Singapore Exchange Securities Trading Limited Issues Consultation Paper on Proposed Registration Framework for Special Purpose Acquisition Companies

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On March 31, 2021, the Singapore Exchange Securities Trading Limited (SGX-ST) published a consultation paper on the proposed listing framework for special purpose acquisition companies (consultation paper). The consultation paper invites comments on proposed policies and rules to be implemented to allow special purpose acquisition companies (SPACs) to be listed on the motherboard.

This briefing focuses on the proposed requirements for the list of SPACs on the motherboard.

context

Generally, a SPAC is a fictitious entity established and initially funded by experienced founding shareholders (usually referred to as sponsors). SPACs are formed to raise capital through initial public offerings (IPOs) for the sole purpose of acquiring businesses or operating assets. Such acquisition may take the form of a merger, stock exchange or other similar method of business combination. A SPAC IPO differs from a traditional IPO in that it involves the listing of a newly created company on the stock exchange with no operational history or business transactions at the time of listing.

The SGX-ST had, more than a decade ago, consulted on the referencing of SPACs (2010 consultation document). Due to a lack of market interest at the time, the SGX-ST had determined that this was not the appropriate time to introduce SPAC listings.

Given recent market developments in the United States, successful SPAC listings and recent SPAC transactions, and various potential M&A opportunities in the Asia-Pacific region, there is renewed and significant interest for introducing SPAC to local capital markets, including Singapore.

Broad admission criteria

The proposed admission criteria for the list of SPACs on the motherboard are defined below:

(i) a minimum market capitalization of S$300 million and at least 25% of total issued shares to be held by at least 500 public shareholders at IPO

(ii) a minimum IPO price of S$10 per share

(iii) at least 90% of the IPO proceeds placed in escrow pending the acquisition of a target company (known as a business combination); the cash will be returned in proportion to the amount escrowed to any shareholder voting against the business combination or upon liquidation of the SAVS

(iv) any warrants (or other convertible securities) issued with the common shares of SPAC on the IPO must be inseparable from the underlying common shares of SPAC for trading on SGX

Conditions for founding shareholders, management team and controlling shareholders

The proposed terms applicable to founding shareholders, management team and controlling shareholders of a SPAC are set out below:

(i) the founding shareholders and/or management team hold minimum equity at IPO of 1.5% to 3.3%, depending on the market capitalization of the SPAC then

(ii) a moratorium on shareholdings held by major parties such as founding shareholders and controlling shareholders at various times

Business Combination Requirements

The proposed requirements that would apply in the event of a business combination are set out below:

(i) a permitted period of three years from the date of the IPO to complete the business combination

(ii) the business combination includes at least one main primary business with a fair market value of at least 80% of the gross proceeds of the IPO in receivership

(iii) the resulting business combination meets the original motherboard listing criteria

(iv) the business combination can only proceed with the approval of a simple majority of the independent directors of SPAC and a simple majority of the independent shareholders

(v) the liquidation of the SPAC may occur under certain conditions, in particular where a material change in the profile of the founding shareholders and/or the management team essential to the successful creation of the SPAC and/or the realization of the business combination occurs before the completion of the business combination, unless the independent shareholders vote to maintain the listing of the SAVS

(vi) the appointment of (a) an accredited issue manager as financial adviser to advise on the business combination and (b) an independent valuator to evaluate the target company

(vii) the shareholders’ circular relating to the business combination contains information at the prospectus level on key areas such as (a) the financial situation and operational control; (b) the character and integrity of incoming directors and management; (c) compliance history; (d) licenses, permits and approvals necessary to operate the business; and (e) resolution of conflicts of interest

Call for comments

Please refer to the consultation document for full details on the proposed PSPC framework to be introduced. The deadline for comments and feedback to be submitted to the SGX-ST is Wednesday, April 28, 2021.

We gather feedback from customers and industry participants for submission to the SGX-ST. If you have any comments on the proposals in the Consultation Paper that you would like us to submit on your behalf, please contact any of the attorneys listed below to share your comments, which should be received no later than Wednesday, April 21, 2021.

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