Before a Public Takeover Bid | Singapore | Global Public M&A Guide

3. Before a Public Takeover Bid

[Last updated: 1 June 2022, unless otherwise noted]

3.1 Shareholding rights and powers

The table below provides an overview of the different rights and powers that are attached to different levels of shareholding within a Singapore listed company:

Shareholding	Rights
One share	The right to attend and vote at general shareholders' meetings. The right to obtain a copy of the documentation submitted to general shareholders' meetings. The right to submit questions to the directors and statutory auditors at general shareholders' meetings (either orally at the meeting, or in writing prior to the meeting). The right to request the nullity of decisions of general shareholders' meetings for irregularities as to form, process or other reasons (as provided for in section 216 of the Companies Act). The right to request to bring an action on behalf of the company or intervene in an action to which the company is a party (as provided for in section 216A of the Companies Act). The right to receive dividends.
5%	The right to put additional items on the agenda of a general shareholders' meeting and to table draft resolutions for items on the agenda. The right to call for a poll vote on a resolution. The right to require directors' salaries and other benefits to be disclosed.
10%	The right to request the board of directors to convene a general shareholders' meeting.
More than 25% of the total number of shares held by independent shareholders (i.e., shareholders other than the bidder and its concert parties) (at a general shareholders' meeting)	The ability to block a delisting proposal at a general shareholders' meeting.
More than 25% (at a general shareholders' meeting)	The ability at a general shareholders' meeting to block: any changes to the constitution, capital reductions, share buy-backs and dissolution of the company; the modification or disapplication (limitation or cancellation) of the preferential subscription right of existing shareholders in case of share issues in cash, or issues of convertible bonds or warrants; the giving of financial assistance by a public company to purchase its shares or shares of its holding company; and certain methods of takeovers, i.e., amalgamations and schemes of arrangements.
More than 50% (at a general shareholders' meeting)	The ability at a general shareholders' meeting: to approve capital increases; to approve a disposal of the whole or substantially the whole of the company's property; to appoint and dismiss directors and to approve the remuneration and, as relevant, severance package of directors; to approve certain aspects of the remuneration and severance package of executive management; to appoint and dismiss statutory auditors and to approve their remuneration; to approve the annual financial statements (including the remuneration report of the remuneration committee of the board of directors); to approve dividend payments; and to take decisions for which no special majority is required.
90%	The right to force all other shareholders to sell their shares (a "squeeze-out") following a takeover bid if (i) the takeover bid is made by way of a general offer or other scheme or contract, and (ii) the bidder, its nominees and its related corporations do not own any shares in the target company as of the date of the offer or proposal.

3.2 Restrictions and careful planning

Singapore law contains a number of rules that already apply before a public takeover bid is announced. These rules impose restrictions and hurdles in relation to prior stake building by a bidder, announcements of a potential takeover bid by a bidder or a target company, and prior due diligence by a potential bidder. The main restrictions and hurdles have been summarized below. Some careful planning is therefore necessary if a potential bidder or target company intends to start up a process that is to lead towards a public takeover bid.

3.3 Insider dealing and market abuse

Before, during and after a takeover bid, the normal rules regarding insider dealing and market abuse remain applicable. The relevant provisions in the Securities and Futures Act prohibit an individual in possession of non-public material price-sensitive information from (a) communicating the information to a third party who is likely to deal in the securities or (b) dealing in the securities.

The rules include, amongst other things, that manipulation of the target company's stock price, e.g., by creating misleading rumours, is prohibited. In addition, the rules on the prohibition of insider trading prevent a bidder that has inside information regarding a target company (other than in relation to the actual takeover bid) from launching a takeover bid.

For further information on the rules on insider dealing and market abuse, see 6.1 below.

3.4 Disclosure of shareholdings

The rules regarding the disclosure of shareholdings and transparency apply before, during and after a public takeover bid.

Pursuant to these rules, if a potential bidder starts building up a stake in the target company, it will be obliged to announce its stake if the voting rights attached to its stake have passed an applicable threshold. The relevant disclosure threshold in Singapore is 5%.

When determining whether a threshold has been passed, a potential bidder must also take into account the voting securities held by the parties with whom it acts in concert or may be deemed to act in concert (see 3.9 below). These include its affiliates, financial or professional advisers and directors. The parties could also include existing shareholders of the target company with whom the potential bidder has entered into specific arrangements such as call option agreements or voting undertakings.

3.5 Disclosures by the target company

The target company must continue to comply with the general rules regarding disclosure and transparency. These rules include that a company must immediately announce all inside information. For further information on inside information, see 6.1 below. The facts surrounding the preparation of a (potential) public takeover bid may constitute inside information. If so, the target company must announce this. However, the board of the target company can delay the announcement if a reasonable person would not expect the information to be disclosed and (a) the information concerns an incomplete proposal or negotiation or (b) the information comprises matters of supposition or is insufficiently definite to warrant disclosure. However, a delay of the announcement is only permitted provided that the non-disclosure does not entail the risk of the public being misled, and that the company can keep the relevant information confidential. Where the target company is the subject of rumours or speculation about a possible bid, or where there is significant movement in its share price or share turnover, the target company must immediately make an announcement.

3.6 Announcements of a public takeover bid

Prior to the public announcement of a (potential) takeover bid by the bidder or the target company, no one is permitted to announce the launching of a public takeover bid.

Following an approach to the target company's board, the target company must make an announcement once it receives notification of a firm intention to make an offer. As soon as the public takeover bid is announced, it can normally no longer be withdrawn (except in certain circumstances).

If there are rumors or leaks that a (potential) bidder intends to launch a public takeover bid, or there are undue movements in the target company's share price or trading volume, and there are reasonable grounds for concluding that it is the potential bidder's actions (whether through purchase of the target company's shares or otherwise) which have directly contributed to the situation, the bidder or the target company (depending on whether or not an approach has been made to the target company) must make a holding announcement to clarify the situation. See 3.7 for further details.

3.7 Early disclosures – Put-up or shut-up

Early disclosure – Where there is a leak regarding information relating to a potential bid, or where there are undue movements in the target company's share price or trading volume, a holding announcement is required to be made, regardless of whether or not there is a firm intention to make an offer. In addition, the target company could request that the SIC imposes a deadline by which the potential bidder must clarify its intention as to whether or not it is making an offer. This type of disclosure may be considered when the bid is hostile or where there is prolonged uncertainty as to whether or not a bid is forthcoming, but an announcement is nevertheless appropriate.
Put-up or shut-up – Under the Code, there are no formal sanction mechanisms for the SIC to force a bidder to make an announcement to clarify whether or not it intends to carry out a public takeover bid. However, in the case of a competitive bid situation, a potential competing bidder must clarify its intention by the 53rd day from the date the first bidder dispatches its offer document (in the case of a general offer), or no later than the seventh day prior to the date of the general shareholders' meeting to approve the scheme of arrangement or amalgamation.

3.8 Due diligence

The Listing Manual generally prohibits selective disclosure in order to prevent insider dealing and market abuse, but allows selective disclosure to be made on an exceptional basis for limited purposes, such as for purposes of facilitating the target company's business or corporate objectives. Appropriate confidentiality restraints (such as the use of confidentiality undertakings and stand-still agreements) must be put in place and disclosure should only be made on a need-to-know basis.

A concern for the parties involved during the due diligence process prior to commencement of the offer is the risk of inside information being disclosed in the process, which would result in the target and the bidder running afoul of the insider dealing and market abuse rules. As a result, care needs to be taken to ensure that the information provided by a target company to a bidder during due diligence does not include materially price-sensitive information. When an offer or a potential offer has been announced, the Code requires the target company to provide, at a competing bidder's request, the information provided to the other competing bidder(s).

In the absence of the target company providing confidential information to the potential bidder, the bidder will only have access to publicly-available information of the target company. In the case of a Singapore listed target company, this would include the following information available from the Accounting and Corporate Regulatory Authority and/or the target company's corporate announcements page on the SGX-ST:

its constitution;
annual audited financial statements;
half-yearly or quarterly financial results;
shareholder circulars and prospectuses;
public announcements pursuant to its disclosure obligations under the Listing Manual, for the last 5 years;
substantial shareholding notifications; and
annual reports.

3.9 Acting in concert

For the purpose of the Singapore takeover rules, persons are "acting in concert" if they collaborate with the bidder, the target company or with any other person on the basis of an express or silent, oral or written, agreement aimed at acquiring or consolidating effective control over the target company.

Persons that are affiliates of each other are presumed to be acting in concert unless the contrary is established.

The concept of persons acting in concert is very broad and, in practice, many issues can arise to determine whether persons act or do not act in concert. This is especially relevant in relation to mandatory general offers. If one or more persons in a group of persons acting in concert acquire voting securities as a result of which the group in the aggregate would pass the 30% threshold, the members of the group will have a joint obligation to carry out a mandatory general offer, even though the individual group members do not pass the 30% threshold.

If persons acting in concert with the bidder possess confidential price-sensitive information, they are prohibited from dealing in the target company's securities during the time when there is reason to suppose that an approach, an offer or a revised offer is contemplated and the announcement of such approach, offer or revised offer. Such restriction does not apply where such dealings are excluded from the proposed offer or where there are no-profit arrangements in place.

If the bidder, the target or any of the persons acting in concert with them deal in the securities of the target company or securities of the bidder (in the case of a securities exchange offer), they are required to publicly disclose such dealings before the commencement of the offer period, if a potential offer has been the subject of an announcement that talks are taking place (whether or not the potential bidder has been named) or if a potential bidder has announced that it is considering making an offer.

Purchases of securities in the target company by persons acting in concert with the bidder within the period between three to six months prior to the commencement of a general offer may affect the price payable by the bidder to the target shareholders. Please see 4 below for more details.

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