Client Update July 2012 Corporate and Capital Markets

SGX Raises Mainboard Admission Requirements Introduction Singapore Exchange Limited (“SGX”) has announced revisions to the Mainboard Listing Rules of the Singapore Exchange Securities Trading Limited (“Mainboard Listing Rules”). The amended Mainboard Listing Rules raise the standards of Mainboard admissions for companies and increase the minimum issue price for listed shares, besides providing for other ancillary changes. The ancillary amendments also apply to Section B of the Listing Rules of the Singapore Exchange Securities Trading Ltd (“Catalist Listing Rules”) where relevant. The changes will take effect from 10 August 2012.

Main changes The two main changes are found in Rule 210(2) and Rule 241 of the Mainboard Listing Rules. Rule 210(2) deals with the quantitative listing admission criteria. With effect from 10 August 2012, a listing applicant will be required to satisfy one of the following quantitative requirements: (a)

Have a minimum consolidated pre-tax profit of at least S$30 million for the latest financial year, and an operating track record of at least three years;

(b)

Be profitable in the latest financial year, have an operating track record of at least three years, and have a market capitalisation at initial public offering (“IPO”) of not less than S$150 million; or

(c)

Have generated operating revenue in the latest completed financial year, and have a market capitalisation at IPO of not less than S$300 million.

The new criteria apply to any issuer of equity securities wishing to list on the Mainboard, and to both primary and secondary listings. Real estate investment trusts (“REITs”) and business trusts which meet the S$300 million market capitalisation requirement in (c) but do not have historical financial information may apply for a listing, if they can show that they will be able to generate operating revenue immediately upon listing.

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Client Update July 2012 Corporate and Capital Markets

Rule 241 relates to the minimum issue price for equity securities (other than convertible equity securities) offered for subscription or sale, for which a listing is sought. Currently, the minimum issue price for such equity securities is S$0.20 each. Under the amended Rule 241, this will be increased to S$0.50 each. Please click here to refer to a comparison table of the existing Mainboard admission criteria against the new, more stringent criteria.

Ancillary amendments Following from the above, ancillary amendments will be made to the Mainboard Listing Rules and the Catalist Listing Rules. These include the following: (d)

A Catalist issuer must satisfy one of the new Mainboard admission criteria in order to qualify for a transfer to the Mainboard;

(e)

A Mainboard-listed issuer who intends to make a bonus issue, capitalisation issue or a subdivision of shares will be required to satisfy SGX that the daily weighted average price of its shares, adjusted for the capitalisation issue or subdivision of shares, will not be less than S$0.50 (increased from the existing S$0.20);

(f)

The distinction between a reverse takeover (“RTO”) and a very substantial acquisition (“VSA”) has also been clarified. For a Mainboard RTO (i.e. an acquisition of assets which will result in a change in control of the issuer), the incoming business and the enlarged group must meet the new Mainboard admission criteria. The issuer must appoint a competent and independent valuer to value the incoming business; and

(g)

For Mainboard-listed issuers, the requirements for a VSA (i.e. an acquisition of assets where any of the relative figures as computed on the bases set out in Rule 1006 is 100% or more) are that the target business need only be profitable and has a healthy financial position without having to satisfy the new Mainboard admission criteria. The issuer is similarly required to appoint a competent and independent valuer to value the business which will be acquired.

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Client Update July 2012 Corporate and Capital Markets

Transitional arrangements SGX will provide a transitional period to cater for companies planning their Mainboard listing or transferring from Catalist to Mainboard around the time when the new admission criteria take effect. Issue managers will be given until 2 August 2012 (14 days from 19 July 2012, the date of announcement of the new Mainboard admission criteria) to register their IPO or RTO mandates with SGX. Following that, the listing applicants will have 9 months to obtain eligibility-to-list from SGX. The new Mainboard admission criteria will apply to all IPO or RTO mandates that have not been registered with SGX by the deadline. Catalist issuers that are applying to transfer to Mainboard under the existing Mainboard criteria will be given 9 months from 19 July 2012 to submit their applications to SGX using the existing Mainboard criteria. The new Mainboard admission criteria will apply to all Catalist issuers seeking a transfer to Mainboard after the 9-month transitional period. With regards to companies planning a bonus issue, capitalisation issue or a subdivision of shares, if the said corporate actions had been announced prior to 19 July 2012, the companies may still apply to SGX for approval using the adjusted price of S$0.20 per share. Those corporate actions announced after 19 July 2012 must comply with the new requirement of S$0.50 per share.

Comments The new, more stringent Mainboard criteria have been anticipated since SGX issued its consultation paper on the subject in January 2010. The amendments reflect SGX’s intention to attract larger and better-established companies to list on the Mainboard of the Singapore Exchange Securities Trading Limited. It is noted that the Catalist admissions criteria have not been so amended; hence companies which do not meet the more stringent Mainboard criteria would still have the opportunity to list on Catalist. Catalist is a sponsor-supervised listing platform for fast-growing local and international companies. A listing applicant seeking admission to Catalist does not need to meet any minimum earnings, operational track record or market capitalisation requirements, but must appoint a sponsor approved by SGX, and once listed, must retain a sponsor at all times. Hence, it may be an option for smaller, but fast-growing companies wanting to issue shares to the public.

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Client Update July 2012 Corporate and Capital Markets

Issue managers with listing applicants or RTO candidates who wish to apply on the basis of the existing Mainboard admission criteria (including those who believe that they will be able to meet the existing Mainboard admission criteria based on their expected results for the financial year ending 2012), should take steps to register their IPO or RTO mandates with the SGX by 2 August 2012, and obtain eligibility-to-list within 9 months.

References Please click here to refer to SGX’s press release on the amendments to the Mainboard Listing Rules.

Contacts

Chia Kim Huat Partner Head, Corporate & Transactional Practice D (65) 6232 0464 F (65) 6428 2188

Evelyn Wee Partner D (65) 6232 0724 F (65) 6428 2199 [email protected]

[email protected] Cheng Yoke Ping Partner D (65) 6232 0265 F (65) 6428 2196

Danny Lim Partner D (65) 6232 0475 F (65) 6428 2197

[email protected]

[email protected]

Howard Cheam Partner D (65) 6232 0685 F (65) 6428 2211 [email protected]

R&T Corporate Services Pte Ltd is one of the first batch of selected law firms qualified as a SGX Catalist Continuing Sponsor for Catalist companies on SGX. R&T Corporate Services Pte Ltd is a subsidiary of Rajah & Tann LLP and provides a suite of corporate and continuing sponsor services to both domestic and international businesses in a comprehensive range of industries. Please feel free to also contact the Knowledge and Risk Management Group at [email protected]

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Client Update July 2012 Corporate and Capital Markets

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