SINGAPORE Law and Practice Contributed by: Benjamin Gaw and Joel Tan, Drew & Napier LLC
9.4 Directors’ Duties Directors continue to owe fiduciary duties to the com - pany pursuant to the Companies Act 1967. Thus, they should have regard to what is best for the interests of the company and its shareholders, and not their own monetary, personal, familial or other interests (see 8.1 Principal Directors’ Duties ). In public M&A transactions that are subject to the Takeover Code, the target company’s board is also usually obliged under the Takeover Code to obtain competent independent advice on any offer, and the advice must be made known to its shareholders. This is especially so if the offer is a management buyout or other similar transaction being made with the co- operation of the existing controlling shareholder(s), due to the very real risk of a divergence of interests within the company. 9.5 Directors’ Ability to “Just Say No” While directors may recommend, strongly even, that shareholders reject a takeover offer, and while they are permitted to take defensive measures, they are not permitted to frustrate a bona fide offer outright (see 9.2 Directors’ Use of Defensive Measures ). Litigation in connection with M&A deals is not com - mon in Singapore. One notable case involved the Noble Group Limited, where Goldilocks Investment Company Limited, an 8% investor, commenced legal action as part of its strategy to obtain a better deal for investors. In connection with the protection of minority rights, the Securities Investors’ Association (Singapore) (SIAS), an advocacy charity for investors, which has been active since 1999, has expressly stated that its preferred approach to resolving investors’ rights issues is in the boardroom and not in the courtroom. This is compounded by the fact that many minority investors tend to be “persons-in-the-street” without the resources necessary to finance litigation against relatively well-funded companies. They may also lack 10. Litigation 10.1 Frequency of Litigation
• the issue of any authorised but unissued shares; • the issue or grant of options in respect of any unis - sued shares; • the creation, issue or permitting of the creation or issue of any securities carrying rights of conversion into or subscription for shares of the company; • the sale, disposition or acquisition or the agree - ment to sell, dispose of, or acquire assets of a material amount; • the entry into contracts, including service con - tracts, otherwise than in the ordinary course of business; and • the causing of the target company or any subsidi - ary or associated company to purchase or redeem any shares in the target company or provide finan - cial assistance for any such purchase. However, soliciting a competing offer and running a sale process for the company are not considered to be frustrating actions. Currently, there is limited guidance on the informa - tion to be provided to shareholders to approve the frustrating action. Under the Proposed Amendments, the SIC proposes codifying the requirements relating to the proposed frustrating action, such as requiring the offeree company board to obtain competent inde - pendent advice as to whether the financial terms of the proposed frustrating action are fair and reasonable and provide additional information to the sharehold - ers. 9.3 Common Defensive Measures As frustrating actions are not permitted in a public M&A transaction that is subject to the Takeover Code (see 9.2 Directors’ Use of Defensive Measures ), the defensive measures that the target company’s board may take are generally limited to soliciting competing offers or running a sale process for the company. The board may also attempt to convince the share - holders not to agree to the offer in its circular(s) to the shareholders. This is especially so if the board believes that the company’s current share price does not reflect its intrinsic value.
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