| Title |
Capitalist: The Sponsor-Supervised Board Of The SGX-St |
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| Issue No. | 3/2008 - Internal Audit | |||||||||
| Details | Capitalist: The Sponsor-Supervised Board Of The SGX-St
Overview On 17 December 2007, SESDAQ, the now-defunct second board of the Singapore Exchange Securities Trading Limited (the “SGX-ST”), was transformed into the Catalist board. Companies previously listed on SESDAQ have been transferred to Catalist and given up to 5 February 2010 to comply with the new Listing Manual Section B: Rules Of Catalist (the “Catalist Rules”). This article provides a brief introduction to Catalist and an overview of the admission requirements and continuing obligations of a Catalist issuer, including the measures required to be implemented by companies previously listed on SESDAQ to facilitate the transition into the new Catalist regime.
What is Catalist? Catalist is the sponsor-supervised board of the SGX-ST modeled on the Alternative Investment Market (“AIM”) of the London Stock Exchange, where nominated advisers (“Nomads”) are authorized to act as gatekeepers, advisers and regulators of AIM issuers. The use of Nomads provides a flexible regulatory system to allow smaller companies to float their shares. Similarly, the sponsor-supervised regime of Catalist provides a more conducive listing platform for fastgrowing companies by according issuers more flexibility in certain regulatory aspects as compared to the Mainboard of the SGX-ST or SESDAQ. For example, there are no prescribed financial admission criteria or size requirement for a company seeking to list on Catalist. Further, the thresholds for requiring shareholder approvals in some instances are higher.
For instance, for acquisitions of assets, shareholder approval is only required for the acquisition of assets of more than 75% but less than 100% of the relevant bases (i.e. group net assets, profits, market capitalisation or equity securities issued, as the case may be), or if the acquisition of assets will result in a fundamental change in the issuer’s business. Thus, the Catalist Rules are responsive to growth companies’ frequent need to raise capital in a timely manner.
Listing on Catalist is open to issuers from any jurisdiction or industry. However, only primary listings of equity securities are currently permitted on Catalist.
Who are Sponsors? Sponsors are qualified professional companies experienced in corporate finance and compliance regulatory work authorised by SGXST to act as sponsors of Catalist issuers. There are two types of sponsors: (a) full sponsors and (b) continuing sponsors. Full sponsors are authorised to undertake initial public offerings (“IPO”) and post-IPO continuing sponsorship activities, while continuing sponsors are authorised to undertake post-IPO continuing sponsorship activities only. The full sponsor will assess a company’s suitability to list and will advise and guide the company through the listing process. After listing, the full or continuing sponsor will supervise and advise the issuer to ensure its compliance with the Catalist Rules, including reviewing documents to be released by the issuer to the market and monitoring the trading of the issuer’s listed securities. In the performance of its continuing activities, a sponsor is expected to whistleblow to the SGX-ST when the issuer has or is suspected to have breached the Catalist Rules. A sponsor is also obligated to notify the SGX-ST when it forms the opinion that trading of the issuer’s securities should be halted or suspended, or that the issuer should be delisted.
A full sponsor that brings an issuer to list on Catalist must continue to sponsor that issuer for at least 3 years after the issuer’s admission to Catalist. The approval of the SGX-ST is required to end the sponsorship within the 3-year period.
Regulatory Structure of Catalist The SGX-ST does not directly review a company’s application for admission to Catalist or directly supervise companies listed on Catalist. However, it regulates Catalist issuers through admission and continuing obligation requirements and retains the power to discipline them for violations of the Catalist Rules. The SGX-ST also has the power to regulate sponsors through strict admission and continuing obligation rules and to discipline them for breach of rules imposed by the SGX-ST.
Key Admission Requirements for Listing on Catalist The SGX-ST has eased certain admission requirements under the former SESDAQ rules to facilitate growth companies’ listing on Catalist. An issuer that seeks to list on Catalist does not need to comply with prescribed track record, market capitalisation or quantitative requirements. There are also no prescribed requirements based on financial parameters or size of the issuer. The Catalist Rules also do not prescribe any quantitative distribution rules for the distribution of invitation shares similar to those prescribed under the former SESDAQ rules.
Below are the key admission requirements for companies to list on Catalist:
a. IPO Document: - An offer document, in place of a prospectus, must be lodged on SGXST’s Catalodge website and disclosures contained therein must comply with the Securities and Futures Act and other applicable regulations.
b. Sponsorship: - The listing applicant must appoint a full sponsor to list and, post-listing, must retain a sponsor at all times or face possible delisting.
c. Shareholding Spread: - The post-invitation share capital in public hands must be at least 15% at the time of listing and must not be obtained by artificial means such as giving shares away and offering loans to prospective shareholders to buy the shares. - At IPO, there must be at least 200 public shareholders, instead of 500 under the former SESDAQ rules. - The overall distribution of shareholdings should be expected to provide an orderly secondary market in the securities when trading commences, and be unlikely to lead to a corner situation in the securities.
d. Directors and Management: - The listing applicant’s directors and executive officers should have appropriate experience and expertise to manage the group’s business. - The character and integrity of the listing applicant’s directors, management and controlling shareholders are relevant factors for consideration. - There must be at least 2 independent directors; if the issuer is a foreign corporation, at least 1 of them must be resident in Singapore.
e. Financial Information
f. Financial Position and Liquidity - Prior to listing, the issuer’s directors and substantial shareholders, including companies controlled by such directors and substantial shareholders, must settle all debts owing to the group (this rule does not apply to subsidiaries and associated companies of the issuer). - Surplus arising from the revaluation of plant and equipment should not be included when computing the issuer’s net tangible assets per share.
g. Restriction on the Issuer’s Promoters’ Sale of Shares: - Promoter’s sale of shares is not permissible at IPO if (i) all promoters in aggregate hold less than 50% of the issuer’s post-invitation share capital or (ii) such sale will reduce their aggregate shareholding to less than 50% of the issuer’s postinvitation share capital
In addition to the general admission criteria listed above, the SGX-ST has prescribed other requirements in respect of foreign issuers and property development companies: a. Foreign Issuers: - All information released to the SGX-ST must be in English. - All securities must be quoted in Singapore dollars, unless the SGX-ST agrees to a quotation in a foreign currency.
b. Property Development Companies: - A valuation report must be provided which states the effective date at which the properties are valued, which should not be more than 6 months from the date of submission of the pre-admission notification to the SGX-ST. - Properties that have remaining leases of lessthan 30 years must not, in aggregate, account for more than 50% of the issuer’s group’s operatingprofits for the past 3 years.
Key Continuing Obligations for Issuers The key continuing obligations of issuers under the Catalist Rules include:
a. Immediate disclosure of material information;
b. Announcement of financial results within: - 45 days of the end of each quarter (for the first 3 quarters, if the issuer exceeds a certain market capitalisation threshold) or the relevant financial period (for first half financial statements, if it does not exceed the market capitalisation threshold), and - within 60 days of the end of the financial year;
c. Compliance with the Code of Corporate Governance;
d. Ensure that at least 10% of the total number of issued shares in a class that is listed is held by the public at all times; and
e. Appointment of 2 authorised representatives (either directors or a director and the company secretary) to act as the principal communication channel between SGX-ST and the issuer.
The Catalist Rules have introduced some changes relating to the undertaking of corporate actions requiring shareholder approval, inter alia, as reflected in the table on the next page.
Transition Measures Companies listed on SESDAQ were transferred to Catalist on 17 December 2007 as non-sponsored Catalist (“Catalist NS”) companies. These companies have been given up to 5 February 2010 to: (a) appoint a sponsor and comply with the Catalist Rules or (b) transfer to the SGX-ST Mainboard upon compliance with the quantitative and other listing requirements applicable to the Mainboard. During the transition period, Catalist NS issuers would continue to be governed by the former SESDAQ rules and supervised by the SGX-ST. A Catalist NS company that fails to comply with either option before the transition deadline may face delisting.
In order to facilitate the smooth transition of Catalist NS companies to the sponsored Catalist regime, the SGX-ST announced on 1 September 2008 a set of transition measures applicable to Catalist NS issuers. These transition measures have been incorporated in the Catalist Rules as Practice Note 14A.
The transition measures require a Catalist NS issuer to, inter alia, submit a quarterly progress report on their transition plans to the SGX-ST Catalist Regulation Unit (“SGX CRU”). The first progress report must be submitted by 1 November 2008, and beginning 1 January 2009, subsequent progress reports must be submitted 45 days after the end of each of the first 3 quarters and 60 days after the end of the financial year. Catalist NS issuers are required to announce their progress reports via SGXNET beginning 1 January 2009. Such announcements must be made within the same periods applicable to the submission of the progress reports to the SGX CRU. The progress report shall contain the following key information:
a. details of the director or person in charge of the search and appointment of sponsor; b. updated timetable of milestones (including estimated time periods for the search for a suitable sponsor, negotiation of terms, as well as estimated dates for board approval and sponsor appointment); c. if applicable, description of any plans that the Catalist NS issuer will implement as an alternative to appointing a sponsor, such as undergoing a reverse takeover, merger & acquisition, or transferring to the SGX-ST Mainboard; and d. list of sponsors approached to date.
The transition measures also require a Catalist NS issuer to, from 1 January 2009, appoint a sponsor and comply with the Catalist Rules when it undertakes any of the following corporate actions: a. rights issue or placement of shares, company warrants or other convertible securities for cash (excluding shares issued pursuant to an employee or performance share/share option plan); b. major transaction as defined under Rule 1013 of the Listing Manual of the former SESDAQ rules; c. transactions that will require shareholders’ approval pursuant to Chapter 9 of the Listing Manual of the former SESDAQ rules; and d. scheme of arrangement.
Mr Pradeep Kumar Singh, |
