Legislation

Companies (Amendment) Act 2005 (Act 21 of 2005)

The Companies (Amendment) Act 2005 (Act 21 of 2005) was gazetted on 6 June 2005.

The Companies (Amendment) Act 2005 has not come into force. The changes to be made will come into force on a date to be gazetted. The Companies (Amendment) Act 2005 was passed in Parliament on 16 May 2005.

The key features of the amendments include:

•     abolishing the concepts of ‘par value’ and ‘authorised capital’;

•     introducing an alternative capital reduction process which does not require court sanction;

•     liberalising the financial assistance restrictions to allow financial assistance to be provided in additional circumstances, eg where less than 10% of the company’s paid-up capital and reserves is involved, or where it is approved by a unanimous resolution of shareholders;

•     allowing share-buyback to be funded out of profits as well as capital so long as the company is solvent;

•     allowing repurchased shares to be held as treasury shares;

•     introducing a more effective and efficient statutory form of merger and amalgamation process.

Partial Commencement of Securities and Futures (Amendment) Act 2005 (A1 of 2005) on 1 July 2005

Parts of the Securities and Futures (Amendment) Act 2005 (A1/2005) (‘SF(A) Act’), which was passed in Parliament on 25 January 2005, came into force on 1 July 2005.

The SF(A) Act came into force on 1 July 2005 (with the exception of sections 2 (c), (g) and (y), 42 to 82, 83 (a) to (d) and (f), 84 to 103, 105 and 109 of the SF(A) Act).

On 1 July 2005, the Securities and Futures Act (‘SFA’) (Cap 289) is amended by the SF(A) Act to introduce the following changes:

•     refinements to the two-tier regulatory framework for markets based on the systemic importance of the markets;

•     new designation approach for regulating clearing facilities;

•     imposing a statutory duty on the substantial unitholders of a listed REIT (real estate investment trust) to notify the Singapore Exchange Ltd and the trustee of the REIT of their interests or change in interests in the voting units of the REIT;

•     refinements to the definitions of classes of investors: ‘accredited investors’, ‘expert investors’ and ‘institutional investors’;

•     removal of restrictions on the grant of unsecured credit facilities by capital markets services licence (‘CMSL’) holders to their officers or employees; and

•     extension of the insider trading provisions to securities of business trusts and listed REITs, certain market misconduct provisions are also extended to securities of business trusts.

The key amendments in the SF(A) Act that are not in force include those relating to the securities offering regime under the SFA and they concern the following developments:

•     abolition of the ‘public offer’ concept;

•     new exemptions from prospectus requirements: small offers, private placement and offers for no consideration;

•     prospectus disclosure liability on issue managers;

•     permitting circulation of pre-deal research reports to institutional investors in certain circumstances; and

•     relaxing publicity restrictions for offers of collective investment schemes.

The Monetary Authority of Singapore (‘MAS’) has indicated that these outstanding amendments will be implemented in the third quarter of 2005.

A number of subsidiary legislation have been enacted under the SFA to support those changes in the SFA that are in operation from 1 July 2005. These subsidiary legislation are also operative from 1 July 2005. Brief details are as follows:

•     Securities and Futures (Markets) Regulations 2005. To set out the criteria to be applied by the MAS when assessing the systemic importance of market operators intending to establish markets in Singapore and to regulate the amendment process of the business or listing rules of approved exchanges.

•     Securities and Futures (Clearing Facilities) Regulations 2005. To prescribe the statutory obligations and regulatory requirements relating to designated clearing houses and to regulate the amendment process of the business or listing rules of designated clearing houses.

•     Securities and Futures (Approved Holding Companies) Regulations 2005. To provide for the approval process and the regulatory requirements concerning the holding companies of approved exchanges and designated clearing houses.

•     Securities and Futures (Transitional and Savings Provisions for Parts II, III and IIIA) Regulations 2005. To set out the ‘deemed approved exchanges’, ‘deemed recognised market operators’, ‘deemed exempt market operators’, ‘deemed designated clearing houses’, ‘deemed approved holding company’ for the purposes of the new regulatory framework for markets, clearing houses and approved holding companies. Also to provide for the transitional provisions relating to directions that have been issued under the old regulatory framework for markets, clearing houses and exchange holding company.

•     Securities and Futures (Prescribed Futures Contracts) Regulations 2005. To prescribe additional classes of commodity futures contracts as futures contracts under the SFA.

•     Securities and Futures (Prescribed Specific Classes of Investors) Regulations 2005. To set out the criteria for ‘accredited investors’ and ‘institutional investors’ for the purposes of the SFA, and to set out the fees for applications to be declared as institutional investors.

•     Securities and Futures (Composition of Offences) (Amendment) Regulations 2005. To make consequential amendments to the SFA following the partial commencement of the SF(A) Act.

Elizabeth Wong

Allen & Gledhill