A reverse takeover (RTO) is a corporate transaction in which a private company acquires a public firm, ensuing within the private company becoming the listed entity. RTOs are a well-liked way for private firms to realize access to the public market without having to go through the traditional initial public providing (IPO) process.
RTOs are also changing into increasingly popular in Singapore, as they offer a number of advantages over IPOs, including:
A faster and more efficient path to the general public market
Lower prices
Higher flexibility in deal structuring
The ability to retain control of the listed entity
Nonetheless, RTOs are additionally advanced transactions that contain a number of legal and compliance considerations. This article will discuss the key legal and compliance points that parties to a Singaporean RTO should 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, including:
The acquirer must make a mandatory provide to all shareholders of the goal firm to buy their shares.
The acquirer should provide a circular to target company shareholders setting out the terms of the supply and the reasons for the RTO.
The goal company should hold an extraordinary general assembly to approve the RTO.
The acquirer and the goal firm must receive approval from the SGX-ST for the listing of the acquirer’s shares on the SGX-ST.
Due Diligence
It’s essential for each the acquirer and the target firm to conduct thorough due diligence on each other earlier than coming into into an RTO agreement. This is because RTOs are advanced transactions that involve a number of risks, including:
Financial risks: The acquirer should be certain that the target firm is financially sound and that it will be able to generate sufficient profits to service its debt and pay dividends to its shareholders.
Regulatory risks: The acquirer should ensure that the goal firm complies with all applicable laws and regulations.
Litigation risks: The acquirer must make sure that the target company is just not going through any significant legal claims.
Corporate Governance
RTOs may also raise a number of corporate governance concerns. For example, it is necessary to make sure that the acquirer and the goal firm have impartial boards of directors that may provide goal oversight of the transaction. It’s also important to make sure that the acquirer will not have a controlling interest within the listed entity after the RTO, as this may 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 needs to be aware of. These include:
The acquirer’s supply to focus on firm shareholders have to be fair and reasonable.
The acquirer should disclose all material information about itself and the goal company to target company shareholders.
The acquirer should not engage in any insider trading or market manipulation activities.
Conclusion
RTOs is usually a complicated and challenging process, but they’ll additionally provide a number of advantages to each acquirers and target companies. It’s important for parties to a Singaporean RTO to seek legal and monetary advice early on in the process to ensure that they comply with all applicable laws and regulations.
Additional Considerations
In addition to the general legal and compliance considerations discussed above, there are a number of other factors that parties to a Singaporean RTO should consider, together with:
Taxation: RTOs can have advanced tax implications for each the acquirer and the goal company. It is very important seek tax advice to make sure that the transaction is structured in a tax-efficient manner.
Employment: RTOs may have implications for the employees of the target company. You will need to consider how the RTO will impact the terms and conditions of employment of target company employees, and to take steps to make sure that all applicable employment laws are complied with.
Intellectual Property: RTOs can even involve the switch of intellectual property from the target firm to the acquirer. It is very important ensure that all vital intellectual property rights are transferred to the acquirer, and to take steps to protect the acquirer’s intellectual property rights after the RTO.
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