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Wednesday, 4 March 2009
SGX defends move to ease fund-raising for firms
The Singapore Exchange (SGX) has defended its controversial move to give listed firms more leeway in raising funds without tripping them with hurdles such as getting shareholders’ fresh approval.
The Singapore Exchange (SGX) has defended its controversial move to give listed firms more leeway in raising funds without tripping them with hurdles such as getting shareholders’ fresh approval.
The bourse operator argued that sufficient safeguards already exist to protect small investors’ interests. The relaxation - lasting till the end of next year - was to allow firms to quickly raise funds, given the severity of the credit crisis.
The new measures double the proportion of new shares firms can raise via a rights issue, from 50 per cent to 100 per cent of the firm’s existing share capital.
They can also place out new shares at a 20 per cent discount to the market price, up from 10 per cent previously.
Explaining the rationale for the relaxation, SGX senior executive vice-president Yeo Lian Sim said yesterday: ‘Right now, companies find themselves in a situation where it is difficult to raise cash. We have shortened the approval time and made the processing more efficient.’
There is one hurdle. Firms need the go-ahead from shareholders to amend articles and memorandum of association to enable them to issue new shares equal to 100 per cent of existing share capital. Investors also have the option to sell rights entitlements on the open market, after making an informed decision on the reasons made by the board for the cash call.
The SGX has also relaxed rules to let a firm place shares to substantial shareholders without shareholder approval.
But small investors are protected as such placees are not supposed to have board representation or control over the running of the company’s business.
The SGX also unveiled fresh revisions to listing rules to take effect in three weeks. They include the need for a firm to disclose details on profit guarantees or profit forecasts when it acquires an asset or a business. It has to disclose safeguards such as compensation provisions if a guarantee is not met.
The firm also has to make immediate disclosure about whether the guaranteed profit level is met or not, and if there are any material variations from the original agreement.
Companies raising funds have to ‘promptly disclose the terms and purpose of the issue’ and identify the merchant bank doing the placement. If no placement agent is involved, the firm must provide the names of the placees and the number of shares for each.
Firms must make immediate announcements on the use of funds raised from issuing new shares ‘as and when they are materially disbursed’. They have to announce any big change in the use of funds earmarked for other purposes and explain why.
The bourse operator requires a director disqualified from acting as one in other markets to resign from his directorships in Singapore as well.
The SGX pressed ahead yesterday with plans to attract life-science firms here. Its listing criteria for them include having a three-year record in research and development of a product and using the money raised to get it launched commercially.
The SGX has also trimmed the minimum number of shareholders in an initial public offering from 1,000 to 500.
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SGX defends move to ease fund-raising for firms
By Goh Eng Yeow
4 March 2009
The Singapore Exchange (SGX) has defended its controversial move to give listed firms more leeway in raising funds without tripping them with hurdles such as getting shareholders’ fresh approval.
The bourse operator argued that sufficient safeguards already exist to protect small investors’ interests. The relaxation - lasting till the end of next year - was to allow firms to quickly raise funds, given the severity of the credit crisis.
The new measures double the proportion of new shares firms can raise via a rights issue, from 50 per cent to 100 per cent of the firm’s existing share capital.
They can also place out new shares at a 20 per cent discount to the market price, up from 10 per cent previously.
Explaining the rationale for the relaxation, SGX senior executive vice-president Yeo Lian Sim said yesterday: ‘Right now, companies find themselves in a situation where it is difficult to raise cash. We have shortened the approval time and made the processing more efficient.’
There is one hurdle. Firms need the go-ahead from shareholders to amend articles and memorandum of association to enable them to issue new shares equal to 100 per cent of existing share capital. Investors also have the option to sell rights entitlements on the open market, after making an informed decision on the reasons made by the board for the cash call.
The SGX has also relaxed rules to let a firm place shares to substantial shareholders without shareholder approval.
But small investors are protected as such placees are not supposed to have board representation or control over the running of the company’s business.
The SGX also unveiled fresh revisions to listing rules to take effect in three weeks. They include the need for a firm to disclose details on profit guarantees or profit forecasts when it acquires an asset or a business. It has to disclose safeguards such as compensation provisions if a guarantee is not met.
The firm also has to make immediate disclosure about whether the guaranteed profit level is met or not, and if there are any material variations from the original agreement.
Companies raising funds have to ‘promptly disclose the terms and purpose of the issue’ and identify the merchant bank doing the placement. If no placement agent is involved, the firm must provide the names of the placees and the number of shares for each.
Firms must make immediate announcements on the use of funds raised from issuing new shares ‘as and when they are materially disbursed’. They have to announce any big change in the use of funds earmarked for other purposes and explain why.
The bourse operator requires a director disqualified from acting as one in other markets to resign from his directorships in Singapore as well.
The SGX pressed ahead yesterday with plans to attract life-science firms here. Its listing criteria for them include having a three-year record in research and development of a product and using the money raised to get it launched commercially.
The SGX has also trimmed the minimum number of shareholders in an initial public offering from 1,000 to 500.
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