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Legal and Compliance Considerations in Singaporean Reverse Takeover Offers

A reverse takeover (RTO) is a corporate transaction in which a private company acquires a public firm, resulting within the private firm turning into the listed entity. RTOs are a popular way for private corporations to gain access to the public market without having to go through the traditional initial public providing (IPO) process.

RTOs are also changing into increasingly widespread in Singapore, as they offer a number of advantages over IPOs, including:

A faster and more efficient route to the public market

Lower costs

Larger flexibility in deal structuring

The ability to retain control of the listed entity

However, RTOs are additionally advanced transactions that involve a number of legal and compliance considerations. This article will talk about the key legal and compliance points that parties to a Singaporean RTO must be aware of.

Regulatory Framework

RTOs in Singapore are regulated by the Securities and Futures Act (SFA) and the Listing Manual of the Singapore Alternate Securities Trading Limited (SGX-ST). The SFA and the Listing Manual set out a number of requirements that parties to an RTO must comply with, together with:

The acquirer must make a compulsory provide to all shareholders of the goal firm to purchase their shares.

The acquirer should provide a circular to target company shareholders setting out the terms of the provide and the reasons for the RTO.

The goal firm must hold an additionalordinary general meeting to approve the RTO.

The acquirer and the target company must acquire approval from the SGX-ST for the listing of the acquirer's shares on the SGX-ST.

Due Diligence

It is essential for each the acquirer and the target company to conduct thorough due diligence on each other earlier than entering into an RTO agreement. This is because RTOs are complex transactions that involve a number of risks, including:

Monetary risks: The acquirer must be certain that the goal firm is financially sound and that it will be able to generate ample profits to service its debt and pay dividends to its shareholders.

Regulatory risks: The acquirer should make sure that the target company complies with all applicable laws and regulations.

Litigation risks: The acquirer must be sure that the target company is not dealing with any significant legal claims.

Corporate Governance

RTOs can also elevate a number of corporate governance concerns. For instance, it is necessary to ensure that the acquirer and the goal firm have impartial boards of directors that can provide objective oversight of the transaction. It's also necessary to ensure that the acquirer will not have a controlling interest in the listed entity after the RTO, as this might lead to conflicts of interest.

Securities Law Considerations

In addition to the general legal and compliance considerations discussed above, there are a number of securities law considerations that parties to a Singaporean RTO must be aware of. These include:

The acquirer's supply to target company shareholders should be fair and reasonable.

The acquirer must disclose all materials information about itself and the target company to focus on firm shareholders.

The acquirer must not have interaction in any insider trading or market manipulation activities.

Conclusion

RTOs is usually a advanced and difficult process, however they'll additionally provide a number of advantages to both acquirers and target companies. It is important for parties to a Singaporean RTO to seek legal and financial advice early on in the process to ensure that they comply with all applicable laws and regulations.

Additional Considerations

In addition to the general legal and compliance considerations mentioned above, there are a number of different factors that parties to a Singaporean RTO ought to consider, including:

Taxation: RTOs can have complex tax implications for each the acquirer and the target company. You will need to seek tax advice to make sure that the transaction is structured in a tax-efficient manner.

Employment: RTOs can also have implications for the employees of the target company. You will need to consider how the RTO will impact the phrases and conditions of employment of target firm employees, and to take steps to make sure that all applicable employment laws are complied with.

Mental Property: RTOs also can contain the switch of mental property from the goal firm to the acquirer. It is important to ensure that all needed intellectual property rights are transferred to the acquirer, and to take steps to protect the acquirer's intellectual property rights after the RTO.

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Website: https://www.singaporelegalpractice.com/2023/09/24/reverse-takeover/

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