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Chapter 1 Introduction
Chapter 2 Equity Securities
Chapter 3 Debt Securities
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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
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Chapter 13 Trading Halt, Suspension and Delisting
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Practice Note 2.1A Independence of Issue Managers
Report of the Committee and Code of Corporate Governance
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Rule Amendments

  Versions
(1 version)
 
Jan 10 2020 onwards

Practice Note 2.1A Independence of Issue Managers

Details Cross References
Issue date: 10 January 2020

Effective date: 10 January 2020
Listing Rule 112A

1. Introduction

Issue managers play a major role in initial public offerings, listings by way of an introduction and reverse takeovers as they prepare listing applicants for the listing, lodge listing applications and deal with the Exchange on matters relating to listing applications.

Rule 112A requires at least one issue manager to be independent of an applicant so that the interests of investors may be safeguarded. All issue managers are expected to provide impartial advice and discharge their professional duties fully and professionally.

2. Independence of Issue Managers

2.1 The Exchange will not normally consider an issue manager to be independent of an applicant if any of the following circumstances exist from the date of submission of the listing application up to the date of listing:—
(i) more than 20% of the gross proceeds from the offering is or will be used to:—
(a) reduce and/or retire any outstanding loan and/or available committed credit facility extended by the issue manager group to the applicant and/or its subsidiaries; and/or
(b) discharge any guarantee given by the issue manager group on behalf of the applicant and/or its subsidiaries;
(ii) the aggregate amount of:—
(a) outstanding loans and/or available committed credit facilities extended by the issue manager group to the applicant and/or its subsidiaries; and
(b) guarantees given by the issue manager group on behalf of the applicant and/or its subsidiaries,
exceed 30% of:
(A) the applicant's latest audited total assets or latest unaudited pro forma total assets (if applicable) prior to the submission of the application;
(B) in the case of an applicant engaged principally in property investment and/or development, the latest valuation of the assets of the applicant and its subsidiaries; or
(C) in the case of a REIT or business trust that does not have audited financial statements, the latest unaudited pro forma total assets prior to the submission of the application; or
(iii) the issue manager group has or will have an interest (direct or deemed) in 5% or more in the equity securities of the applicant, its principal subsidiaries and/or controlling shareholder(s) before or after the listing.
2.2 References to "loans" and "guarantees" in paragraphs 2.1(i) and 2.1(ii) above exclude short-term financing facilities granted by the issue manager group to REITs, business trusts and/or their subsidiaries for the sole purpose of the acquisition of the assets for the proposed initial public offering or reverse takeover, where such short-term financing facilities are repaid on or around the time of completion of the listing.
2.3 For the purposes of paragraphs 2.1(ii)(A), (B) and (C), where a loan provided by the issue manager group is drawn down for the purpose of the acquisition of an asset and such asset is not included in the applicant's latest audited total assets, unaudited pro forma total assets or valuation of the assets (where applicable), the valuation of the asset, for which the loan was based upon, may be included as part of the applicant's total asset figure as referred to in paragraph 2.1(ii)(A), (B) or (C).
2.4 For the purposes of paragraph 2.1(ii)(B) above, the Exchange would consider the applicant to be engaged principally in property investment and/or development where the property investment and/or development activities of the applicant and/or its subsidiaries, based on the applicant's latest audited financial statements: (1) represents 50% or more of the total assets, revenue or operating expenses of the group; or (2) is the single largest contributor based on any of the tests in (1) above.
2.5 For the purposes of paragraph 2.1(iii) above:—
(i) reference to "equity securities" excludes equity interests:
(a) held by an investment unit/entity in the issue manager group on behalf of, and for the benefit of, its independent and discretionary clients;
(b) held by a fund management unit/entity in the issue manager group on behalf of its independent and non-discretionary clients;
(c) held in a custodial capacity on behalf of independent clients; and
(d) held by the issue manager group that arise as a result of an underwriting obligation; and
(ii) an issue manager group would be deemed to have an interest in the equity securities of the applicant, its principal subsidiaries and/or controlling shareholder(s) if the issue manager group will be granted securities that may be convertible to shares in the applicant, its principal subsidiaries and/or controlling shareholder(s) before or after the listing.
2.6 Notwithstanding that specific numerical limits have been provided in paragraphs 2.1(i), (ii) and (iii) above, the Exchange retains the discretion to deem the issue manager independent or otherwise having regard to the spirit and intent of Rule 112A.

The issue manager must consider whether there are any circumstances other than those set out in paragraph 2.1 above that may materially affect its independence. In the event of any uncertainty, the applicant should consult and clarify with the Exchange as soon as possible.

Added on 10 January 2020.