Singapore Code on Take-overs and Mergers
REVISED EDITION 1990
(25th March 1992)
[1st November 1985]
This Code was issued in 1985, under the Companies Act. Section 213 of the Companies Act, under which this Code was issued, has been repealed with effect from 1/1/2002. This version of the Code is obsolete. The Code is now issued under the Securities and Futures Act (Cap. 289).
This is the third edition of the Singapore Code on Take-overs and Mergers. It is issued by the Minister for Finance pursuant to a notice made under section 213(17) of the Companies Act in order to give guidance on the principles of conduct and procedures to be observed in take-over and merger transactions. The Code is of a non-statutory nature and is intended to supplement and, in some ways, expand on the statutory provisions dealing with take-overs to be found in sections 213 and 214 of, and the Tenth Schedule to, the Companies Act. The Code and the statutory provisions do not, however, cover the whole field of take-overs and mergers for there are provisions in the Listing Manual of the Stock Exchange which will also need to be complied with by all parties to a take-over or merger involving a company or companies whose shares are quoted on the Stock Exchange of Singapore Ltd. The common purpose of these statutory and non-statutory requirements is to ensure that sufficient information is provided to shareholders and to set out the procedures to be followed by parties to a take-over or merger transaction. The Code, however, also includes provisions which are designed to ensure that shareholders are treated equally.
The Code represents the collective opinion of those professionally concerned in the field of take-overs and mergers on the proper standard of conduct to be observed in a take-over or merger transaction. Those who wish to have the facilities of the securities markets available to them should abide by the principles and rules laid down in the Code; those who do not so conduct themselves cannot expect to enjoy those facilities and will find that they are withheld. The privileges and disciplines described herein apply in the first place to those who are actively engaged in the securities market in all its aspects, but they will also apply to directors of public companies or persons or groups of persons who seek to gain control (as defined in the Code) of public companies, and professional advisers (insofar as they advise on the transactions in question).
The Code is framed in non-technical language for experience has shown that concepts in the field of take-overs and mergers do not easily lend themselves to legislative expression. This is emphasised in General Principle 1 of the Code which enunciates that the spirit as well as the precise wording of the Code must be adhered to by parties in a take-over or merger transaction and, further, that it must be accepted that the General Principles and the spirit of the Code will apply in areas or circumstances not explicitly covered by any Rule.
The provisions of the Code fall into two categories. On the one hand, the Code enunciates general principles of conduct to be observed in bid situations and, on the other hand, it lays down certain rules, some of which are precise, others no more than examples of the application of the general principles. The Rules, however, in no way limit the application of the General Principles.
The Code is administered and enforced by the Securities Industry Council whose members are made up of representatives from the Government, the Monetary Authority of Singapore and the private sector. The Council will, from time to time, issue Practice Notes on the interpretation of the principles and the rules and the practice to be followed. The duty of the Council is the enforcement of good business standards and not the enforcement of law. Council’s rulings will be final.
If there appears to be a breach of the Code, the Secretary will summon the alleged offenders to appear before the Council for a hearing. If the Council finds that there has been a breach it may have recourse to private reprimand or public censure or, in a more flagrant case, to further action designed to deprive the offender temporarily or permanently of its ability to enjoy the facilities of the securities market. In the event that the Council finds evidence to show that a criminal offence has taken place whether under the Companies Act, the Securities Industry Act (Chapter 289) or under the criminal law, it will recommend to the Attorney-General that the alleged offender be prosecuted. Every alleged offender will have the opportunity to answer allegations and to call witnesses. The Council may also summon witnesses. Proceedings are informal and no legal representation is permitted. The Council has powers under the law to investigate any dealing in securities that is connected with a take-over or merger transaction.
The primary responsibility of ensuring observance of the Code rests with parties to a take-over or merger and their advisers, not with the Council. This is the essence of self-regulation. Documents issued in a take-over or merger are not required to be submitted to the Council in advance. This means that anything contained in them which the Council feels to be misleading or incomplete (in terms of information which the shareholders could reasonably expect) can only be corrected by further circulars or announcements. In practice, companies and their advisers do submit draft documents to the Council in advance in order to clear some unusual features. The Council welcomes this in cases where advisers are in doubt as to whether some aspects of the documents or the proposals contained in them conform to the Code. But the Council does not generally encourage advance copies of documents to be sent to it where these are not expected to give rise to any problems. Responsibility for the contents of documents rests with the offeror and the offeree company and their advisers. The Stock Exchange of Singapore Ltd. also plays a part in that it requires to see certain documents in advance of publication and bears in mind the requirements of the Code when commenting on them.
The Code applies to both take-overs and mergers. It is drafted with listed public companies in view, but unlisted public companies are expected to observe the letter and spirit of the General Principles and Rules, wherever this is possible and appropriate. The Code does not apply to take-overs or mergers of private companies. The Code, like the statutory provisions, also applies to offeror companies which are incorporated outside Singapore.
Neither the Code nor the Council is concerned with the evaluation of the financial or commercial advantages or disadvantages of a take-over or merger proposition which must be decided by the company and its shareholders.
The Council, as the administering body, performs its day-to-day business through its Secretariat headed by the Secretary to the Council. The Secretariat is available at all times for confidential consultation on points of interpretation of the Code.
Acting In Concert Persons acting in concert comprise individuals or companies who, pursuant to an agreement or understanding (whether formal or informal), co-operate, through the acquisition by any or them of shares in a company, to obtain or consolidate control of that company.
Without prejudice to the general application of this definition, the following individuals and companies will be presumed to be persons acting in concert with each other unless the contrary is established:
a company, its parent, subsidiaries and fellow subsidiaries, and their associated companies, and companies of which such companies are associated companies, all with each other. For this purpose ownership or control of 20% or more of the equity share capital of a company will be regarded as the test of associated company status;
a company with any of its directors (together with their close relatives and related trusts);
a company with any of its pension funds;
a person with any investment company, unit trust or other fund whose investment such person manages on a discretionary basis; and
a financial adviser with its client in respect of the shareholdings of —
the financial adviser; and
all the funds which the financial adviser manages on a discretionary basis, where the shareholdings of the financial adviser and any of those funds in the client total 10% or more of the client’s equity share capital.
Associate (This definition has relevance only to disclosure of dealings under Rule 30). It is not thought practicable to define “associate” in precise terms which would cover all the different relationships which may exist in a take-over or merger transaction. The term “associate” is intended to cover all persons (whether or not acting in concert with the offeror, offeree company or with one another) who directly or indirectly own, or deal in, the shares of the offeror or offeree company in a takeover or merger transaction and who have (in addition to their normal interests as shareholders) an interest or potential interest, whether commercial, financial or personal, in the outcome of the offer.
The definition of “associate” does not apply to a banker whose relationship with a party to a take-over or merger transaction is the provision of normal commercial banking services or such activities in connection with the offer as confirming that cash is available or handling acceptances and other registration work.
Without prejudice to the generality of the foregoing, the term “associate” will normally include the following:
the offeror or offeree company’s parent, subsidiaries and fellow subsidiaries, and their associated companies, and companies of which such companies are associated companies. For this purpose ownership or control of 20% or more of the equity share capital of a company will be regarded as the test of associated company status;
bankers, stockbrokers, financial and other professional advisers to the offeror, the offeree company or appointed for or in connection with the take-over or merger transaction by any company mentioned in (a);
the directors (together with their close relatives and related trusts) of the offeror, the offeree company or any company mentioned in (a);
the pension funds of the offeror, the offeree company or any company mentioned in (a);
any investment company, unit trust or other fund whose investments an associate manages on a discretionary basis;
a holder of 10% or more of the equity share capital of the offeror or offeree company. This includes a holder who acquires shares which takes him through 10%. Where two or more persons act as a syndicate or other group, pursuant to an agreement or understanding (whether formal or informal) to acquire or hold such capital, they shall be deemed to be a single holder for the purpose of this paragraph; and
a company having a material trading arrangement with the offeror or offeree company.
Cash Purchases References to purchases for cash and cash prices paid for shares shall be deemed to include contracts or arrangements for the acquisition of shares where the consideration consists of a debt instrument maturing for payment in less than 3 years.
Council Council means the Securities Industry Council.
Director A director includes any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the director of a corporation is accustomed to act, and an alternative or substitute director.
Effective Control Effective control shall be deemed to mean a holding, or aggregate holdings, of shares carrying 25% or more of the voting rights (as defined below) of a company, irrespective of whether that holding (or holdings) gives de facto control.
Offer Offer includes, wherever appropriate, take-over and merger transactions, howsoever effected, including reverse take-overs, schemes of arrangement, partial offers and also offers by a parent company for shares in its subsidiary, but offers for non-voting non-equity capital do not come within the Code.
Offeror Offeror includes companies incorporated inside or outside Singapore and individuals wherever resident.
Offer Period Offer period means the period from the date when an announcement is made of a proposed or possible offer (with or without terms) until the date such offer is declared to have closed or lapsed.
Persons Persons include bodies corporate.
Unconditional References to an offer becoming or being declared unconditional relate to cases in which the offer has been announced to have become or been declared unconditional as to acceptances. Such offer may, however, still be subject to one or more other previously stated conditions, including for example the creation of additional capital or the grant of quotation being fulfilled.
Voting Rights Voting rights shall mean all the voting rights attributable to the share capital of a company which are currently exercisable at a general meeting.