October 3, 2016

RHTLaw Taylor Wessing Deputy Head of Banking and Finance Ow Kim Kit quoted in The Straits Times

RHTLaw Taylor Wessing’s Deputy Head of Banking and Finance, Ow Kim Kit, was quoted in The Straits Times article titled “Scheme's real value lies in the long-term benefits". The article was first published in The Straits Times on 1 October 2016.  Scheme's real value lies in the long-term benefits Source: The Straits Times © Singapore Press Holdings Ltd Date: 1 October 2016 Author: Francis Chan Francis Chan Indonesia's much touted tax amnesty scheme has not generated anything close to the quadrillion rupiah cash injection Jakarta had hoped for from the repatriation of offshore assets. Of the 937 trillion rupiah (S$102 billion) worth of offshore assets declared by Indonesians, only 14 per cent has been sent home since the scheme's launch. Sceptics will undoubtedly use this fact to argue that the amnesty will not succeed in helping Indonesia raise the capital it needs to balance its state budget for the coming year. An insider in the Joko Widodo administration, however, has told The Straits Times that seeking repatriated funds was never the only objective of the amnesty. What it was also going after was a more valuable commodity - information. This includes assets owned by Indonesians at home and abroad, as well as other income data, which can be used as a foundation for Indonesia to rebuild its notoriously loose tax regime. Only 27 million of Indonesia's 250 million population have registered as taxpayers. Of these, less than a million actually file tax returns and experts say this has been the case for as long as they can recall. But director-general of taxes Ken Dwijugiasteadi told The Straits Times yesterday that of the 341,110 tax- payers who have filed their returns under the amnesty, 15,000 were new taxpayers. Indeed, Finance Minister Sri Mulyani Indrawati earlier this week said the scheme was more about reforming Indonesia's tax policy and administration. "What is more important is that Indonesian taxpayers realise that in order for us to build the country we really have to mobilise tax in a much more professional and good governance fashion," she said. As of yesterday, Indonesians declared 3,516 trillion rupiah worth in assets, achieving almost 90 per cent of its four quadrillion rupiah target in the first three months of the nine-month-long scheme, which officially kicked off only in mid-July. The taxman also collected 97 trillion rupiah, or 59 per cent of the 165 trillion rupiah in tax revenue Jakarta had hoped to raise. These figures mean Indonesia has managed to outperform - in just the first phase of the scheme - other jurisdictions around the world such as Australia, Chile, Ireland, Italy, South Africa and Spain, which had introduced tax amnesties between 1993 and last year. It has also raised the highest in tax revenue among countries that have done so over the same period. Therefore, the repatriation shortfall, the only blemish in the scheme thus far, may well be a short-term issue, said experts such as RHTLaw Taylor Wessing deputy head of banking and finance Ow Kim Kit. "Some of the customers' funds may be locked up in illiquid property or investments that may require more time and resources to find a buyer at an appropriate price. No one's interest will be served by any large-scale divestment of any asset class that disrupts the market." OCBC Bank economist Wellian Wiranto agrees the real game-changing element of the tax amnesty is over the longer term and how it would be a boon to Indonesia's narrow tax base and less than developed financial sector. "What is worth thinking about too, and much less discussed thus far, is the notion that the tax amnesty would shift how the average Indonesian views the government-to-citizenry relationship."
September 26, 2016

RHTLaw Taylor Wessing Managing Partner Tan Chong Huat shared his views on “Bridging the trust gap” in this week’s Views from the Top

RHTLaw Taylor Wessing’s Managing Partner Tan Chong Huat shared his views in this week’s topic in the Business Times’ weekly column, Views from the Top. This article was first published in The Business Times on 26 September 2016. Bridging the trust gap SEP 26, 2016 5:50 AM THIS WEEK'S TOPIC: What can be done - by business leaders and companies - to build trust? Tan Chong Huat Managing Partner RHTLaw Taylor Wessing LLP At the risk of over simplifying the subject, I would recommend that business leaders and companies remember the acronym "GRACE" ie Governance, Risk, Anti-Money Laundering, Compliance & Ethics. These are important virtues when it comes to building trust.  The embracing of each and every one of them will be essential to guide and promote trust, and prevent the destruction of trust that have been established, built over time and maintained between companies and stakeholders. Good governance that delivers performance and profitability which complies with regulations (among others, anti-money laundering as in the recent BSI / 1MDB case), conforms with good ethics, and is equipped with adequate and effective risk management will offer a good trust-enabling framework. Needless to say, the honesty, diligence and accountability of business leaders will be of foremost importance in determining the trust quotient of the companies they helm. Examples include Dr Cheong Choong Kong (Singapore Airlines) and Warren Buffet (Berkshire Hathaway), just to name a notable few. Over time, some of these companies become great institutions which are trusted and loved by their stakeholders, with a distinctive culture of honour and integrity. Hence the importance of "GRACE"
September 21, 2016

Head of Intellectual Property and Technology Practice Jonathan Kok quoted in The Straits Times

RHTLaw Taylor Wessing’s Head of Intellectual Property and Technology Practice Jonathan Kok was quoted in The Straits Times article titled “Samsung Galaxy Note7 exchange includes parallel import sets; deadline extended". The article was first published in The Straits Times on 21 September 2016.  Samsung Galaxy Note7 exchange includes parallel import sets; deadline extended Source: The Straits Times © Singapore Press Holdings Ltd Date: 21 September 2016 Author: Irene Tham Samsung has confirmed that it is extending the exchange programme for its faulty Galaxy Note7 to include parallel import sets in what is Singapore's first major mobile phone recall. Although it will first replace the phones of those who bought from authorised retailers here - estimated to be in the "thousands" - the South Korean firm will also provide a new Note7 device to those who bought handsets from parallel importers. Samsung will also extend the exchange programme beyond its original Oct 2 deadline. A Samsung spokesman told The Straits Times: "While we encourage consumers to always buy from authorised retailers, Samsung is prioritising consumer safety in the global replacement programme." She said those who bought from authorised retailers will get their replacement handsets first in its exchange programme, which kicked off last Friday. It will run until Oct 2 at the Suntec Singapore Convention and Exhibition Centre. After Oct 2, customers will need to call the 1800-SAMSUNG (7267864) hotline to make arrangements for the exchange. Users who bought from parallel importers - usually at a discount from e-marketplaces such as eBay and Qoo10 - can call the same hotline to arrange for an exchange. Technology lawyer Jonathan Kok of RHTLaw Taylor Wessing said Samsung is controlling the damage to its reputation. "If Samsung does not replace the faulty sets, it can be sued for product liability (in the case of) a customer injury, loss or damage as a result of the defect." Note7 user Sadiq R, 26, is glad that Samsung has extended the exchange programme beyond Oct 2. "I was told by its call centre on Monday that I would not be able to replace my handset after Oct 2," said the graphic designer, who had also asked for a refund. But the phone maker maintained yesterday that it will not be offering Singapore consumers a refund, which is being offered in markets such as Australia and the US. Samsung, which issued a global recall of 2.5 million Note7 phones this month, said it will resume selling the device in Singapore in October, after the exchanges are done. With its new edge-to-edge screen, water-resistant feature and iris scanner, the Note7 debuted in August to rave reviews. It was poised to lift Samsung's quarterly profit and take on Apple's new iPhone 7, which went on sale in Singapore last Friday. To date, close to 80 per cent of Note7 owners who had bought from Samsung's authorised retailers in Singapore have registered to have their handsets replaced. Local authorised retailers and distributors have also since returned more than 80 per cent of all unsold Note7 devices. Lawyer Kala Anandarajah, who heads the Competition & Antitrust and Trade team at Rajah & Tann, said Singapore laws are stricter on defective cars than on defective phones. "Defective cars that are not safe must be fixed under the law, and this requirement applies to both authorised dealers and dealers of parallel import cars," she said. "For mobile phones, however, a formal recall imposed on the manufacturer, authorised resellers or dealers of parallel imports is at the discretion of Spring Singapore." Last Thursday, the United States safety regulator, the Consumer Product Safety Commission, started banning the sale of the phone, which had caught fire, as well as issuing an official recall.
September 7, 2016

RHTLaw Taylor Wessing Managing Partner Tan Chong Huat and Head of Capital Markets Ch’ng Li-Ling authored an article titled “Managing the pros and cons of dual-class listings a balancing act” for The Business Times

RHTLaw Taylor Wessing Managing Partner Tan Chong Huat and Head of Capital Markets Ch'ng Li-Ling authored an article titled “Managing the pros and cons of dual-class listings a balancing act” for The Business Times. The article was first published in The Business Times dated 7 September 2016. Managing the pros and cons of dual-class listings a balancing act Singapore Exchange will need to carefully assess the requirements that should be imposed on companies seeking to list a dual-class share structure here. Source: The Business Times © Singapore Press Holdings Ltd. Date: 7 September 2016 Author: Tan Chong Huat & Ch'ng Li-Ling THE investment and business community has lately been abuzz with reactions to the recent move by Singapore Exchange (SGX) to consider the listing of dual-class shares. In its 2016 annual report, SGX revealed that "an overwhelming majority" of the members of its Listing Advisory Committee (LAC) voted in favour of permitting the listing of dual-class shares although this was qualified by the need to implement the relevant corporate governance safeguards to mitigate the inherent risks associated with a dual-class share structure. This is a timely update from SGX, following the amendment to the Singapore Companies Act which took effect in March this year, that enables a public company to issue different classes of shares if the company's constitution allows for such issue and if it sets out, in respect of each class of shares, the rights attached to that class of shares. The following briefly sets out the pros and cons of the listing of a dual-class share structure and considers some of the safeguards that may mitigate the risks. THE CASE FOR THE LISTING OF DUAL-CLASS SHARES Founders preserve power while getting access to capital For founders, a dual-class share structure retains some of the positive aspects of being a private company - it allows founders control over significant decisions of the company, while allowing them to access the equity markets for additional financing for the company. A dual-class share structure which has multiple votes for founder shares may also protect a company from hostile takeovers and act as a takeover defence mechanism. There is more flexibility in capital management and encourages innovation and the pursuit of long-term growth A company has greater flexibility in raising capital by issuing non-voting shares and shares with multiple votes. With control, the founders and management are afforded a certain degree of autonomy in strategic decisions, have the freedom to innovate (that is, take more risks) and are better able to focus on long-term growth, instead of being under shareholders' pressure to deliver short-term financial returns. For example, in Google's initial public offering letter, the founders highlighted that its share capital structure (under which the founders and management had 10 votes per Class B common stock compared to Class A common stockholders with one vote per share) was designed to protect Google's ability to innovate and to retain its distinctive characteristics; and while the Class A common stockholders would fully share in Google's long-term economic future, they would have little ability to influence Google's strategic decisions through their voting rights. THE CASE AGAINST THE LISTING OF DUAL-CLASS SHARES Bad management is insulated from market discipline, and problem of the "next generation" A dual-class share structure allows disproportionate control over a company, and shields a bad management from market discipline as shareholders and "white knights" hoping to make a corporate rescue will find it more difficult to remove the owner-management. In Singapore, there is also not yet an activist shareholder culture, compared to a market such as the US that can keep the management in check. There is also the uncertainty of the "next generation", when the founder retires and hands over the management (and weighted shares in the company) to his next generation, who may not drive the business as successfully. Risk to corporate governance structure and agency problem A dual-class share structure also exposes the company to the risk of the owner-management pursuing goals that are not in the interests of the company or the public shareholders. There may also be heightened risks in accounting and financial controls and in the prevalence of related or interested person transactions. When such a company is poorly managed, the perceived agency problem may ultimately be reflected in higher cost of capital when the company raises further financing. The minority public shareholders may be disenfranchised The dual-class share structure limits investors of their voting rights and, consequently, their ability to participate in shareholders' meetings. While there are statutory protections under the Companies Act to protect the interests of minority shareholders, the costs of litigation and the dearth of local case law on derivative actions brought against public companies are drawbacks that may prevent them from seeking recourse. With no or limited mechanism by which to effect change or to voice their opinions, shareholders would simply feel forced to sell and exit. If such a problem becomes prevalent in the stock market, it will in turn affect investor confidence and adversely affect the perception of our stock exchange. MITIGATING THE RISKS AND PROPOSED SAFEGUARDS The Companies Act contains basic safeguards as follows: (1) A public company shall not issue shares that confers special, limited or conditional voting rights or no voting rights, unless the issuance is approved by members by special resolution. (2) Where a public company has one or more classes of shares that confer special, limited, conditional or no voting rights, the notice of any general meeting required to be given must specify the rights (or the absence of rights) in respect of each such class of shares. (3) Holders of non-voting shares should be accorded at least one vote on a poll at a meeting of the company for a resolution to voluntarily wind up the company under section 290 of the Companies Act or a resolution to vary any rights attached to the non-voting shares and conferred on the holders. The additional safeguards for public listed companies may include: permitting only companies with a large market capitalisation, such as a high minimum valuation to be eligible for the dual class share structure; restrictions on transfers; cap on votes per share; loss of superior voting rights after a vote by independent shareholders; and board structure with a greater proportion of independent non-executive directors. The above safeguards were considered by the Hong Kong Stock Exchange (HKSE) when it reviewed a proposal to allow the listing of dual-class shares and may be further examined. Other safeguards may include a "sunset provision" for founder shares with multiple votes, where the rights to multiple votes terminate after a specified period of time or upon the occurrence of a specified event (for example, where the founder retires or transfers his shares). In addition, it may be appropriate to require the appointment of a compliance officer to further strengthen the independent director regime under our Code of Corporate Governance. The authors believe that each of these and other safeguards proposed by the LAC may be further enhanced or tweaked depending on the LAC's holistic assessment of the listing aspirant, for example cap on votes per share. It is noteworthy that despite the recommendations of the HKSE, the Securities and Futures Commission of Hong Kong (SFC) rejected HKSE's draft proposal as the (i) high expected market capitalisation does not guarantee that an issuer would treat its shareholders fairly, and (ii) the "enhanced suitability" criteria proposed by HKSE to determine which listing applicants are eligible to adopt the dual-class shares are subjective and vague, which can lead to regulatory uncertainty and inconsistent and unfair decision-making. The concerns by the SFC are valid and in our case, SGX will need to carefully assess the requirements that should be imposed on companies seeking to list a dual-class share structure in Singapore. It will be a delicate balance between the need to remain competitive and relevant in an evolving global landscape, the need to be able to effectively mitigate the increased governance risks in the market, and the need to remain true to the general principles of the listing rules which require, among others, the fair and equitable treatment of shareholders.