When does a Catalist-listed company need to engage a sponsor for its corporate actions or transactions?
To provide greater clarity and guidance on this matter, the Singapore Exchange (SGX) has introduced a ‘practice note’ spelling out the situations that require or do not require a sponsor.
But it said in an announcement, which also reiterated the pivotal role of sponsors, which the practice note is not an exhaustive one and that issuers are advised to consult their continuing sponsors. When in doubt, sponsors must consult the exchange, SGX said.
Catalist - a result of the revamp of the Sesdaq junior board - came into being in late 2007. As the revamped board comes under a sponsor-supervised regulatory framework, existing Sesdaq companies then were given a deadline to find a sponsor.
The SGX practice note comes at a time when the pace of former Sesdaq companies finding a sponsor as required under the Catalist sponsor-supervised regime is hampered by the current poor market conditions, with some of them wondering whether there are merits in meeting the deadline earlier.
Of the former Sesdaq companies that are still on Catalist, more than 30 have found a sponsor, but close to 90 have yet to do so before the February 2010 deadline.
Under the practice note issued, the corporate actions that require a sponsor to provide corporate finance advice include transfer of the Catalist company to the SGX mainboard; the issue of shares, including rights issue and share placement, and warrants; issue of shares or convertible shares or options by a principal subsidiary; and capital reduction/distribution.
A sponsor is also required for a scrip dividend scheme or a share option scheme where the terms of the scheme may be prejudicial to shareholders and for an interested person transaction, a major transaction, a scheme of arrangement and a delisting.
There are situations where an issuer can choose to engage non-sponsor financial advisers or a continuing sponsor may choose to outsource part of its work to other financial advisers in the market.
‘Such situations arise when the corporate finance advisory work relates to transactions that are procedural in nature and are expected to pose minimal regulatory risk,’ SGX said yesterday.
But SGX stressed these situations do not change the principal role of the continuing sponsor ‘to retain overall management and responsibility for the transaction’.
Sponsors told BT that while they practise this regulatory oversight, they do not repeat the due diligence conducted by the professionals, such as financial or legal advisers, auditors and valuers. Sponsors therefore do not vouch for the accuracy of hard numbers or truthfulness of the announcements. This is why sponsors say they do not ‘independently verify the contents of the announcement’ in the company announcements they issue.
The sponsors will conduct the onerous due diligence on the transactions if they are engaged as a corporate adviser. But that would entail additional fees on top of sponsor fees, they say.
Some sponsors explained that it is impractical to repeat the onerous due diligence already conducted by other professionals. But they will query the management on the merits of the transaction and ensure compliance with SGX listing rules.
PrimePartners corporate finance director Mark Liew told BT that as a sponsor, he also attends the board meetings and by doing so, understands what the company is doing in terms of its plans and directions.
‘So, when a company makes an announcement, we know if it is consistent with what the board has approved,’ he said. ‘But sponsors don’t interfere with the management’s business decisions. We will raise questions that investors and regulators will ask.’
Stamford Law director Soh Chun Bin said the sponsors also seek to value-add by spurring issuers towards fuller disclosures, suggesting suitable routes to take and reminding directors to make sound decisions.
‘It is hard to draw a line on the sponsors’ responsibilities as it depends on the circumstances,’ he said.
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Catalist guide on engagement of sponsors
Lynette Khoo, Business Times
1 April 2009
When does a Catalist-listed company need to engage a sponsor for its corporate actions or transactions?
To provide greater clarity and guidance on this matter, the Singapore Exchange (SGX) has introduced a ‘practice note’ spelling out the situations that require or do not require a sponsor.
But it said in an announcement, which also reiterated the pivotal role of sponsors, which the practice note is not an exhaustive one and that issuers are advised to consult their continuing sponsors. When in doubt, sponsors must consult the exchange, SGX said.
Catalist - a result of the revamp of the Sesdaq junior board - came into being in late 2007. As the revamped board comes under a sponsor-supervised regulatory framework, existing Sesdaq companies then were given a deadline to find a sponsor.
The SGX practice note comes at a time when the pace of former Sesdaq companies finding a sponsor as required under the Catalist sponsor-supervised regime is hampered by the current poor market conditions, with some of them wondering whether there are merits in meeting the deadline earlier.
Of the former Sesdaq companies that are still on Catalist, more than 30 have found a sponsor, but close to 90 have yet to do so before the February 2010 deadline.
Under the practice note issued, the corporate actions that require a sponsor to provide corporate finance advice include transfer of the Catalist company to the SGX mainboard; the issue of shares, including rights issue and share placement, and warrants; issue of shares or convertible shares or options by a principal subsidiary; and capital reduction/distribution.
A sponsor is also required for a scrip dividend scheme or a share option scheme where the terms of the scheme may be prejudicial to shareholders and for an interested person transaction, a major transaction, a scheme of arrangement and a delisting.
There are situations where an issuer can choose to engage non-sponsor financial advisers or a continuing sponsor may choose to outsource part of its work to other financial advisers in the market.
‘Such situations arise when the corporate finance advisory work relates to transactions that are procedural in nature and are expected to pose minimal regulatory risk,’ SGX said yesterday.
But SGX stressed these situations do not change the principal role of the continuing sponsor ‘to retain overall management and responsibility for the transaction’.
Sponsors told BT that while they practise this regulatory oversight, they do not repeat the due diligence conducted by the professionals, such as financial or legal advisers, auditors and valuers. Sponsors therefore do not vouch for the accuracy of hard numbers or truthfulness of the announcements. This is why sponsors say they do not ‘independently verify the contents of the announcement’ in the company announcements they issue.
The sponsors will conduct the onerous due diligence on the transactions if they are engaged as a corporate adviser. But that would entail additional fees on top of sponsor fees, they say.
Some sponsors explained that it is impractical to repeat the onerous due diligence already conducted by other professionals. But they will query the management on the merits of the transaction and ensure compliance with SGX listing rules.
PrimePartners corporate finance director Mark Liew told BT that as a sponsor, he also attends the board meetings and by doing so, understands what the company is doing in terms of its plans and directions.
‘So, when a company makes an announcement, we know if it is consistent with what the board has approved,’ he said. ‘But sponsors don’t interfere with the management’s business decisions. We will raise questions that investors and regulators will ask.’
Stamford Law director Soh Chun Bin said the sponsors also seek to value-add by spurring issuers towards fuller disclosures, suggesting suitable routes to take and reminding directors to make sound decisions.
‘It is hard to draw a line on the sponsors’ responsibilities as it depends on the circumstances,’ he said.
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