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Prolonged suspension not in interest of shareholders and market
"Cash companies" (companies which have sold their operations so that their assets comprise wholly or substantially of cash) and "distressed companies" (companies facing persistent financial difficulties) are given a reasonable period of time under the listing rules to submit proposals for very substantial acquisitions or reverse takeovers ("RTOs") with a view to resuming trading ("resumption proposals"). Such companies are given an extension of time to implement resumption proposals already approved by the Exchange. Continuation of listing is contingent on companies complying with the listing rules.
Safeguard interest of shareholders
Companies should submit satisfactory resumption proposals as soon as they can, to keep their suspension to the shortest period possible. A longer suspension is not necessarily helpful in the search for viable alternatives. Companies under suspension incur expenses, draw down on assets and the return of remaining cash to investors will be delayed. This in turn causes the financial position of such companies deteriorates.
From the past experience, proposals hurriedly put together near the delisting deadline are unlikely to satisfy SGX listing criteria. The prolonged wait for shareholders would have been in vain. Hence, the Exchange reminds suspended companies to take constructive steps towards the resumption of trading. The Exchange undertakes to process well-prepared proposals rapidly.
Suspended companies and directors should be aware of the opportunity cost for shareholders from prolonged suspension. Besides, cash should be returned to shareholders who can deploy the funds or re-invest according to their preference if the suspended company is unable find an investment within the timeframe granted.
Resumption of Trading via RTOs
The resumption proposals which involve very substantial acquisitions or RTOs have to comply with the standards and scrutiny applicable to initial public offering applications, in order to ensure consistent application of listing standards. Otherwise, unqualified listing applicants may obtain listing status by acquiring suspended companies.
RTOs often involve significant dilution of shareholding level of the incumbent minority shareholders. The directors of suspended companies have the responsibility to evaluate whether RTOs will benefit incumbent minority shareholders vis-à-vis returning the cash earlier to shareholders.
Extension to implement viable resumption proposals
For the reasons outlined above, the Exchange does not have strong grounds for granting extensions of time without clear signs of distressed and cash companies submitting viable resumption proposals. An extension will be granted where it is necessary to implement viable proposals that would restore the companies to compliance with continuing listing obligations on a sustained basis.
Maintaining Listing Standards
The Exchange prescribes minimum entry requirements and continuing listing obligations, in order to maintain quality and foster an enduring marketplace. Maintaining listings standards is critical in upholding the integrity of the market and safeguarding the interest of shareholders.
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