SINGAPORE Law and Practice Contributed by: Renu Menon, May Ng, Blossom Hing, SC and Ong Ken Loon, Drew & Napier LLC
tors from adverse risk due to undisclosed uses of proceeds. • Anti-money laundering (AML) and counter financing of terrorism (CFT) – borrowers must comply with Singapore’s AML and CFT regulations. Proceeds from loans or debt securities cannot be used for illicit activities and financial institutions are required to conduct thorough checks to ensure that the funds are not used for money laundering or terror- ism financing purposes, by monitoring the use of proceeds and filing suspicious transaction reports if necessary. • Property loans – there are regulatory limits on the use of proceeds from loans secured by property. For instance, the Total Debt Servicing Ratio (TDSR) framework limits the amount of credit an individual borrower can take against property, and proceeds cannot exceed the threshold set under the TDSR, which is 55%. 3.5 Agent and Trust Concepts Both agent and trust concepts are recognised under Singapore law. Typically, lenders in a syndicated loan or a debt securities issuance appoint an agent to act on behalf of the lenders and a trustee to hold rights and other assets on trust for the lenders or secured parties. 3.6 Loan Transfer Mechanisms In Singapore, loan transfers generally occur through assignments or novations, each with distinct implica- tions for the transfer of benefits, rights and obliga- tions. Assignment This is the most common method of transferring a loan. Under an assignment, a lender (the assignor) can transfer their rights to receive loan repayments to another party (the assignee) without the borrow- er’s consent, provided the loan agreement allows it. Assignments can be legal or equitable. A legal assign- ment must be in writing, signed by the assignor, and a notice of assignment must be issued to the bor- rower in order to allow the assignee to enforce the rights directly. However, obligations cannot be trans- ferred by assignment and the original lender typically remains responsible for its obligations under the loan agreement.
When an assignment involves security interests, such as a mortgage or a charge, the assignment should expressly cover the transfer of such security inter- ests as well. Additional agreements or steps may be required to effect or perfect the transfer of such secu- rity interests. Novation Novation fully transfers both rights and obligations under the loan to a new lender, effectively replacing the original lender with the new one. This requires consent from all parties, including the borrower. Fresh or sup- plemental security documentation may be required to transfer the associated security package to the new lender, unless the security package is held by an agent or trustee for the benefit of the lenders and their suc- cessors in the case of a syndicated loan. 3.7 Debt Buyback Subject to the terms of the loan documentation, debt buyback by the borrower or sponsor may be permit- ted. The borrower may also prepay outstanding loans prior to the maturity of such loans – loan documenta- tion typically includes right of voluntary prepayment by the borrower, with or without prepayment fee or penalty. An issuer may redeem debt securities prior to their maturity in accordance with the terms and conditions relating to the securities. 3.8 Public Acquisition Finance Pursuant to rule 23.8 of the Singapore Code on Take- overs and Mergers (Code), “certain funds” provisions in public acquisition finance transactions are neces- sary to ensure that the acquirer/offeror has committed financing available to satisfy full acceptance of the offer of the acquisition. This financing commitment gives certainty to target shareholders and regulators like the SGX and the Singapore Securities Indus- try Council (SIC), which is the Singapore take-over regulator, by limiting the lenders’ ability to withdraw funding due to adverse events during the offer period. These provisions are less prevalent in private acquisi- tion finance but may be negotiated in complex trans- actions to secure commitment certainty.
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