital available to the company is sufficient for present requirements and for at least 12 months after listing.21
iii Overview of law and regulations
The primary regulatory authority for the offering of shares to the public in Singapore is the MAS.
The MAS administers the legislation governing the offering of shares and units in Singapore, which consists of the Securities and Futures Act, Chapter 289 of Singapore (SFA) along with its ancillary regulations including Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005, Securities and Futures (Offers of Investments) (Business Trusts) (No. 2) Regulations 2005, and Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations 2005 (collectively, the Regulations).
The SFA governs requirements for a prospectus such as the contents and the role of the MAS in the prospectus review process, and also sets out the liability that attaches to such document.
III THE OFFERING PROCESS
i General overview of the IPO process
IPOs in Singapore can be structured as public offerings or placings, and shares offered can be either new shares or existing shares. As placings typically result in a smaller shareholder base compared to a public offer, Mainboard listings are often undertaken by way of combination of a public offer with a placing in order to meet the shareholding and distribution requirements. IPOs are usually underwritten, and if they are not then the issuer must consult with the SGX as early as possible.22
Process and timeline for Mainboard listing
The table below highlights the milestones and key steps to listing on the Mainboard. While the timeline will vary depending on the complexity of the IPO and the issuer’s own internal procedures and processes, a straightforward IPO can be completed within four to five months.
(1) Appointment of advisers – the primary adviser is the issue manager, who
(2) Due diligence and structuring work
(3) Preparation of listing documents including Sections (A) and (B) of the
Dependent on the issuer’s processes
Submission to SGX and MAS pre-lodgement review
Submit Section (A) of the LAP to the SGX – this should contain general information on the applicant, highlight any key issues for the SGX to consider and is submitted by the issuer manager. As part of its review, the SGX may ask questions. Upon completion of its preliminary review and if key issues have in the assessment of the SGX been satisfactorily resolved, the SGX will inform the issuer manager that the application can proceed to the second stage
(1) Submit Section (B) of the LAP to the SGX with the full listing application
(2) Submit preliminary prospectus to MAS for pre-lodgement review. MAS
(3) If the SGX approves the application, it will issue the eligibility-to-list letter
(ETL), which is valid for three months***
Two to four weeks
Lodgement and public exposure
(1) Lodge prospectus with MAS during validity period of the ETL
(2) Prospectus available for public comment on OPERA
Registration and listing
(1) MAS will register the prospectus
(2) The offer can be launched and must be open for at least two market days*****
(3) Trading commences
One to two weeks
* Rule 246(4), Mainboard Rules.
** www.sgx.com/wps/portal/sgxweb/home/listings/getting_started/listing_process, accessed on 19 January 2017.
*** Rule 243(2), Mainboard Rules.
**** SGX has indicated that the review period once a completed application has been received should be 4 weeks. http://www.sgx.com/wps/portal/sgxweb/home/listings/getting_started/listing_process, accessed on 19 January 2017.
***** Rule 242, Mainboard Rules.
As indicated above, a prospectus is the primary document produced for an IPO, as required pursuant to Section 240(1) of the SFA (although there are certain exemptions to this requirement). The prospectus is required to contain all the information that investors and their professional advisers would reasonably require to make an informed assessment of particular matters including:
- a the rights and liabilities attaching to the securities;
- b assets liabilities, profits and losses, financial position, and performance and prospects of the issuer; and
- c assets liabilities, profits and losses, financial position and performance, and prospects of the underlying entity if controlled by the offeror or its related parties.23
It must contain matters prescribed in the Regulations including details of the issuers’ share capital and substantial shareholders, business operation and risk factors, among others. It must also comply with the contents requirements in Chapter 6 of the Mainboard Rules. Criminal and civil liability can attach to several categories of person if there is a false or misleading statement in the prospectus, or if there is an omission of any required information.
Other documents that must be prepared include audited financial statements, an auditor’s audit report, an underwriting agreement where the IPO is underwritten and ancillary documents, such as the constitution of the issuer and any necessary approvals.
Listing by way of introduction
It is worth noting that certain companies may be able to list on the Mainboard by way of introduction without any offer of its shares, provided that it complies with the relevant shareholding spread requirements.24 One way in which this may be useful is for companies listed on another stock exchange, looking for a secondary listing, and the Mainboard Rules list this as a circumstance in which an introduction may be appropriate.25 The issuer will have to produce an introductory document rather than a prospectus.26 While the content requirements are largely the same, the introductory document will not attract prospectus liability under the SFA and will not be reviewed by MAS.
Process for listing on Catalist
For companies listing on Catalist, the process is sponsor-led, as mentioned above. The primary differences are that an offer document is prepared rather than a prospectus, which will be submitted by the sponsor after submission of a pre-admission notification.27 The offer document will be lodged with SGX acting as agent for MAS, who will also be responsible for registering such document in accordance with the SFA. The SGX decides whether the applicant can proceed with lodgement of the offer document on the basis of the preliminary offer document.
ii Pitfalls and considerations
In considering listing on the SGX, potential issuers will need to consider the potential pitfalls and considerations in pursuing a listing in general. These issues are not unique to the SGX.
Pursuing a listing can be a costly exercise from fees to be paid to professionals such as issue managers, auditors, lawyers and experts through to placing and underwriting fees to be paid to the placing agents and underwriters. These fees are typically recouped from the funds raised or from exiting shareholders; however, should the listing exercise be delayed or aborted for any reason, these costs will need to be absorbed by the issuer.
Ongoing fees and costs
Post-listing, the issuer will need to pay annual listing fees to the SGX. Other costs would include the holding of public annual general meetings and the payment of directors’ fees to independent directors.
Ongoing compliance obligations and approval requirements
Listed companies are required to comply with the listing rules as well as the SFA on an ongoing basis. Depending on its activities, these may include filings to be made with the SGX and the MAS, announcements to be made to its shareholders or, in the case of transactions that require approval of its shareholders, the calling of extraordinary general meetings (EGMs) and the preparation and publication of circulars prior to such EGMs. Such obligations may also require either dedicated compliance and investor relations personnel or substantial time from the issuer’s management.
Decrease in autonomy of founder shareholders
A significant number of companies are listed by founder shareholders who have grown the company from inception. While one of the benefits of listing is access to a larger pool of capital that would allow the issuer to spur its growth and expansion, founder shareholders who continue to play executive roles in the issuer would need to adjust to the decrease in autonomy and increased accountability towards independent shareholders. Certain mandatory shareholder or board approvals in the decision-making process may also be perceived to reduce the ability of the issuer to be opportunistic and nimble.
iii Considerations for foreign issuers
The IPO process is generally no different for foreign issuers than domestic issuers. However, there are some specific considerations that foreign issuers should take into account when assessing whether to list on the SGX.
Foreign issuers should consider whether they need to restructure their board when listing on the SGX due to the requirement that an SGX Mainboard listed company must have at least two independent directors resident in Singapore.28
Foreign issuers seeking a primary listing on either the Mainboard or Catalist should consider whether they may need to use different accounting standards to those they currently use. Financial statements and future periodic financial reports must be prepared in accordance with Singapore Financial Reporting Standards (SFRS), International Financial Reporting Standards (IFRS) or US Generally Accepted Accounting Principles (US GAAP).29 Alternatively, for foreign issuers only seeking a secondary listing on the Mainboard, financial statements and future periodic reports only need to be reconciled to SFRS, IFRS or US GAAP.30
IV POST-IPO REQUIREMENTS
Companies listed on the SGX are subject to continuing obligations under either the Mainboard Rules or the Catalist Rules. The main areas are set out below.
i Disclosure obligations
Chapter 7 of the Mainboard Rules sets out the main continuing obligations for companies listed on the Mainboard, including several obligations regarding the disclosure of information. An issuer must announce any information known to it concerning it or any of its subsidiaries or associated companies, which:
- a is necessary to avoid the establishment of a false market in the issuer’s securities; or
- b would be likely to materially affect the price or value of its securities.31
There are exemptions, including when the information is a trade secret or concerns an incomplete proposal or negotiation provided that the information is confidential and a reasonable person would not expect the information to be disclosed.32 Issuers must observe the Corporate Disclosure Policy, Appendix 7.1 to the Mainboard Rules, which includes further requirements, such as a requirement to promptly clarify or confirm any rumours that are likely to have, or have had, an effect of the price of its securities and that have not been substantiated by the issuer.33
In addition, there are several specific disclosure obligations concerning, for example, appointment and cessation of key persons such as directors, chief executive officers, etc.; acquisitions and sales subject to certain thresholds; and general meetings, among others.34
ii Reporting obligations and annual general meetings
In terms of periodic reporting, issuers must announce financial statements for the full financial year immediately after the figures are available, and no later than 60 days after the relevant financial period.35 Depending on its market capitalisation, an issuer may also have to announce its quarterly results for the first three quarters of the financial year, in which case it must do so no later than 45 days following the end of the relevant quarter.36
Annual general meetings must be held no later than four months after the end of the issuer’s financial year, with the annual report to be circulated 14 days prior to the annual general meeting.37 One recent addition to reporting requirements for listed companies was the introduction in July 2016 of the requirement for a sustainability report in response to increasing global interest in this field.38 The report must be issued no later than five months after the end of the financial year and be can a separate report or form part of the annual report.39 The report must describe the sustainability practices with reference to several factors, including material environmental, social and governance factors and targets.40
iii Free float requirement
As regards the free float, an issuer must ensure that at least 10 per cent of the total number of issued shares, excluding treasury shares and excluding preference shares and convertible equity securities, in a class listed on the SGX, remain in public hands at all times. Trading may be suspended by the SGX if the percentage falls below 10 per cent.41
iv Transactions with interested persons
Chapter 9 of the Mainboard Rules governs transactions with interested persons. In the case of a company, ‘interested person’ means a director, chief executive officer or controlling shareholder of the issuer, or any associate of such person. ‘Transaction’ includes the provision or receipt of services, issuance or subscription of securities and the provision or receipt of financial assistance, among other things, irrespective of whether it is in the ordinary course of business.42
An issuer must immediately announce any transaction with interested persons of a value equal to, or more than, 3 per cent of the group’s latest audited net tangible assets.43 Further, an announcement must be made if the aggregate value of all transactions entered into with the same interested person during the same financial year hits the same 3 per cent threshold.44 Shareholder approval is required for any transaction with an interested person that has a value equal to, or more than, 5 per cent of the group’s latest audited net tangible assets, whether alone or aggregated with other transactions in the same financial year.45 These rules exclude transactions which are below S$100,000.46 Certain transactions are excluded from this regime.
v Announcements regarding acquisitions and realisations of assets
Immediate announcements are also required under Chapter 10 in relation to acquisitions and realisations of assets by an issuer or a subsidiary that is not listed on the SGX or another approved exchange.47 The threshold for making such an announcement is when the value of the transaction exceeds 5 per cent of any of the relative figures, to be calculated by reference to specific rules in Rules 1003–1007.48 Further conditions are imposed on major transactions, where the relative figures exceed 20 per cent, and reverse takeovers, where the relative figures exceed 100 per cent.49
vi Corporate governance
Finally, the Mainboard Rules give effect to the Code of Corporate Governance, which operates on a ‘comply or explain’ basis.
vii Issuers with secondary listings
An issuer with a secondary listing on the Mainboard does not have to comply with the majority of continuing obligations provided it maintains its primary listing on its home exchange and complies with the applicable listing rules of the home exchange.50 It must release all information and documents in English to the SGX at the same time as they are released to the home exchange.51
viii Continuing obligations for issuers listed on Catalist
The Catalist Rules contain broadly the same continuing obligations for companies listed on Catalist, noting that certain thresholds differ. For example, in respect of transactions that must be disclosed, a transaction is classed as a major transaction if any of the relative figures exceed 75 per cent but are less than 100 per cent for an acquisition, or exceed 50 per cent for a disposal.52
In addition, it is important to note that a company listed on Catalist must maintain a sponsor at all times.53 An issuer will be suspended if it does not have a sponsor undertaking continuing activities for it, until the sponsor takes on the activity, and can be removed from Catalist if it does not have a sponsor for more than three continuous months.54
V OUTLOOK AND CONCLUSIONS
Despite the SGX witnessing a decline in IPOs in the past couple of years, performance in certain areas remains strong. In particular, the dominance of REIT listings has been a key theme for the SGX and, given the popularity of this product with investors, it is likely that this trend will continue.
Recent developments demonstrate that the SGX is keen to ensure it continues to attract foreign issuers and remain a regional IPO hub. In a bid to make itself more attractive to companies considering where to list its shares, the SGX is currently considering whether to allow companies with a dual-class share structure to list on the SGX. This was considered an issue back in 2012 following Manchester United’s decision to list in New York instead, on the basis that the New York Stock Exchange would allow dual-class shares. On the back of the recent amendment to the Singapore Companies Act removing the existing one-share-one-vote restriction for public companies, in August 2016, the Listing Advisory Committee of the SGX announced that it is in favour of this proposal, subject to various corporate governance safeguards.55 The SGX will consult publicly on this in due course and it remains to be seen whether this will be implemented.
In addition, the SGX issued a public consultation in February 2016 proposing that issuers seeking a Mainboard listing allocate at least 10 per cent of the total offer size to retail investors, the intention being to widen retail participation in Singapore’s capital markets.56
Overall, the SGX remains a popular stock exchange for Asian companies looking for a listing. However, as other stock exchanges in the region become more popular, such as the Bursa Malaysia and the Stock Exchange of Thailand, Singapore risks losing new listings by companies in those countries to their home exchanges, as demonstrated by the fact that both the Stock Exchange of Thailand and Bursa Malaysia overtook the SGX in 2015.57 The Indonesian Stock Exchange has also grown significantly in recent years. Nevertheless, Singapore’s political and economic stability, and its status as a regional financial centre, should work in its favour to continue to entice companies to the SGX.
1 Siddhartha Sivaramakrishnan is a partner and Jin Kong is a senior associate at Herbert Smith Freehills LLP. Ban Leong Oo is a managing director and Sandra Tsao is of counsel at Prolegis LLC.
2 http://sgx.com/wps/portal/sgxweb/home/regulation/consult_pub/reg_statistics, accessed on 20 January 2017.
3 Mergermarket and Merrill Corporation, Southeast Asia M&A: Trends shaping the region, Issue 2, 14 December 2016.
4 Data from the Mergermarket IPO database, accessed on 20 January 2017.
5 http://sgx.com/wps/portal/sgxweb/home/listings/why_sgx, accessed on 16 January 2017.
9 Joseph T L Ooi, Graeme Newell, Tien-Foo Sing, The Growth of REIT Markets in Asia, Journal of Real Estate Literature, Issue14(2), January 2006.
10 Rule 210(1)(a), Mainboard Rules.
11 Rule 210(1)(b), Mainboard Rules.
12 Rule 210(2), Mainboard Rules.
13 Rule 210(3)(a), Mainboard Rules.
14 Rule 210(4)(a), Mainboard Rules.
15 Rule 406(6)(a), Catalist Rules and Rule 210(4)(b), Mainboard Rules.
16 Rule 210(5), Mainboard Rules.
17 Rules 210(8), 210(9) and 222, Mainboard Rules.
18 Rule 402(1), Catalist Rules.
19 Rule 402, Catalist Rules.
20 Rule 406(1), Catalist Rules.
21 Rule 407(2) and (3), Catalist Rules.
22 Rule 239, Mainboard Rules.
23 Sections 243(1) and 243(3) SFA.
24 Rule 235, Mainboard Rules.
25 Rule 236, Mainboard Rules.
26 Rule 238, Mainboard Rules.
27 Appendix 4F, Catalist Rules.
28 Rule 221, Mainboard Rules.
29 Rule 415, Catalist Rules, Rule 220(1), Mainboard Rules.
30 Rule 220(2), Mainboard Rules.
31 Rule 703(1), Mainboard Rules.
32 Rule 703(3), Mainboard Rules.
33 Rule 703(4)(a), Mainboard Rules and Appendix 7.1, Mainboard Rules.
34 Rule 704, Mainboard Rules.
35 Rule 705(1), Mainboard Rules.
36 Rule 705(2), Mainboard Rules.
37 Rule 707(1) and (2), Mainboard Rules.
38 SGX News Release, SGX Consults on ‘comply or explain’ sustainability reporting rules and guide, 5 January 2016, http://infopub.sgx.com/FileOpen/20160105_SGX_consults_on_sustainability_reporting_rules.ashx?App=Announcement&FileID=384639, accessed on 18 January 2017.
39 Rule 711A, Mainboard Rules.
40 Rule 711B, Mainboard Rules.
41 Rule 723 and 724, Mainboard Rules.
42 Rule 904, Mainboard Rules.
43 Rule 905(1), Mainboard Rules.
44 Rule 905(2), Mainboard Rules.
45 Rule 906(1), Mainboard Rules.
46 Rule 905(3) and 906(2), Mainboard Rules.
47 Rule 1002, Mainboard Rules.
48 Rule 1010, Mainboard Rules.
49 Part VII and Part VIII of Chapter 10, Mainboard Rules.
50 Rule 751, Mainboard Rules.
51 Rule 217(1), Mainboard Rules.
52 Rule 1014(1), Catalist Rules.
53 Rule 746(1), Catalist Rules.
54 Rules 746(4) and (5), Catalist Rules.
55 www.sgx.com/wps/wcm/connect/b9f773a8-d2b0-4920-8466-6bf021df5332/SGX+Listing+Advisory+Committee+Report+FY2016.pdf?MOD=AJPERES&CACHEID=b9f773a8-d2b0-4920-8466-6bf021df5332, accessed on 31 January 2017.
56 http://sgx.com/wps/wcm/connect/sgx_en/home/higlights/news_releases/sgx-proposes-introducing-10percent-allocation-of-mainboard-ipo-shares-for-retail-investors, 26 February 2016, accessed on 19 January 2017.
57 Mergermarket and Merrill Corporation, Southeast Asia M&A: Trends shaping the region, Issue 2, 14 December 2016.