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Legal and Compliance Considerations in Singaporean Reverse Takeover Deals

 

A reverse takeover (RTO) is a corporate transaction in which a private company acquires a public company, resulting in the private company becoming the listed entity. RTOs are a preferred way for private companies to gain access to the public market without having to go through the traditional initial public providing (IPO) process.

 

 

RTOs are also turning into more and more standard in Singapore, as they offer a number of advantages over IPOs, together with:

 

 

A faster and more efficient path to the general public market

 

Lower costs

 

Better flexibility in deal structuring

 

The ability to retain control of the listed entity

 

Nonetheless, RTOs are also complex transactions that contain a number of legal and compliance considerations. This article will talk about the key legal and compliance issues that parties to a Singaporean RTO needs to be aware of.

 

 

Regulatory Framework

 

 

RTOs in Singapore are regulated by the Securities and Futures Act (SFA) and the Listing Manual of the Singapore Alternate Securities Trading Limited (SGX-ST). The SFA and the Listing Manual set out a number of requirements that parties to an RTO must comply with, together with:

 

 

The acquirer should make a mandatory offer to all shareholders of the target company to buy their shares.

 

The acquirer must provide a circular to target firm shareholders setting out the phrases of the supply and the reasons for the RTO.

 

The goal company should hold an additionalordinary general meeting to approve the RTO.

 

The acquirer and the target firm should obtain approval from the SGX-ST for the listing of the acquirer's shares on the SGX-ST.

 

Due Diligence

 

 

It is essential for both the acquirer and the target company to conduct thorough due diligence on each other earlier than entering into an RTO agreement. This is because RTOs are complicated transactions that contain a number of risks, including:

 

 

Monetary risks: The acquirer should be certain that the target company is financially sound and that it will be able to generate sufficient profits to service its debt and pay dividends to its shareholders.

 

Regulatory risks: The acquirer must ensure that the goal firm complies with all applicable laws and regulations.

 

Litigation risks: The acquirer should make sure that the goal firm shouldn't be going through any significant legal claims.

 

Corporate Governance

 

 

RTOs also can increase a number of corporate governance concerns. For instance, it is essential to ensure that the acquirer and the goal company have unbiased boards of directors that can provide objective oversight of the transaction. It's also essential to ensure that the acquirer will not have a controlling interest within the listed entity after the RTO, as this may lead to conflicts of interest.

 

 

Securities Law Considerations

 

 

In addition to the general legal and compliance considerations discussed above, there are a number of securities law considerations that parties to a Singaporean RTO must be aware of. These include:

 

 

The acquirer's provide to target company shareholders must be fair and reasonable.

 

The acquirer should disclose all material information about itself and the target company to target company shareholders.

 

The acquirer should not interact in any insider trading or market manipulation activities.

 

Conclusion

 

 

RTOs is usually a advanced and challenging process, but they will also supply a number of advantages to each acquirers and target companies. It will be important for parties to a Singaporean RTO to seek legal and monetary advice early on in the process to ensure that they comply with all applicable laws and regulations.

 

 

Additional Considerations

 

 

In addition to the general legal and compliance considerations discussed above, there are a number of other factors that parties to a Singaporean RTO ought to consider, including:

 

 

Taxation: RTOs can have advanced tax implications for both the acquirer and the target company. It is very important seek tax advice to make sure that the transaction is structured in a tax-efficient manner.

 

Employment: RTOs also can have implications for the employees of the goal company. It is important to consider how the RTO will impact the terms and conditions of employment of target company employees, and to take steps to make sure that all applicable employment laws are complied with.

 

Mental Property: RTOs also can contain the switch of mental property from the goal company to the acquirer. It is very important be sure that all necessary intellectual property rights are switchred to the acquirer, and to take steps to protect the acquirer's mental property rights after the RTO.

 

 

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