CLIENT UPDATE
2015 MARCH
CORPORATE
Key Issues for Your Business in 2015
2015 is well into the end of the 1st quarter, with some degree of uncertainty emerging as regards where the
economy is heading. Yet with the ASEAN Economic Community activities planned to take off this year,
there is hope that there will be more deals and transactions, and at the same, heightened regulations
overnight.
In this update, we provide a snapshot of key issues across various areas that you must be alert to, as
transactions are negotiated and sealed. Many of the changes are to be welcomed as they contribute
towards the ease of doing business; yet there are some, which if not carefully followed through would trip
businesses.
Banking
Abolition of Financial Assistance for Private Companies
Contact
The Companies (Amendment) Act 2014 (―CA Amendment
Act‖) was passed on 8 October 2014 and the changes are targeted
to come into effect in Q2 of 2015.
Angela Lim
Head, Banking & Finance
Following the amendments to the Companies Act (―CA‖), private
companies which are not subsidiaries of public companies will no
longer be affected by financial assistance restrictions. Public
companies and their subsidiaries will still be subject to the
general prohibition, although a new exception, where the giving
of financial assistance does not materially prejudice the interest
of the company or its shareholders, or the company’s ability to
pay its creditors, will be introduced. In addition, solvency
statements for short form whitewash will no longer have to be
made by way of statutory declaration. These changes are clearly
to be welcomed as they provide a good balance as regards risk
management.
Financial Transactions involving Directors and Entities
Connected with Directors
Sections 162 and 163 of the CA restrict a company, subject to
certain statutorily provided exceptions, form making loans to, or
entering into any guarantees or providing any security in
connection with any loan to a director or any company in which
the directors have at least a 20% interest.
To discourage creative structuring, these sections will be
expanded to cover quasi-loans, credit transactions and related
agreements. For potential lenders and borrowers, the most
interesting change to Section 163 is the incorporation of a new
exception. Where there was previously no option if a transaction
did not fall within any of the permitted exceptions, an important
new exception of having prior shareholders’ approval (subject to
any interested directors and their family members abstaining
from voting) will be created. These are clearly necessary changes
to allow for business efficacy and yet maintaining proper
governance.
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D (65) 6232 0189
angela.lim@rajahtann.com
CLIENT UPDATE
2015 MARCH
CORPORATE
Capital Markets
Minimum Trading Price of S$0.20 for SGX-ST Mainboard
Issuers
With effect from 1 March 2016, issuers listed on the SGX-ST
Mainboard (including REITs and business trusts but excluding
companies with secondary listings) will be required to meet a
Minimum Trading Price (―MTP‖). Issuers which fail to record a
volume-weighted average price (―VWAP‖) of at least S$0.20
over a preceding 6-month period will be placed on the SGX-ST
watch-list. SGX-ST will publish the 6-month VWAP of issuers on
the SGX website. Mainboard issuers will be assessed for
compliance on a quarterly basis (ie on the first market day of
March, June, September and December every year). SGX-ST is
giving issuers a 12-month transition period before effecting the
MTP requirement. The first quarterly review date will be on 1
March 2016.
Issuers should undertake remedial measures to avoid being
placed on the watch-list. In order to comply with the MTP
requirement, affected Mainboard issuers may consider
undertaking share consolidation exercises, transferring to
Catalist, or undertaking restructuring or other corporate actions,
such as acquisition of businesses or reverse takeovers. Issuers
which enter the SGX-ST watch-list will be given a 3-year cure
period to comply with the MTP requirement and exit the watchlist, failing which the SGX-ST may either remove them from the
Official List, or suspend trading of the listed securities with a
view to delist them.
Reinforcing the SGX Listings and Enforcement Framework
In 2014, SGX and the Monetary Authority of Singapore (―MAS‖)
issued 2 consultation papers seeking feedback on proposals to
reinforce the SGX listings and enforcement framework. In the
SGX consultation paper issued in September 2014, SGX said that
it is proposing to amend the proposed rule amendments to effect
these measures in the first quarter of 2015, subject to approval by
MAS.
If implemented, SGX’s administrative and enforcement powers
against listing rule breaches will be strengthened and three
independent committees (namely, the Listings Advisory
Committee, Listings Disciplinary Committee and Listings
Appeals Committee) will be established.
The above proposals are discussed in more detail in our Firm’s
Update which can be accessed here.
Poll Voting and Disclosure of Voting Outcomes
With effect from 1 August 2015, all primary-listed issuers on the
SGX-ST are to conduct the voting of all resolutions by poll rather
than by show of hands, and to promptly announce relevant
details of the voting outcomes of a general meeting. These rules
were introduced with a view to enhancing transparency of the
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© Rajah & Tann Singapore LLP
Contact
Evelyn Wee
Head, Capital Markets
Deputy Head, Corporate &
Transactional Practice
D (65) 6232 0724
evelyn.wee@rajahtann.com
CLIENT UPDATE
2015 MARCH
CORPORATE
voting process and encourage greater shareholder participation.
Immediately after each general meeting and before the
commencement of the pre-opening session on the market day
following the general meeting, the issuer must announce whether
the resolutions put to a general meeting of an issuer were passed
disclosing the prescribed information set out in the new rules.
Multiple Proxies
Amendments to the CA which affect listed companies also include
the introduction of the multiple proxies regime and the revision
in the cut-off time for the filing of proxies prior to shareholders’
meetings.
Under the new multiple proxies regime, specified intermediaries
such as banks, the CPF board and capital markets services licence
holders which provide custodial services (collectively, the
―relevant intermediaries‖) will be allowed to appoint more
than 2 proxies to attend and vote at general meetings. Proxies
appointed by relevant intermediaries shall each have the right to
vote on a show of hands or on a poll with respect to the rights
attached to shares held by them, as if they were holding such
shares in their own name. This will in effect give recognition to
the votes by indirect investors at shareholders’ meetings.
In view of the increased number of proxies who may be
appointed by the relevant intermediaries, the cut-off time for the
submission of proxy forms will be revised from the current 48
hours to 72 hours prior to shareholders’ meetings.
Companies will need to amend their constitutive documents to
take into account the above as well as other changes introduced
by the CA Amendment Act.
Product Highlights Sheet for Offers of Debt Securities, Hybrid
Instruments and Equity Securities
Since October 2010, MAS has had in place guidelines requiring
the preparation of a Product Highlights Sheet (―PHS‖) for offers
of debentures in the form of debentures or units of debentures
issued pursuant to a securitisation transaction and structured
notes, and unlisted collective investment schemes and exchangetraded funds, where these are made in or accompanied by a
prospectus.
To facilitate better understanding of prospectuses by investors,
MAS issued guidelines in February 2015 for offers of:



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plain vanilla debentures (―Debt Securities―);
preference shares, perpetual securities or convertible
bonds ("Hybrid Instruments"); and
ordinary shares, real estate investment trust (―REIT‖)
units or business trust (―BT‖) units (―Equity
Securities‖).
© Rajah & Tann Singapore LLP
CLIENT UPDATE
2015 MARCH
CORPORATE
A PHS is required:


where offers of Debt Securities, Hybrid Instruments and
Equity Securities are made in or accompanied by a
prospectus; or
where offers of Debt Securities and Hybrid Instruments
are made in or accompanied by an offer information
statement (―OIS‖).
When an offer requiring a PHS is made, the PHS should, together
with the prospectus or OIS, be given or made available online to
investors.
The guidelines will apply to offers of Debt Securities, Hybrid
Instruments and Equity Securities for which prospectuses or OIS
(where applicable) are submitted or lodged with MAS on or after
1 July 2015.
Competition
Enforcement against International Cartels – Impact on
Singapore Operations
In 2014, the Competition Commission of Singapore (―CCS‖)
issued infringement decisions against two international cartels,
one involving ball bearing manufacturers and another involving
international freight forwarders, whose anti-competitive effects
were allegedly imported into Singapore through their local
subsidiaries.
In the freight forwarding decision, the CCS imposed a financial
penalty on both the parent and local companies, even though the
CCS did not find any evidence that the Singaporean subsidiaries
had knowledge of their parents’ anti-competitive agreements.
The CCS also established the existence of a single economic entity
as it imputed liability. Multinational corporations operating in a
group structure need to recognise that whilst legal separation
gives them a degree of protection against civil claims, the CCS
will pierce this veil by relying on the fact that economically the
entity operates as one thus imputing liability of one on the other
in the group. To the extent possible, corporations need to avoid
factors that could lead to them being viewed as a single economic
entity.
Greater Incentives to Whistle-blowers
As part of its cartel detection measures, the CCS introduced a
financial reward scheme in 2014, offering a financial incentive of
up to S$120,000 to informants who whistle-blow and provide
information on anti-competitive conduct. This reward scheme
offered to individuals is a complement to the CCS’ leniency
programme which offers immunity or reduced penalty to
undertakings for disclosing their participation in a cartel. On a
going forward basis, it is critical that companies update their
competition compliance policy, educate and train their
employees on proper business protocol, as well as provide
internal whistle-blowing channels so that any potential infringing
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Contacts
Kala Anandarajah, PBM
Head, Competition & Anti-Trust and
Trade
Employment & Executive
Compensation
D (65) 6232 0111
kala.anandarajah@rajahtann.com
Dominique Lombardi
Deputy Head, Competition & AntiTrust and Trade
D (65) 6232 0104
dominique.lombardi@rajahtann.com
CLIENT UPDATE
2015 MARCH
CORPORATE
activities can be nipped in the bud.
Increased Scrutiny on Mergers
While Singapore continues its voluntary merger notification
regime, the record number of merger notifications made to the
CCS in 2014 – a total of 10 mergers compared to 3 in 2013 –
indicates that companies are increasingly seeing the advantages
of notifying their mergers for certainty, and highlights the CCS’
increasingly proactive stance in scrutinising non-notified
mergers. This increased scrutiny is evident in the fact that 2 out
of the 10 mergers in 2014 proceeded to a Phase 2 review (which
suggests a high risk of substantial lessening of competition)
compared to 6 out of 37 mergers from 2007 – 2013.
With the CCS increasing its market surveillance on merger
activity in both the local and global market, and its right to
approach merger parties for information and possibly stall the
transaction, business engaging in acquisitions, joint ventures or
other forms of structures which results in control passing,
whether the transaction is in Singapore or otherwise, must
carefully analyse and ascertain if a merger filing is required.
Failure to notify may result in financial penalties, imposition of
behavioural and structural remedies, or an unwinding of the
transaction.
Private Actions - Are we ready for this?
Under the Competition Act, any person who suffers a loss or
damage directly as a result of a cartel or an abuse of dominance
has a right of action against the participants in the cartel or the
dominant undertaking. Such private action can only be exercised
within 2 years after the CCS issues an Infringement Decision and
the appeal process has been exhausted. To date there have been
no reported cases of private actions. Yet, the time might now be
ripe, given the increased number of behavioural decisions (cartel
and dominance) the CCS has issued. Private actions are fairly
common in a number of jurisdictions, and businesses in
Singapore must in their risk assessment bear this as a possibility
and manage the same.
CCS may Conduct Market Studies
The CCS is empowered to conduct market studies as it deems
necessary. This can be where it feels that some features of a
market may produce an anti-competitive outcome. Over the years
that CCS has thus reviewed various markets or industries,
including the retail petrol market, the airline industry and even
the industrial property market. Market studies are an efficient
tool for the regulator as it may highlight structural or behavioural
issues that would have not otherwise surfaced. A point to note is
that from such market studies, the CCS could commence
investigations as well. Possible markets that the CCS could
decide to study this year include those with a small number of
players and/or with market players that seemingly have market
power falling short of dominance.
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CLIENT UPDATE
2015 MARCH
CORPORATE
Corporate Governance & Directors
Duties
Directors Must be Alert to Every Change Highlighted in this
Update and More
Directors, as the guardians of the corporation, exercise a critical
function of oversight. With the spread of regulatory changes
introduced in the last 18 to 24 months, some of which are
outlined in this update, 2015 will see directors even busier trying
to come up to speed with relevant laws, regulations and
accounting changes. It is not for the directors to understand
every change, but it is their role to ensure they are cognisant of
the developments and that someone appropriately qualified has
been tasked to look into the matter and to update the board. The
board can then direct appropriate action to be taken. Failure to at
least be aware and direct someone to look into the matter could
result in a breach of fiduciary duties. It is likely that there will be
more active enforcement
Board Diversity
Board diversity will remain an issue of interest in 2015. Board
diversity goes beyond gender diversity extending to diversity in
skills, experience, age and nationality, as examples. Yet, the area
of greatest scrutiny for 2015 will remain gender diversity,
particularly given that Minister Grace Fu publicly named several
corporations which had no females on the boards. The SGX has
formed a Diversity Action Committee towards the end of last
year, and various action plans is likely to be expected from the
Committee.
Nominating committees are expected to be
particularly busy having to formulate detailed guidelines on
diversity as a whole.
Extension of Statutory Duty of Disclosure to CEOs
At present, the only persons who are required to disclose their
interests in transactions or shareholdings in the company and its
related corporations are the directors. Pursuant to the
amendments, CEOs of private companies (who are not also
directors) will be required to disclose the interests that he and/or
his family members hold in the shares of the company as well as
any conflict of interests in transactions with the company arising
due to the nature of his office or the properties owned by him.
This change has been introduced due to the influence that CEOs
have in the decision-making of a company, and is aimed at
promoting better standards of corporate governance.
Review of OECD Corporate Governance Principles
The OECD Corporate Governance Principles were first
introduced 16 years ago and updated in 2004. The OECD is now
conducting a review of the Principles. It notes that the "rationale
for the review is to ensure the continuing high quality, relevance
and usefulness of the Principles taking into account recent
developments in the corporate sector and capital markets. The
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© Rajah & Tann Singapore LLP
Contact
Kala Anandarajah, PBM
Head, Competition & Anti-Trust and
Trade
Employment & Executive
Compensation
D (65) 6232 0111
kala.anandarajah@rajahtann.com
CLIENT UPDATE
2015 MARCH
CORPORATE
outcome should provide policy makers, regulators and other rulemaking bodies with a sound benchmark for establishing an
effective corporate governance framework." If it comes to pass,
directors can expect there to be various changes to be introduced
in Singapore as well.
Employment
Employment Pass Holders – Jobs Bank Requirement
Contacts
Businesses which have a substantial number of Employment Pass
holders, or tend to second or post employees from foreign
headquarters to their Singapore operations must be mindful of
the Jobs Bank requirement that came into effect on 1 August
2014.
Kala Anandarajah, PBM
Head, Competition & Anti-Trust and
Trade
Employment & Executive
Compensation
To ensure that employers consider Singaporeans fairly before
hiring Employment Pass holders, prior to applying for new
Employment Passes, subject to limited exemptions, employers
must first advertise their job vacancies in the Jobs Bank. The
advertisement must be open to Singaporeans, comply with the
Tripartite Guidelines on Fair Employment Practices, and run for
at least 14 calendar days. This has lengthened employers’ HR hire
periods, which could result in a strain if not planned well.
Employers who fail to comply with the requirement will have
their work pass privileges curtailed.
D (65) 6232 0111
kala.anandarajah@rajahtann.com
Representation of Professionals, Managers and Executives by
Trade Unions
Employers must review their current employment arrangements
and policy on unions given the amendments to the Industrial
Relations Act (―IRA‖) which will take effect from 1 April 2015.
Under the amended IRA, rank-and-file trade unions will be able
to represent a limited class of executive employees in
negotiations for collective bargaining, and on an individual basis
for disputes relating to retrenchment benefits, dismissal,
breaches of employment contracts, victimisation and reemployment. This may result in heightened union activity.
Executive employees who hold roles and responsibilities likely to
give rise to conflicts of interest or undermine the effective
operations of the business are excluded from this wider scope of
representation and employers will be able to prohibit such
executive employees, as a condition of their appointment or
promotion, from being an officer or a member of any rank-andfile trade unions.
MediShield Life Scheme
The MediShield Life Scheme (the ―ML Scheme‖) introduced as
a Bill in January 2015, and expected to be implemented by end2015 brings significant changes. First, employers may find
themselves potentially liable for the outstanding premiums of
their employees who defaulted on the payments. Second, as the
ML Scheme applies to all Singaporeans, employers should note
the potential for an overlap between the medical benefits that
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© Rajah & Tann Singapore LLP
Desmond Wee
Head, Corporate Commercial
D (65) 6232 0474
desmond.wee@rajahtann.com
CLIENT UPDATE
2015 MARCH
CORPORATE
they provide to employees and that under the ML Scheme. Third,
corporations outside Singapore hiring Singaporeans based out of
Singapore must note that the requirements apply to such
employees as well. In this regard, employers are encouraged to
review and restructure (if necessary) their employee benefits
schemes to allow employees to enjoy portable medical benefits
that are in addition to the ML Scheme or provide additional
Medisave contributions to help employees pay for premiums
under the ML Scheme.
CPF, PDPA and Retirement Issues
The CPF Board has in recent times, ramped up its enforcement
activities to initiate and conduct audits and investigations into
the CPF practices of companies. Companies should relook their
CPF practices to ensure that the employer portion of CPF
contributions are not included in their employees’ salaries
(whether expressly stated or not, with or without the employees’
consent) and ascertain if any employment benefits paid or made
to employees incur CPF contributions.
On the Personal Data Protection Act (―PDPA‖) front, companies
should already have in place PDPA policies and procedures for its
employees. Nevertheless, where companies obtain personal data
of its employees’ dependents from the employees (e.g. through
insurance benefits or reimbursement of medical claims), for
certainty, consent should be obtained.
For employers who have older employees in the company, do
note that the Tripartite Committee on Employability of Older
Workers has recommended for the re-employment age to be
increased from the current 65 to 67 years old.
Entitlement to Discretionary Bonuses
The recent High Court decision of Brader Daniel John v.
Commerzbank AG [2013] SGHC 284 held that communications
between employers and employees (even through an update
broadcasted over the company intranet) may give rise to an
enforceable contract – for instance entitling the employees to
discretionary bonus payments where the employers expressly
represented or communicated to their employees that such bonus
payments will be made. In light of this, employers are advised to
be mindful of what they communicate in their letters or
notifications to their employees to avoid inadvertently forming an
enforceable contract with them.
Mergers & Acquisitions
New and Enhanced Incentives for Companies to Expand
Overseas
In order to motivate more companies to explore overseas
markets, the Government has announced a new 10%
concessionary tax rate (dubbed the "International Growth
Scheme") on certain income of larger companies that are
expanding abroad. Although the details for the concessionary tax
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© Rajah & Tann Singapore LLP
Contacts
Lawrence Tan
Head, Mergers & Acquisitions
D (65) 6232 0726
lawrence.tan@rajahtann.com
CLIENT UPDATE
2015 MARCH
CORPORATE
rate have not been announced, the Government has said that
such companies must continue to centre their headquarters and
key business activities in Singapore in order to avail themselves
of these benefits.
In addition, the Government will be raising its support under its
internationalisation grants awarded by IE Singapore from the
current 50% to 70% for all forms of overseas activities for three
years. The Government will also be broadening an existing
double tax deduction scheme against qualifying market
expansion activities to cover manpower expenses. The enhanced
scheme could thus cover salaries incurred for Singaporeans
posted overseas.
The current M&A allowance will be extended for another 5 years
and will be enhanced to 25% of the value of a qualifying
investment, up from the 5% threshold allowed previously. The
M&A allowance scheme applies to a qualifying Singapore
company that acquires the ordinary shares of a target company
on or before 31 March 2020, and provides for a tax allowance
that is capped at S$5 million for all qualifying share acquisitions
occurring in the basis period for each Year of Assessment.
Additionally, from 1 April 2015 onwards, companies will be able
to claim benefits for acquisitions that translate to a 20%
shareholding in the target company, down from the current 50%
threshold. This move is ostensibly to help small and medium
enterprises, which may not be able to acquire large stakes in their
internationalisation strategies.
Schemes of Arrangement
Section 210 of the CA currently provides that a scheme of
arrangement must be approved at a court-ordered meeting by a
majority
in
number
(the
―numerical
majority
requirement‖), with such majority representing ¾ in value of
the members or creditors present and voting. The scheme of
arrangement must also be approved by the court. Given the
numerical majority requirement, a member’s scheme could be
defeated by parties opposed to the scheme engaging in ―sharesplitting‖, which involves one or more members transferring
small parcels of shares to a large number of other persons who
are willing to vote in accordance with the transferor’s wishes.
When the Amendment Act comes into operation, Section 210 will
be amended such that the Singapore court would be given the
discretion with respect to the numerical majority requirement so
as to deal with the issue of share-splitting and the latitude to
decide who the members are in a particular case. In other words,
the amendment will enable the court to approve a scheme of
arrangement where the numerical majority requirement is not
satisfied by reason of share splitting.
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© Rajah & Tann Singapore LLP
Lim Wee Hann
Head, Mergers & Acquisitions
D (65) 6232 0606
wee.hann.lim@rajahtann.com
CLIENT UPDATE
2015 MARCH
CORPORATE
REITs
MAS Consultation Paper on Enhancements to the Regulatory
Regime Governing REITs
MAS issued a consultation paper on 9 October 2014 containing
proposals to strengthen Singapore's real estate investment trust
(―REIT‖) market, which are geared towards enhancing the
transparency and corporate governance of the REIT market and
improving REITs’ attractiveness.
The proposals include (i) imposing a statutory duty on the REIT
manager and its individual directors to prioritise the interests of
unitholders over those of the REIT manager and its shareholders
in the event of a conflict of interest, (ii) enhancing Board
independence
requirements,
(iii)
enhanced
disclosure
requirements in REITs’ annual reports, (iv) requiring the
performance fee payable to the REIT manager to be computed
taking into account unitholders’ long-term interest and payment
of acquisition and divestment fees to be on a cost-recovery basis,
and (v) adopting a single-tier leverage limit of 45% without
requiring a credit rating and allowing a REIT to undertake
development activities up to 25% of its deposited properties.
The consultation closed in November 2014. Whilst the MAS has
yet to issue its responses to the feedback, REIT managers should
be cognisant of these proposals and in time, will need to assess
whether their REIT operations, fee arrangements and
organisational structure may need to be re-looked in light of the
upcoming changes.
Click here to refer to our Firm’s Update on the proposed
enhancements to the REIT regulatory regime.
Extension of Certain Tax Concessions, and Expiration of Stamp
Duty Remission, for REITs
Pursuant to Singapore's Budget 2015 statement, certain tax
concessions for REITs listed on the Singapore Exchange
Securities Trading Limited have been extended until 31 March
2020. These include the tax exemption on qualifying foreignsourced income, which will continue to apply so long as the
overseas property is acquired by the REIT or its wholly-owned
Singapore tax resident subsidiary company on or before 31 March
2020. The concessionary income tax rate of 10% for qualifying
non-tax-resident non-individual investors will also continue until
31 March 2020. The existing goods and services (―GST‖)
concession will also be extended to 31 March 2020.
In addition, to facilitate fundraising by REITs through special
purpose vehicles, the GST concession will be enhanced to allow
REITs to claim GST on expenses incurred to set up special
purposes vehicles that are used solely to raise funds for the
REITs, and the special purpose vehicles do not hold qualifying
assets of the REITs, directly or indirectly. These REITs will also
be allowed to claim GST on the business expenses of such special
purpose vehicles.
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© Rajah & Tann Singapore LLP
Contact
Evelyn Wee
Head, Capital Markets
Deputy Head, Corporate &
Transactional Practice
D (65) 6232 0724
evelyn.wee@rajahtann.com
CLIENT UPDATE
2015 MARCH
CORPORATE
However, the stamp duty remission on the transfer of Singapore
immovable properties and transfer of the issued share capital of
Singapore-incorporated
companies
holding
immovable
properties outside Singapore will lapse after 31 March 2015. Such
concessions were introduced with the intention of enabling the
industry to acquire a critical mass of local assets as a base from
which the REITs can expand abroad, which the Minister for
Finance, Mr Tharman Shanmugaratnam, in the Budget 2015
statement indicates has been achieved.
MAS will release further details on the tax treatment of REITs by
May 2015.
Technology, Media &
Telecommunications
IDA Public Consultation – Enhancing Mobile Competition
Contacts
On 22 April 2014, IDA issued a public consultation on ―Proposed
Allocation
of
Spectrum
for
International
Mobile
Telecommunications (IMT) and IMT-Advanced Services and
Options to Enhance Mobile Competition‖. Through this public
consultation, IDA is exploring approaches for facilitating the
entry of Mobile Virtual Network Operators (―MVNOs‖) into
Singapore, thereby enhancing competition. In IDA’s 4G spectrum
auction in 2013, IDA had set aside spectrum for a new mobile
network operator to enter the market. Although no new operator
came in, IDA remains open to facilitating the entry of new players
into the mobile market.
Rajesh Sreenivasan
Head, Technology, Media &
Telecommunications
The proposed liberalisation will likely see both local startups and
major foreign telcos seeking an entry to still profitable and
growing segments such as data access, and revisiting niche
telecoms models such as the MVNO market. Existing telcos will
continue to look at diversifying their revenue generation, such as
by moving more aggressively into digital media and mobile
applications.
D (65) 6232 0786
steve.tan@rajahtann.com
On 12 December 2014, IDA released its Decision to allow the
deployment of 4G and IMT-Advanced systems and services in the
3G bands, prior to the expiry of the 3G Spectrum Rights in 2021,
with immediate effect. IDA is assessing the responses to the rest
of the public consultation, and is targeting to release its decision
in early 2015.
Outsourcing
Outsourcing involves the wholesale delegation of specific service
lines to an external vendor, which requires complex outsourcing
agreements that cover the transition of services to the vendor,
together with assessment against detailed service levels. The
outsourcing arrangement may also involve the transfer of
personnel, physical hardware and leases over premises —
specialist skills in these areas may be required for drafting and
negotiation.
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© Rajah & Tann Singapore LLP
D (65) 6232 0751
rajesh@rajahtann.com
Steve Tan
Deputy Head, Technology, Media &
Telecommunications
CLIENT UPDATE
2015 MARCH
CORPORATE
Regulatory issues are still very much in the frame; for example,
the MAS Outsourcing Guidelines (last updated 1 July 2005) and
Technology Risk Management Notice and Guidelines. In
September 2014, MAS issued Consultation Papers on the Notice
on Outsourcing and Guidelines on Outsourcing, seeking
comments on the proposed draft Notice and Guidelines. The
draft Notice defines a set of minimum standards for outsourcing
management, such as assessment and audits of service providers,
protection of customer data, and termination of the outsourcing
arrangement. The updated Guidelines provide further guidance
on sound practices relating to the ―Responsibility of the Board
and Senior Management‖ and ―Monitoring and Control of
Outsourcing Arrangements‖.
Personal Data Protection Act — Enforcement
The PDPA was introduced in 2012 as a baseline legislation to
govern the collection, use and disclosure of personal data in
Singapore. The provisions of the PDPA relating to the Do Not Call
(―DNC‖) Registry came into effect on 2 January 2014 and the
data protection provisions on 2 July 2014.With the PDPA now in
full swing, the Personal Data Protection Commission (―PDPC‖)
is actively investigating numerous complaints and businesses
may have to defend enforcement actions taken by the PDPC.
On 27 August 2014, Star Zest Home Tuition Pte Ltd and its
director, Law Han Wei, were the first offenders to be fined
$39,000 each, for breaching the DNC provisions. On 20 October
2014, property agent Kuan Chow Sheng was fined $27,000, also
for breaching the DNC provisions.
2015 will be a year where data security and personal data usage
concerns will feature prominently, if recent data breaches and
hacking incidents, both in Singapore and around the world, are
any indication to go by. All Singapore organisations, not limited
to those in highly regulated industries, would need to seriously
factor in data related compliance measures into their operations,
especially with the maximum S$1 million fine that comes with a
breach of the data protection provisions. For consumer facing
businesses, with ever greater emphasis on digital technology, ecommerce, data mining and analysis to extract value from data
collected, with the objective of guiding business and marketing
decisions, designing privacy and data security into day-to-day
operations and new projects will be extremely important.
Cybersecurity
With the recent highly publicised data security breaches through
hacking (or insider incidents), companies have no choice but to
prioritise cybersecurity. Any unauthorised access that results in
confidential data or personal data being accessed by third parties
may result in criminal investigations, penalties imposed by
Personal Data Protection regulators, reputational damage and
civil liabilities.
Companies will need to manage their security systems, as well as
continue to raise awareness among their employees to mitigate
any risks. Companies that have a regional footprint will face
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CLIENT UPDATE
2015 MARCH
CORPORATE
added pressures because the sharing of data among related
entities is essential to maintain a competitive edge, yet this
increases the risks of unauthorised access. There is a need to
prepare a contingency plan in advance, so as to deal effectively
with any breach, minimise the reputational damage and manage
any civil liabilities.
The setting up of the Cyber Security Agency (―CSA‖) of Singapore
under the auspices of the Prime Minister's Office is a noteworthy
development. In addition to providing dedicated and centralised
oversight of national cyber security functions, the CSA will also
work closely with the private sector to develop Singapore's cyber
security eco-system. Organisations would be well advised to
ensure that they are ready to comply with all and any directions
that may be issued by the CSA in the coming months on
cybersecurity threats and countermeasures.
Trade
Permit Requirements for Strategic Goods & Voluntary
Disclosure Programme
Companies that deal in strategic goods or high-tech and speciality
materials must obtain the relevant strategic goods permit prior to
the export, transhipment, bringing in transit, or brokering of
strategic goods and technology. The Singapore Customs has been
active on the enforcement front, and does from time to time
conduct ad hoc checks at ports as well audits and investigations
against companies to check for non-compliance. Failure to obtain
the relevant permit from the Singapore Customs is an offence,
carrying penal fines and imprisonment terms, as well as
potentially substantial financial penalties.
The Singapore Customs has a Voluntary Disclosure Programme
(―VDP‖) which allows companies to voluntarily approach the
Singapore Customs in good faith to disclose contraventions of the
Customs Act, Regulation of Imports and Exports Act or Strategic
Goods (Control) Act, in exchange for reduced penalties, or no
penalties at all. Companies which are engaged in trade activities,
or have substantial dealings in the import and export of goods
should implement compliance policies and train the relevant
employees to look out for red flags. While all trade-related
offences may be disclosed under the VDP, it is essential to detect
and confine non-compliance as early as possible, since eligibility
for the VDP ceases once the Singapore Customs gives notice or
commences audits/investigations against the company. The
Singapore Customs is particularly vigilant in this regard and
companies must take a more active interest.
Trade Sanctions
The Singapore Customs has identified several sanctioned
countries, for which exports from and imports to Singapore are
either prohibited outright or strictly regulated and require
various permits. The list of prohibited and/or controlled exports
and imports go beyond strategic goods, and even includes luxury
items for some sanctioned countries. Companies in Singapore are
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Contact
Kala Anandarajah, PBM
Head, Competition & Anti-Trust and
Trade
Employment & Executive
Compensation
D (65) 6232 0111
kala.anandarajah@rajahtann.com
CLIENT UPDATE
2015 MARCH
CORPORATE
also prohibited from providing financial services or transferring
financial assets to these sanctioned countries. As such, businesses
must be cognisant of how their goods are being shipped through,
in or out of, Singapore, and be alert if customers or suppliers are
requesting for funds to be indirectly routed through third parties.
Transfer Pricing
In January 2015, the Inland Revenue Authority of Singapore
(―IRAS‖) issued a second edition of its e-tax guide on Transfer
Pricing Guidelines. Transfer pricing concerns prices charged in
transactions between related parties. IRAS recognises that where
related parties transact with each other, the prices charged may
not reflect market conditions due to lack of independence in their
commercial and financial relations. As a result, the profits and
hence tax liabilities may be distorted.
IRAS has indicated that if transactions between related parties
are not on an arms-length basis, IRAS (or another tax authority
concerned) will adjust the parties’ profits upwards. However,
before doing so, the relevant transactions may first be subject to
review and audit. Taxpayers with high transfer pricing risks, such
as those with many cross-border transactions with large values,
especially involving intellectual property, proprietary knowledge
or other intangibles, may be subject to audit.
Moving ahead, it is important that taxpayers who have, in the
ordinary course of business, many related party transactions,
have proper transfer pricing policies and documentation to be
able to justify the related party transaction prices. IRAS has
indicated that it expects a taxpayer’s transfer documentation to
be submitted within 30 days of request, and non-compliance may
be subject to penalties.
Corporate Commercial
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Shares with Different Voting Rights
Contact
Presently, only private companies are allowed to issue shares
with different voting rights. The amendments extend this right to
public companies, thereby increasing their flexibility in capital
management. However, the CA Amendment Act also puts in
place certain safeguards for the shareholders of public
companies, for instance: (i) the public companies must specify
the rights for the different classes of shares in their constitutional
documents and must clearly demarcate such different classes so
that the shareholders know the rights attached to any particular
class of shares; (ii) shareholders must approve the issuance of
shares with different voting rights via special resolution; (iii)
information on the voting rights for each class of shares must
accompany the notice of meeting at which the resolution is
proposed to be passed; and (iv) holders of non-voting shares will
have equal voting rights on resolutions to wind up the company,
or on those that vary the rights of non-voting shares.
Desmond Wee
Head, Corporate Commercial
© Rajah & Tann Singapore LLP
D: (65) 6232 0474
desmond.wee@rajahtann.com
CLIENT UPDATE
2015 MARCH
CORPORATE
Solvency Tests/Statements
Under the current legislative framework, there exists different
solvency tests for different transactions. The amendments will
introduce a uniform solvency test for all transactions, save for
amalgamations. In addition, the solvency statement will, upon
the amendments coming into force, take the form of a declaration
in writing as opposed to a statutory declaration subject to the
Oaths Act.
Capital Reduction
Currently, a company must meet the prescribed solvency
requirements if it wishes to reduce its share capital. The solvency
requirements do not apply only if the reduction is in respect of
the cancellation of capital lost or unrepresented by available
assets. Pursuant to the Amendment Act, the company is no
longer required to meet the solvency requirements in the event
that the reduction of share capital does not involve (i) a reduction
or distribution of cash or other assets by the company; or (ii) a
release of any liability owed to the company.
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