Source of article: THE BUSSINESS TIMES

My post on LinkedIn can be seen here.

In summary:

SGX RegCo has proposed changes to the listing rules to facilitate the corporate restructuring of financially distressed issuers. The proposed changes are timely and would be consistent with Singapore’s aim to position itself as a leading debt restructuring hub.

To enable the company to be properly rehabilitated, all stakeholders must be prepared to share the burden and make deep concessions to invest in the longer term prospects of the company. A successfully rehabilitated company benefits all and sundry.     

The proposed new rules retain the regulatory compliance that a material price-sensitive event such as a court-supervised scheme application or placing an issuer (or any of its subsidiaries) under judicial management, requires an immediate announcement to the market. This is to maintain a fair, orderly and transparent market for the issuer’s shares, while it is undergoing rehabilitation.

Presently, corporate restructurings involving the disposal of assets requires the issuer’s board (in a scheme situation) or the judicial manager to obtain RegCo’s approval to dispense with the need to seek shareholders’ approval. The proposed dispensation of such a regulatory requirement provides certainty and clarity. This will greatly facilitate the disposal of non-performing or non-core assets to improve the much needed cash-flow in a timely manner.

The proposed new rules are silent on whether shareholders’ approval is required when new assets are injected into the company as part of the corporate rehabilitation exercise. It would be best to require shareholders’ approval in such an event. The new assets proposed to be injected could totally transform the business sub-stratum of the issuer, exposing it to financial and business risks in an entirely new industry. Shareholders should be permitted to decide on such a major transformation that will affect their investments in the company, as opposed to leaving it entirely in the hands of the scheme managers or judicial managers.

The proposed rules allow a financially distressed issuer’s shares to remain trading if there is certainty (such as a “pre-pack” arrangement) as to the completion of the issuer’s restructuring process. Price-sensitive information could be divulged prior to and during open court proceedings which investors trading on the company’s shares may not be privy to. To prevent any inadvertent false market on the company’s shares, it would be best to require a trading suspension until the corporate restructuring and rehabilitation of the issuer is fully completed.

I shared my observations in the attached Business Times report by Navene Elangovan, published on 23 February 2024.

Connect with me on LinkedIn or visit my profile.