A reverse takeover (RTO) is a corporate transaction in which a private firm acquires a public firm, ensuing in the private company changing into the listed entity. RTOs are a preferred way for private companies to achieve access to the public market without having to undergo the traditional initial public providing (IPO) process.
RTOs are also becoming increasingly standard in Singapore, as they provide a number of advantages over IPOs, together with:
A faster and more efficient path to the general public market
Lower costs
Better flexibility in deal structuring
The ability to retain control of the listed entity
However, RTOs are additionally complicated transactions that involve a number of legal and compliance considerations. This article will focus on the key legal and compliance issues that parties to a Singaporean RTO needs to 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 should comply with, together with:
The acquirer must make a compulsory provide to all shareholders of the goal company to purchase their shares.
The acquirer must provide a circular to target company shareholders setting out the phrases of the provide and the reasons for the RTO.
The goal company must hold an extraordinary general assembly to approve the RTO.
The acquirer and the goal firm should obtain 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 goal company to conduct thorough due diligence on each other before getting into into an RTO agreement. This is because RTOs are complicated transactions that contain a number of risks, together with:
Financial risks: The acquirer must make sure 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 be certain that the target company complies with all applicable laws and regulations.
Litigation risks: The acquirer should be sure that the target firm shouldn’t be going through any significant legal claims.
Corporate Governance
RTOs also can elevate a number of corporate governance concerns. For example, it is important to make sure that the acquirer and the target company have unbiased boards of directors that may provide goal oversight of the transaction. It’s also important to ensure that the acquirer will not have a controlling interest in the listed entity after the RTO, as this could lead to conflicts of interest.
Securities Law Considerations
In addition to the general legal and compliance considerations mentioned above, there are a number of securities law considerations that parties to a Singaporean RTO should be aware of. These embrace:
The acquirer’s provide to focus on company shareholders must be fair and reasonable.
The acquirer should disclose all material information about itself and the target firm to focus on firm shareholders.
The acquirer should not have interaction in any insider trading or market manipulation activities.
Conclusion
RTOs is usually a complicated and challenging process, however they can also supply a number of advantages to both acquirers and target companies. It is vital for parties to a Singaporean RTO to seek legal and financial advice early on within 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 other factors that parties to a Singaporean RTO ought to consider, together with:
Taxation: RTOs can have complicated tax implications for both the acquirer and the target company. It is very important seek tax advice to ensure that the transaction is structured in a tax-efficient manner.
Employment: RTOs may also have implications for the employees of the goal company. You will need to consider how the RTO will impact the phrases and conditions of employment of target company employees, and to take steps to make sure that all applicable employment laws are complied with.
Mental Property: RTOs may contain the switch of intellectual property from the target company to the acquirer. It is very important ensure that all essential mental property rights are transferred to the acquirer, and to take steps to protect the acquirer’s mental property rights after the RTO.
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