When engaging in a merger or acquisition, there are a variety of formalities and concerns to consider. These increase exponentially when the deal involves parties from different jurisdictions. This guide aims to offer you an electronic, on-demand resource to common questions, issues, and general pitfalls which you might encounter in the course of negotiations and closing.
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In general, there are no restrictions on foreign ownership or investment, except for certain industries for policy considerations (for example, insurance, banking, and broadcasting and newspaper publishing). Approval may also be required for acquisition of certain types of private residential property.
There are no exchange control or currency regulations, except those relating to money laundering.
There is a wide range of grants and incentives available in Singapore to support private sector investment by foreign and domestic investors. For further information, see http://www.edb.gov.sg.
Generally, employees are not entitled to management representation or to be consulted in relation to corporate transactions (save as described below). A contract between a company and a labour union that represents some of its employees could provide the union with management representation and prior notification rights, but this is not usual.
The Employment Act of Singapore covers employees who are under a contract of service with an employer, except (i) any seaman; (ii) any domestic worker; and (iii) any person employed by a statutory board or government. However, part IV of the Employment Act which provides for rest days, hours of work, and other conditions of service, only applies to (i) a workman (doing manual labour) earning a basic salary of not more than S$4,500, and (ii) an employee who is not a workman, but earns a monthly basic salary of not more than S$2,600.
The Employment Act provides for automatic transfer of such employees covered thereunder, if there is a transfer of a business undertaking. As soon as it is reasonable and before the transfer of the business undertaking, the transferor must notify the affected employees and the trade union of the affected employees (if any) of the impending transfer of employment from the transferor to the transferee, its implications, and the measures that the transferee envisages that it will take in connection with the transfer of employees, and to facilitate consultations.
It is permitted and usual to give the employer and the employee the right to terminate by notice. The required notice period and the events that trigger termination will be as specified in the employment contract or any collective agreement.
In the absence of such agreements, the minimum notice period to be given to employees covered by the Employment Act (see above) ranges from one day to four weeks depending on the length of service by the employee.
An employer should also be familiar with the Tripartite Guidelines on Wrongful Dismissal, developed by the Ministry of Manpower (“MOM”), the National Trades Union Congress, and the Singapore National Employers Federation. These guidelines are not legally binding, but are referenced by the Employment Claims Tribunal, which adjudicates wrongful dismissal claims. If an employer is found to have acted unfairly, it risks having its work pass privileges curtailed.
The Tripartite Guidelines on Managing Excess Manpower and Responsible Retrenchment encourages companies to consult trade unions and employees before redundancies or layoffs are made. As above, these guidelines are not legally binding but heavily relied upon by the MOM.
Under the Tripartite Guidelines on Managing Excess Manpower and Responsible Retrenchment, a company that intends to layoff an employee should first “consider alternative ways of managing their local manpower where possible. These could include upskilling employees and redesigning jobs. Employers are encouraged to consult the unions, business associations and employees about these changes”.
Where retrenchments are necessary, a company should ensure that it:
Finally, companies should consider the possibility of an employee filing a wrongful dismissal claim, regardless of what the company may frame as “retrenchment”. This requires the employer to be familiar with the Tripartite Guidelines on Fair Employment Practices as stated above.
The MOM also suggests some retrenchment benefits on their website, depending on the number of years the employee has worked. However, as above, this is just a guide and not legally binding.
The statutory minimum notice periods applicable to termination of employment contracts under the Employment Act will apply likewise in the context of redundancies and layoffs.
An employee's entitlement to retrenchment benefit is a matter of contract. The quantum of retrenchment benefit depends on what is provided for in the collective agreement or the employee's contract of service. If there is no provision, the quantum (if any) may be negotiated between the employees (via their union in the case of a unionised company) and the employer concerned.
(i) Sale of Shares: Stamp duty payable on the sale of shares is 0.2% of (a) the value of the consideration paid; or (b) the total value of the shares transferred; whichever is higher. Relief from stamp duty is available for mergers and acquisitions which meet certain qualifying conditions.
If the entity whose shares are being transferred is a property-holding entity (“PHE”), additional conveyance duties (“ACD”) applicable to both the seller and buyer will be payable. A PHE is an entity that has substantial residential property holdings (i.e. with property holdings making up more than or equal to 50% of the entity’s total tangible assets). The ACD is an amount that is payable in addition to the stamp duty payable on the transfer of shares, and was enacted as a means to equalise treatment between direct transfers of real property and indirect transfers through the use of PHEs. For the exact rates that are applicable to a buyer and/or seller from time to time, please refer to https://www.iras.gov.sg/irashome/Other-Taxes/Stamp-Duty-for-Property-Holding-Entities/Learning-the-basics/Stamp-Duty-Basics-for-Property-Holding-Entities/.
(ii) Sale of Assets: Goods & Services Tax (“GST”) of 7% of the purchase price may be payable if the vendor is a GST registered company. However, if the business (whole or part thereof) is transferred as a going concern and certain conditions are satisfied, GST will not be chargeable on the supply of the transferred assets.
Where the assets comprise immovable property (or any interest thereof), both buyer’s and seller’s stamp duty may be payable on the purchase price or market value of the property (whichever is higher). For seller’s stamp duty, the exact rates of stamp duty payable will be dependent on the original date of purchase or acquisition of the property, as well as the date of sale or disposal. For buyer’s stamp duty, stamp duty is payable on a tiered basis and there are different rates for residential and non-residential property.
For more information and the latest stamp duty rates, please refer to https://www.iras.gov.sg/irashome/Other-Taxes/Stamp-Duty-for-Property/.
(iii) There is no tax charged on an issue of shares.
Mergers that result in the “substantial lessening of competition within any market in Singapore for goods or services” are prohibited under the Competition Act. Included in the concept of mergers are acquisitions of voting and other rights providing the rights-holder with direct or indirect control or decisive influence over the undertaking, pooling or acquisition of assets, and lasting joint ventures intended to perform as an autonomous economic entity. As a guideline, a decisive influence is generally deemed to exist if there is ownership of more than 50% of the voting rights, and a rebuttable presumption of decisive influence is raised if there is ownership of between 30% to 50% of the voting rights.
In determining whether a transaction will contravene or has contravened the prohibition, the analysis is undertaken on a case-by-case basis taking into account all relevant facts and circumstances. As a guideline, the Competition Commission of Singapore has indicated that competition concerns are unlikely to arise unless (i) the merged entity will have a market share of 40% or more; or (ii) the merged entity will have a market share of between 20% and 40% and the post-merger combined market share of the three largest firms is 70% or more. Proposed updates to the published guidelines indicate that the financial turnover of the transaction parties may also be used as a factor for consideration.
It depends on the transaction. Documents commonly produced and executed at signing meetings include: acquisition agreement; disclosure letter; board and/or shareholder resolutions of the parties approving the transaction and giving authority to enter into the transaction documents.
Documents commonly produced and executed at closing meetings include: share transfer forms (the instrument required to transfer title to shares); resignation letters for existing directors; new service agreements for incoming directors of the target company; board resolutions of the target company approving the registration of the buyer as a shareholder; and waivers from existing shareholders of the target company in respect of any pre-emption rights relating to the shares being sold.
No - this is a matter for negotiation.
No.
Corporate parties will normally be required to produce a copy of the board resolution approving the transaction and authorising an individual director (or directors) to execute the documents on behalf of the company. Proof of identity is commonly requested.
Yes. Singapore law makes a distinction between deeds and agreements executed under hand. A document may be executed as a deed if there is no consideration given by one of the parties or to enable the grantee of a power of attorney (or similar authorisation) to execute deeds on behalf of the Singapore company.
In the case of a document to be executed as a deed, the document must clearly identify that it is a deed, and for a company, it may be executed by way of the affixation of the common seal of the company or in the manner provided in the Companies Act of Singapore, as follows:
For individuals executing a deed, the previous position under common law was that deeds had to be signed, sealed, and delivered. However, the traditional sealing requirement (which was typically done by way of affixing a red sticker onto the document) has been replaced by the requirement that, on its face, the document must clearly be intended to be a deed. The requirements that a deed should be signed and delivered still remain. To this end, the “delivery” of a document would be any act of the grantor which shows his intention to be bound.
There are no specific requirements for document execution. Where the document is to be executed under hand, this should be signed by an authorised signatory. For the execution of document as a deed, see previous response.
There are no specific requirements save for certain types of contracts and documents such as conveyances of real property which must be by deed in the English language. An individual executing a deed must do so under seal.
There are no prescribed formalities that the foreign company must comply with. The exact requirements depend on conflicts of law principles, and such principles may require the execution to comply with the laws of incorporation of the foreign company.
Under Singapore law, there is no requirement for documents to be executed before a notary. However, where a document may be used overseas, notarisation may be required to meet the requirements of that other country.
A notary cannot change the terms of the deal.
A notary's fee will depend on the number of documents to be executed before him.
Normally not as Singapore law does not require a transaction document to be executed before a notary. However, if the document that is to be executed before a notary is for use overseas, additional time should be factored in for the authentication, verification, and legalisation process by the Singapore Academy of Law, Ministry of Foreign Affairs, and the appropriate consular authorities.
Shareholders A change in shareholders is just a result of a transfer of shares. The companies registry in Singapore maintains an electronic register of members (“EROM”) for private companies. The notification of the change in shareholders must be updated with the companies registry following the closing of the share sale, so that this may be recorded in the EROM and legal title to the shares will vest in the buyer.
Company officers
The appointment of a director or company secretary of a Singapore company is regulated by the constitution of the company. Usually, the board of directors has the power to appoint a new director, whereas removal of a director may require a shareholders’ ordinary resolution.
However, for public companies, a director may be removed by ordinary resolution of the shareholders, notwithstanding anything in the company’s constitution.
There are other certain requirements pertaining to the appointment of company officers under Singapore law. Full reference should be made to the provisions in the Companies Act.
To effect a change in legal title, a notice for the change of share needs to be lodged with the companies registry by the company. The process leading up to the transfer will depend on the constitution of the company.
Yes. An individual as well as a company can appoint another person to execute documents on his or its behalf, subject to the laws of agency. An individual may also appoint another person to execute documents by way of a power of attorney in the form of a deed.
A company can appoint an authorised representative to execute a document under hand, by passing a board resolution or otherwise in accordance with the provisions of its constitution.
If the authorised person is intended to be authorised to execute deeds on behalf of the authoriser, then the authorisation document itself must be executed as a deed.
Statutorily, there are no restrictions. As such, the scope and corresponding restrictions will depend on the terms of the power of attorney. Any restriction (for example, the duration and scope of powers, and the right of the attorney to delegate his powers) should thereafter be expressly specified in the power of attorney document.
The general rule is that documents must be proved in court using originals. However, faxed copies of an executed document can be admissible as evidence of the existence, condition, or contents of the documents in specified circumstances, for example, if the original is lost or destroyed. The faxed document may be subject to objection by the other party should the latter contest the genuineness of the signature, seal, or handwriting on the document, or the non-conformity of the faxed document with the original version.
Yes. Legislation has been enacted to provide for the admissibility of digital signatures (as defined in the Electronic Transactions Act) as evidence of execution. However, this does not apply to certain documents including powers of attorney, trusts, contracts for sale of immovable property, and negotiable instruments.
Yes. The counterparts will be taken together as one and the same document.
We assume this refers to the undertaking of a lawyer. A solicitor’s undertaking will constitute an independent obligation of the lawyer and such an undertaking is governed by the terms set out in the undertaking itself.
If there is an outstanding formality relevant to the closing, as a starting point, it is usual to provide that the closing will be deferred until the formality is fulfilled. In some cases, where the formality is not required to pass title to the shares/asset and is a mere post-transfer filing requirement, the parties may agree to make it a condition subsequent.
The main formality is the payment of stamp duty upon the share transfer forms and the registration of the buyer in the target company's register of members. As mentioned above, the EROM of the company must be updated with the Singapore companies registry following the closing of the share sale so that legal title to the shares will vest in the buyer.
Various other forms may need to be filed at the companies registry in connection with the share sale (for example, if the share sale results in a change of directors, company secretary, auditors, or registered office address).
These are not legally required, although depending on the size of the transaction, local counsel may be required to issue an opinion.
This depends on the complexity of the transaction. Factors that typically prolong the transaction timetable prior to signing include the level of due diligence required, the availability of due diligence documents, the necessity of dealing with or rectifying issues identified in the due diligence process, and the level of negotiation between the parties on the commercial and legal terms of the transaction. Factors that typically prolong the transaction timetable prior to closing include the necessity and speed of obtaining regulatory clearance and/or change of control consents.
Under Singapore law, non-compete or restraint of trade clauses are enforceable only if they meet the “reasonableness” threshold. Factors that determine whether a non-compete clause is reasonable include:
Disclaimer: This guide contains summaries of general principles of law. It is not a substitute for specific legal advice and should not be relied upon in relation to the application of the law or subject matter covered.
