Singapore Public Company Limited By Shares

blankSingapore Public Company Limited By Shares

Introduction

A public company limited by shares can have more than 50 shareholders. The company may raise capital by offering shares and debentures to the public. A public company must register a prospectus with the Monetary Authority of Singapore before making any public offer of shares and debentures. It includes all those companies whose shares are listed on the Singapore Exchange Limited (SGX), either on the mainboard or the secondary board known as Catalist.

A company with more than 50 shareholders is a public company even if its shares are not listed.

 

What is the difference between Listed Company and Public Company?

The main and the most critical difference between publicly and privately held companies is that public companies have shares that can be publicly traded on a stock exchange, or otherwise between its members. All listed companies will necessarily be public limited whereas all public limited companies will not necessarily be listed companies.

 

Conversion of Pte Ltd into Public Limited Company in Singapore

When a Pte Ltd company has decided or reached a situation of choice to go public, then it must abide by a process set out to transform private company to a public corporation. The procedure of transforming into a public corporation focuses on the preparatory works for the application statements and other pertinent papers.

The starting point for transformation is due diligence which is required to be carried by a professional service provider. It involves with a complete check into every aspects of the company. This due diligence is the cornerstone upon which all facts divulged to the general public are founded. The corporation’s perceived worth will then be allotted and a suitable amount of stock will be sold.

 

Initial Public Offering (IPO)

The investors are, at this point, given the chance to purchase the stock. This is referred to as the Initial Public Offering (IPO). Anytime a syndicate takes on this action, they are said to underwrite the IPO. Underwriting is the course of action through which an underwriter offers new stock to the market. Through underwriting the IPO, the syndicate is guaranteeing the corporation that they’re going to market and then sell all the stock that is available. In exchange, the corporation that is going public forks over a commission to the underwriting syndicate for each share sold.

The issuing corporation starts the public listing procedure by selecting a Singapore-centered financial establishment, either a member of SGX, a merchant bank or another comparable organization, to become its head manager and sponsor. Apart from handling the IPO kick off, the head manager also sends in the listing application and works with SGX on all issues that arise as a consequence of the listing application.

 

Timeline

Just before submitting the listing application, the corporation is required to seek advice from the SGX on all complexities in order to minimize any potential setbacks with costs.

Normally, the listing procedure is made up of two stages– the pre-submission groundwork and the post-submission authorization and listing. Usually, the pre-submission prep work should consume approximately four to nine months while post-submission tasks will require around five to seven weeks to accomplish. Based on the source of information, the listing procedure can take between four months and two years.

 

What is Singapore Stock Exchange?

Singapore Exchange (SGX) is a stock exchange for Singapore stocks. It is a place where stocks trading between investors takes place. SGX also provides different services related to equities, fixed income, derivatives, commodities and foreign currency exchange (FX). SGX is also globally recognized for its risk management and clearing capabilities.

 

What is Singapore Mainboard listing?

The Mainboard caters to the needs of established enterprises. Companies seeking a listing on the Mainboard must meet the entry criteria, which includes minimum profit and/or market capitalisation levels.

Mainboard-listed companies enjoy the prestige of an established market place and access to the widest range of institutional and retail investors.

Companies may list via an initial public offer (IPO) with issue of new shares or offer existing shares to the investing public. For this, a prospectus has to be lodged with the Monetary Authority of Singapore (MAS) and prepared in accordance with the Securities and Futures Act (SFA) and the Securities and Futures Regulations (SFR).

The prospectus is posted on MAS’ website (OPERA) for a period of at least 7 days for public comments.

 

Mainboard Admission Criteria

A company seeking a listing on the Mainboard must meet the following admission requirements.

Quantitative Requirements

Companies intending to join SGX’s Mainboard must meet one of the following quantitative requirements:

  • Minimum consolidated pre-tax profit of at least S$30 million for the latest financial year with operating track record of at least 3 years;
  • Profitable in the latest financial year, and has a market capitalisation of not less than S$150 million based on the issue price and post-invitation issued share capital with operating track record of at least 3 years; or
  • Operating revenue in the latest completed financial year and a market capitalisation of not less than S$300 million based on the issue price and post-invitation issued share capital. Real Estate Investment Trusts and Business Trusts who have met the S$300 million market capitalisation test but do not have historical financial information may apply under this rule if they are able to demonstrate that they will generate operating revenue immediately upon listing.
MOG (Mineral, Oil & Gas) Requirements

A MOG listing aspirant unable to satisfy the above quantitative requirements for listing, may list its securities if has to satisfy the following additional conditions:

  • Has market capitalisation of not less than S$300 million based on the issue price and post-invitation issued share capital; and
  • Discloses its plans, milestones and capital expenditure to advance to production stage. These plans must be substantiated by the opinion of an independent qualified person.
Requirement for all MOG Companies
  • Have established existence of adequate resources in a defined area where the company has exploration and exploitation rights, which must be substantiated by an independent qualified person’s report. The resource must be at least Indicated Resources (for Minerals) or Contingent Resources (for Oil & Gas)
  • Have sufficient working capital for 18 months from listing
  • Have at least one independent director with appropriate industry experience and expertise
  • Appoint an audit firm where the auditing firm and audit partner-in-charge have the relevant industry experience
Additional Requirements
Review of Listing Documents
  • SGX &MAS
Shareholder Spread
  • For market capitalisation < S$300 million, 25% of issued shares in the hands of at least 500 shareholders (For market capitalisation > S$300 million, shareholding spread varies between 12-20%);
  • At least 500 shareholders worldwide in the case of a secondary listing and where the Exchange and the primary home exchange do not have an established framework and arrangement to facilitate the movement of shares, at least 500 shareholders in Singapore or 1,000 shareholders worldwide.
Independent Directors        
  • At least 2 independent directors for all issuers
  • For foreign issuers, there must be at least 2 Singapore resident independent directors.
Moratorium
  • Where an issuer satisfies the profitability test, promoters cannot sell any of their shareholdings for 6 months after listing.
  • Where an issuer satisfies the market capitalisation test, promoters cannot sell any of their shareholdings for 6 months after listing, and 50% of their shareholdings thereafter for the next 6 months.
  • For Pre-IPO investors who had acquired their shares within the 12-month period prior to IPO and hold ≥ 5% shareholding, the “profit portion” of their shareholdings is subjected to a moratorium period of 6 months after IPO. The profit portion is calculated by multiplying the percentage difference between the IPO price and price paid by the investor for the shares, by the number of shares held.
IPO Documentation
  • Prospectus;
  • Lodged on MAS OPERA website.
Accounting Standard
  • Singapore Financial Reporting Standards, International Financial Reporting Standard, or US Generally Accepted Accounting Principles
Domicile
  • At the discretion of the issuer.
Trading & Reporting Currency
  • At the discretion of the issuer.
Business Operations
  • No requirement for operations in Singapore.
Continuing Obligations
  • Rules relating to disclosure of material information, periodic reporting, additional share issuance, corporate transactions, corporate governance guidelines, interested persons transaction and free float will apply.

 

What is Singapore Catalist?

The ideal platform for fast-growing enterprises seeking a primary listing.

Catalist caters to the needs of fast-growing enterprises. Companies seeking a primary listing on the Catalist must be brought to list by authorised Full Sponsors via an initial public offering (IPO) or a reverse takeover.

There are no quantitative entry criteria required by SGX. Instead, Full Sponsors decide if the listing applicant is suitable to be listed.

Companies must lodge an Offer Document with SGX which will be posted on SGX’s Catalodge website, for a period of at least 14 days for public comments. This will provide an avenue for any public feedback, and act as an additional safeguard.

The Offer Document has to comply with the same disclosure requirements as a prospectus prepared In accordance with the Securities and Futures Act and the Securities and Futures Regulations, as it is the basis for investors to make informed decisions on the company. Provisions relating to civil and criminal liability in the Securities and Futures Act similarly apply to an Offer Document.

Catalist Sponsors & Companies

Sponsors are authorised and regulated by SGX through strict admission criteria and subject to continuing obligation under the Catalist Rules. Sponsors will in turn determine the suitability of a company to list and supervise listed companies’ compliance with their continuing listing obligations.

Quantitative Requirements
  • No minimum quantitative criteria required by SGX – Sponsors will use their own house deal selection criteria. Adequate amount of Indicated Resources for a minerals company and contingent Resources for an Oil & Gas company are required.
Requirements for all MOG (Mineral, Oil & Gas) companies:
  • Have at least achieved Indicated Resources (for Minerals) or Contingent Resources (for Oil & Gas)
  • Have sufficient working capital for 18 months from listing
Additional Requirements
Review of Listing Documents
  • Sponsor & SGX
Shareholder Spread
  • 15% of post-invitation share capital in public hands;
  • Minimum 200 shareholders.
Independent Directors        
  • 2 independent directors (minimum of 1 Singapore resident independent director for Foreign Companies).
Moratorium
  • At the time of IPO, if promoters as a group hold more than 50% of the post-invitation share capital, they may sell but must retain at least 50%. If they hold less than 50% of the post-invitation share capital at IPO, they may not sell any shares at the time of IPO.
  • After IPO, promoters cannot sell any of their shareholdings for 6 months. They may sell up to 50% of their shareholdings thereafter for the next 6 months;
  • For Pre-IPO investors who had acquired their shares within the 12- month period prior to IPO, the “profit portion” of their shareholdings is subjected to a moratorium period of 12 months after IPO. The profit portion is calculated by multiplying the percentage difference between the IPO price and price paid by the investor for the shares, by the number of shares held.
  • Promoters of an MOG company are not to sell any of their shareholdings for 12 months after IPO.  They may sell up to 50% of their shareholdings for the next 6 months.
IPO Documentation
  • Offer Document;
  • To include working capital sufficiency statement for a 12-month period, or 18-month period for MOG companies, from the issuer’s directors and Sponsor;
  • Lodged on SGX Catalodge website.
Accounting Standard
  • Singapore Financial Reporting Standards, International Financial Reporting Standard, or US Generally Accepted Accounting Principles
Domicile
  • At the discretion of the issuer.
Business Operations
  • No requirement for operations in Singapore.
Continuing Obligations
  • Rules relating to disclosure of material information, periodic reporting, additional share issuance, corporate transactions, corporate governance guidelines, interested persons transaction and free float will apply.
  • Additional requirement to retain a Sponsor at all times will apply to Catalist companies.

 

Key difference between Mainboard and Catalist listing

  • A Mainboard listing is subject to review and approval by the SGX-ST and the Monetary Authority of Singapore (“MAS”) whereas a Catalist listing is supervised and approved by its appointed sponsor.
  • No quantitative requirements are required for a Catalist listing but one needs to appoint a sponsor, who will assess its suitability to list and will advise and guide the company through the listing process. Also, the company must maintain the sponsor at all times after listing.

 

Advantages / Pros of Public Listed Company

 Vast & Easier form of Capital

To attain financial benefits, most Private Companies choose to go public. Initial Public Offering (IPO) is one of the strategies that the company can use to get more capital. The registered company can also get additional funding by offering debentures and transferable shares to the public. The funds can be used to support its growth, offset debts, or fund capital expenditure.

Publicity

IPOs receive a lot of publicity which in turn introduces the company to a new segment of potential customers resulting in an increase in market share. A lot of people have an improved opinion of public businesses. This is especially crucial in those sectors in which suppliers’ and customers’ long-term obligations are required for the company’s success.

A public sale of stock creates with it esteem, attention and visibility. These are beneficial in promoting your Singapore corporation and bringing awareness to it. This can often times result in new business innovations and important affiliations. It can also captivate the interest of prospective business partners or merger candidates.

Gain Prestige

One of the guaranteed ways of gaining the prestige of the company in the market is by offering the company’s stock to the public. The company’s founders, managers, and co-founders will get immense personal prestige from being associated with a company that confidently goes public. It is also important to note that market influence makes it easy to market products and services as well as recruit key employees such as Chief Financial Officers, Human Resource Managers, etc.

Liquidity

By selling a registered private company’s stock, the stockholder has to find willing investors who are interested in buying its shares. Going public makes this process much easier because the enterprise creates an open niche market where both buyers and sellers can interact and do business.

Unlocking Shareholder Value

Becoming public is a brilliant way of helping your corporation’s shares to be dependent on fair-market-value, thereby showing its accurate worth and producing a substantial ROI for its stockholders.

Compensation To Employees

Enterprises that are registered as public companies in Singapore are allowed to give securities as a form of compensation for their employees, officers, and directors. The securities market value is dependent on the price that it is sold on the stock exchange.

Mergers and Acquisitions (M&A)

The corporation’s stock is effective for funding and works extremely well in buying other firms.

 

Disadvantages / Cons of Public Listed Company

Expensive / Costly

The actual price of IPO offerings as well as adhering the continual legal obligations can be very costly. Examples of the extra charges would be the accounting charges, legal charges, miscellaneous charges and professional consultant charges.

Lengthy Process

Transforming into a public corporation can also be a cumbersome and lengthy procedure. Company functions might be disturbed if top administration is simply too swept up in the IPO undertaking.

Additional Liability Exposure

There will be elevated danger of prosecution and civil liability for public businesses, officers and company directors for untrue or inaccurate assertions in the registration document. Executives may confront liability for lying in documents submitted to the SGX or for divulging information that is imaginary.

Loss in control

Public corporations are confronted with the challenges of the marketplace. This might potentially lead them to concentrate more on short-term outcomes instead of long-term progress. Moreover, public corporations have a higher danger of buyout initiatives because of market investing in stock.

Fiduciary Obligations / Compliance

Listed Public companies also have to file reports with Singapore Stock Exchange regularly and comply with statutory requirements and exchange guidelines. Stringent regulation, such as Company Secretary’s qualifications and director’s age.

No Privacy

There is a lack of confidentiality because public companies have to disclose financial information to the public. By publishing the reports publicly the rivals will be able to have better comparison.

 

Conclusion

In conclusion, you are strongly required with specific grounds when deciding to take your business public. Despite the fact that a public offering could be a good choice for vast capital funds and supporting the expansion of company, there will be a great number of issues that are not ideal for most private enterprises.

 

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