SINGAPORE Law and Practice Contributed by: Terence Quek, Benjamin Cheong, Hoon Chi Tern and Favian Tan, Rajah & Tann Singapore
6.11 Additional Governance Rights In the context of a public takeover offer, no additional rights are granted to a shareholder by reason of a significant shareholding. A bidder may seek to nominate and vote for its preferred directors of the target company’s board, subject to the directors having the appropriate qualifica- tions required under listing rules and other appli- cable laws and regulations. 6.12 Irrevocable Commitments In the context of a scheme of arrangement, it is not uncommon to obtain irrevocable com- mitments from the target company’s significant shareholders to accept (or vote in favour of) the offer in order to enhance deal certainty. It is possible for such undertakings to specify circumstances that then cease to be binding – for example, where a better offer is made and it is a matter of negotiation between the signifi- cant shareholder and the bidder. The irrevocable commitment must be disclosed at the time of the offer announcement and will need to be made available for inspection. 6.13 Securities Regulator’s or Stock Exchange Process Whether the offer needs to be approved by the SIC or the SGX will depend on the nature and structure of the takeover offer. Consultation and/ or approval must be sought from the SIC prior to the takeover offer’s launch in certain situations specified in the Takeover Code, including: • where the offer will be carried out by way of a scheme of arrangement; • where the offer has unusual conditions or is conditional on a high level of acceptance; • where there are special deal arrangements that benefit certain shareholders but not oth- ers; and
not undertake any deal protection mechanism without the shareholders’ approval if such mech- anism could effectively result in any bona fide offer being frustrated or the target’s sharehold- ers being denied an opportunity to decide on the offer’s merits. That being said, the Takeover Code does allow for deal protection measures such as break fees to be negotiated and paid if certain speci- fied events occur; however, the SIC will need to approve the break-fee provisions. The break fee must comply with the safeguard provisions under the Takeover Code, such as the following. • A break fee must be minimal (normally no more than 1% of the value of the target com- pany, calculated based on the offer price). • The board of the target company and its financial adviser must provide the SIC with: (a) an explanation of the basis on and the circumstances in which the break fee becomes payable; and (b) written confirmations that, inter alia (i) the break fee arrangements were agreed as a result of normal commercial negotiations; (ii) all other agreements or understand- ings in relation to the break-fee arrange- ments have been fully disclosed; and (iii) they each believe the fee to be in the best interests of the target company. Other deal protection mechanisms (eg, non- solicitation provisions) may be possible and are more commonly seen in public takeovers involv- ing schemes of arrangements where the target company’s board is: • supportive of the buyer’s offer; and • prepared to convene a scheme meeting in order to table the buyer’s offer.
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