Rulebooks: Contents

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Chapter 1 Introduction
Chapter 2 Equity Securities
Chapter 3 Debt Securities
Chapter 4 Investment Funds
Chapter 5 Structured Warrants
Chapter 6 Prospectus, Offering Memorandum and Introductory Document
Chapter 7 Continuing Obligations
Chapter 8 Changes in Capital
Chapter 9 Interested Person Transactions
Chapter 10 Acquisitions and Realisations
Chapter 11 Takeovers
Chapter 12 Circulars, Annual Reports and Electronic Communications
Chapter 13 Trading Halt, Suspension and Delisting
Chapter 14 Disciplinary and Appeals Procedures, and Enforcement Powers of the Exchange
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Practice Notes
Practice Note 8.2 Sub-underwriting Arrangements
Report of the Committee and Code of Corporate Governance
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Rule Amendments

  Versions
(2 versions)
 
Jan 1 2011 - Sep 28 2011Sep 29 2011 onwards

Practice Note 8.2 Sub-underwriting Arrangements

Details Cross References
Issue date: 1 January 2011

Effective date: 1 January 2011
Chapter 8 Part V

1. Introduction

1.1 The objective of this Practice Note is to provide guidance on sub-underwriting arrangements entered into with controlling shareholders and substantial shareholders where sub-underwriting fees will be paid. Payment of sub-underwriting fees to controlling shareholders and substantial shareholders to take up their rights entitlement and/or sub-underwrite a portion of the excess rights shares translates to a larger price discount for the rights shares for such shareholders.
1.2 This Practice Note sets out the requirement for all sub-underwriting arrangements, entered into with controlling shareholders and substantial shareholders where sub-underwriting fees are paid, to be subject to specific shareholders' approval. To protect the interest of other shareholders, we are also requiring specific conditions to be met by issuers and underwriters.

2. Shareholders' Approval

2.1 For issuers seeking shareholders' approval for the rights issue, a separate resolution is needed where sub-underwriting fees will be paid to controlling shareholders and substantial shareholders.
2.2 Issuers that intend to utilize the general mandate for the issue of rights shares will have to seek specific shareholders' approval for the sub-underwriting arrangements where a sub-underwriting fee will be paid.

3. Conditions to be Satisfied by Issuers and Underwriters

3.1 To increase the transparency and accountability of these sub-underwriting arrangements, the Exchange will allow sub-underwriting arrangements with a fee to be entered into with controlling shareholders and substantial shareholders, where specific conditions are satisfied by issuers and underwriters:—
3.1.1 The issuer's Board of Directors ("Board") provides assurance that the terms of the sub-underwriting arrangement are fair and not prejudicial to the issuer and to other shareholders. The Board must provide the basis for their opinion;
3.1.2 The issuer's Board provides a confirmation in the circular to shareholders that the terms agreed between the issuer and the underwriter (including the commission payable to the underwriter and the controlling and/or substantial shareholder) are on arms' length and normal commercial terms;
3.1.3 The underwriter must be a financial institution licensed by the Monetary Authority of Singapore to conduct underwriting activities;
3.1.4 The Board's opinion (including the basis thereof) and the confirmation referred to in paragraphs 3.1.1 and 3.1.2 above, together with a statement whether there are any dissenting views of the Board members (and if so, details of the dissenting views), must be disclosed in the circular to shareholders;
3.1.5 The underwriters confirm to the Board that:—
(a) the discussion on the sub-underwriting arrangement with the sub-underwriters was initiated by the underwriters and not by the sub-underwriters; and
(b) the underwriters will not underwrite the rights issue unless the sub-underwriters enter into the sub-underwriting arrangement.
3.1.6 The commission that the sub-underwriters earn shall not be higher than, and must be part of, the commission paid to the underwriters; and
3.1.7 The fee earned by the underwriters and the sub-underwriters must be disclosed in the circular to shareholders.

Amended on 1 January 2011 and 29 September 2011.