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Small investors to be better protected when firms voluntarily delist

This article is more than 12 months old

Move comes after public consultations last year on the heels of buyout deals

Small investors who hold minority stakes will see their interests better protected when companies decide to voluntarily delist from the stock exchange.

This comes on the back of two key changes announced by the regulatory arm of the Singapore Exchange (SGX RegCo) yesterday, which take immediate effect.

Between them these ensure that not only do minority shareholders have a major say in whether a company gets delisted, but they will also not get shortchanged in terms of the price that is offered to them.

The move comes after a public consultation last year on the heels of a series of buyout deals.

From now on, SGX said, whoever is trying to voluntarily delist a company must make an exit offer that is not just reasonable, but also fair, in the opinion of the appointed independent financial adviser.

In the past, there was no requirement for the offer to be "fair". But now the price offered to the minority shareholders should be at least as much, or more, than the value of the securities they hold.

This means that companies have to give shareholders a better exit value if they choose to go private by way of a voluntary delisting.

SGX RegCo chief executive Tan Boon Gin said: "In arriving at the new voluntary delisting framework, SGX RegCo was cognisant of the need to ensure that exit offers are fair and reasonable, so as to better align the interests of the offeror and independent shareholders."

Another key change centres on who can vote on the voluntary delisting resolution.

SGX yesterday ruled that the party making the offer and any other parties acting in concert with it should sit out the vote.

This means that only minority shareholders and those not making or involved with the offer will vote on the voluntarily delisting resolution.

SGX has also determined that the approval threshold for delisting votes remains the same.

It currently stands at 75 per cent of the total number of shares held by independent shareholders present and voting.

But SGX will remove another provision which required that a voluntary delisting resolution must not be voted against by more than 10 per cent of issued shares held by shareholders present and voting.

That is because it may be difficult for minority shareholders to obtain this requirement in some cases.

Mr David Gerald, chief executive of the Securities Investors Association (Singapore), said: "It is a good move. For some time now, minority shareholders in the delisting have been of the view that they are disadvantaged because the majority shareholders could participate in the voting. The minority was therefore unable to overcome the tyranny of the majority."