Issue date: 5 July 2002
Effective date: 8 July 2002
29 September 2011
Revised on: 24 March 2009
14 September 2011
Listing Rule 1014
1.1 This Practice Note sets out the circumstances under which the Exchange may grant a waiver of the requirement for shareholder approval of any major transactions.
1.2 This Practice Note sets out general principles only. The Exchange invites companies, REITs and business trusts to consult on a particular transaction if it wants certainty with respect to the application of the rules.
2. Major Transactions
2.1 A major transaction is one where any of the relative figures as computed on the bases set out in Rule 1006
exceeds 20%. Pursuant to Rule 1014
, a major transaction must be made conditional upon approval by shareholders in general meeting and a circular containing the information in Rule 1010
must be sent to all shareholders.
2.2 Rule 1006
sets out the following bases for computing the relative size of a transaction:
(a) The net asset value of the assets to be disposed of, compared with the group's net asset value. This basis is not applicable to an acquisition of assets.
(b) The net profits attributable to the assets acquired or disposed of, compared with the group's net profits.
(c) The aggregate value of the consideration given or received, compared with the issuer's market capitalisation.
(d) The number of equity securities issued by the issuer as consideration for an acquisition, compared with the number of equity securities previously in issue.
2.3 Rule 1002
(1) states that, unless the context otherwise requires, "transaction" refers to the acquisition or disposal of assets by an issuer or a subsidiary that is not listed on the Exchange or an approved Exchange, including an option to acquire or dispose of assets. It excludes an acquisition or disposal which is in, or in connection with, the ordinary course of its business or of a revenue nature.
3. Transactions in, or in Connection with, the Ordinary Course of an Issuer's Business
3.1 In determining whether a transaction can be regarded as in the ordinary course of an issuer's business, the Exchange will have regard to the issuer's existing core business. This is elaborated in paragraphs 3.2 and 3.3 below.
3.2.1 Shareholder approval is not required if an acquisition will result in an expansion of an issuer's existing core business. The Exchange takes the view that it should not in normal circumstances require an issuer to seek shareholder approval if the expansion is by way of an acquisition of a similar business, when other means to expand its business that are open to the issuer would not require shareholder approval.
3.2.2 However, should the acquisition change the risk profile of the issuer, shareholders should have an opportunity to have their say on the proposed acquisition. This is so notwithstanding that the acquisition will not change the main business of the issuer.
3.2.3 In determining whether an acquisition would change an issuer's risk profile, the Exchange will have regard to the following:—
(a) whether the acquisition will increase the scale of the issuer's existing operations significantly. An acquisition is regarded as increasing the scale of operations significantly if any of the relative figures computed on the bases set out in Rule 1006
(c) and 1006
(d) is 100% or more. Rule 1015
requires shareholder approval to be obtained for such an acquisition regardless of whether the acquisition is treated as in the issuer's ordinary course of business. Such an acquisition may be treated as a very substantial acquisition;
(b) whether the acquisition will result in a change in control of the issuer. Rule 1015
requires shareholder approval to be obtained if the acquisition will result in a change in control of the issuer regardless of whether the acquisition is treated as in the issuer's ordinary course of business. Such an acquisition may be treated as a reverse takeover;
(c) whether the acquisition will have a significant adverse impact on the issuer's earnings, working capital and gearing;
(d) the extent to which the acquisition will result in an expansion of the issuer's business to a new geographical market and/or a new business sector; and
(e) the extent to which the intended expansion has been foreshadowed and investors have had an opportunity to vote at previous general meetings on:
(i) the issuer's proposal; or
(ii) waiving their rights to approve the issuer's proposal.
3.2.4 The above factors are neither exhaustive nor conclusive.
3.3.1 The disposal of an issuer's core business (or a substantial part of its core business) will usually result in a material change to the nature of the issuer's business. Thus, shareholders should have an opportunity to consider the future direction of the issuer, and Rule 1014
will be applied.
3.3.2 However, in exceptional circumstances, the Exchange may waive Rule 1014
if the intended disposal has been foreshadowed and investors have had the opportunity to vote at previous general meetings on:
(i) the issuer's proposal to dispose of specific assets or businesses; or
(ii) waiving their rights to approve the issuer's proposal.
3.3.3 Further, where an issuer proposes to dispose of a non-core business or a non-core asset (for example, a vacant factory) without affecting the nature of its main business, it is reasonable in normal circumstances to expect shareholders not to be overly concerned about the disposal. The Exchange may grant a waiver under such circumstances.
3.4 In the Exchange's review whether shareholders' approval is required for a transaction, the Exchange will also take into consideration the following:—
(a) an opinion from the board of directors that there has been no material change in the risk profile of the issuer arising from the transaction, including the basis for their opinion; and
(b) a confirmation by an independent financial adviser acceptable to the Exchange that the directors' opinion and their basis have been stated by the directors after due and careful enquiry.
Where the opinion and confirmation of the directors and the independent financial adviser are submitted, or required by the Exchange, and a waiver is granted, the issuer must announce such opinion and confirmation and their basis via SGXNET.
3.5 REIT and Property Trust
Where the disposal of property is executed in conjunction with a view to reinvest the disposal proceeds into an acquisition of another property, it is reasonable to expect that the risk profile of the issuer will not change provided that:—
(i) The property to be acquired has identified and is within its investment mandate including being in a similar sector that the issuer has been investing in and similar jurisdictions where its current portfolio of properties are located; and
(ii) A legally binding agreement for the acquisition of the property has been signed.
Under such circumstances, the Exchange may grant a waiver of Rule 1014
3.6 Issuers should consult the Exchange as early as possible about whether a proposed transaction must comply with the rules.
4. Relative Figures
4.1 Under Rule 1014
, the profit test does not apply to an acquisition of profitable assets as shareholders are not expected in normal circumstances to be concerned if the assets to be acquired are profit contributors. Similarly, shareholders generally would not be concerned if the assets to be disposed of are non-core or loss-making. Thus, for such disposals, the Exchange may grant a waiver of Rule 1014
from the requirement to seek shareholder approval for the disposal.
4.2 In some cases, tests based on assets and profits may not give a meaningful indication of the significance of the transaction to the issuer. This can happen where, for example, the issuer or the asset to be acquired is loss-making; or the issuer or the asset to be acquired has a negative net asset value. The limit of 20% in Rule 1013
cannot be applied in such circumstances. The Exchange will assess the significance of the transaction on a case by case basis, and we encourage issuers to consult the Exchange as early as possible.
5.1 Undertaking From Substantial Shareholder(s) Regarding Voting
5.1.1 The Exchange will not grant a waiver from the requirement for shareholder approval solely on the basis that the substantial shareholders of the issuer have undertaken to vote in favour of the transaction. As a general rule, shareholders should be given the opportunity to have their say on the issuer's proposal.
5.2 Separate Resolution
5.2.1 If a transaction requires more than one approval, the issuers should consider whether separate resolutions on the different aspects of the proposal are put to shareholders. One matter that the Exchange will consider when clearing a circular to shareholders is whether the resolutions have been constructed in a way that allows shareholders to properly exercise their voting rights.
6. Cost and Inconvenience of Convening a Shareholder Meeting
6.1 The Exchange would not in normal circumstances regard only the cost and inconvenience of convening a meeting as sufficient reasons to grant a waiver.
7.1 For the purposes of determining the relative figure of Rule 1006(c), the aggregate value of consideration given or received should include:—
7.1.1 Any deferred consideration that may be payable or receivable by the issuer in the future (the consideration is the maximum total consideration payable or receivable under the agreement); and
7.1.2 Further amounts related to the transaction.
7.2 Issuers should consult the Exchange as early as possible about whether further amounts relating to the transaction are part of "consideration". For example, loans or guarantees extended by purchaser, the discharge of any liabilities (whether actual or contingent), or the provision of other forms of security, may be deemed to be part of "consideration".
Shareholder Approval For Major Transactions
7.3 Substantive factors should be disclosed to justify the aggregate value of the consideration. For the avoidance of doubt, a statement that the consideration was on a “willing buyer willing seller” basis is not sufficient.
Amended on 29 September 201129 September 2011.