September 8, 2016

RHTLaw Taylor Wessing congratulates Chow Tai Fook Charity Foundation (Singapore) Limited on its successful registration as a charity in Singapore

RHTLaw Taylor Wessing congratulates Chow Tai Fook Charity Foundation (Singapore) Limited (“Foundation”) on its successful registration as a charity in Singapore effective from 25 August 2016. The vision and mission for which the Foundation is established include relief of poverty, community development, advancement of education, health, arts, heritage and science, as well as provision of aid, assistance and relief to voluntary welfare organisations.   For more information, please contact Partner Kaylee Kwok.
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.
September 5, 2016

RHTLaw Taylor Wessing Managing Partner Tan Chong Huat shared his views on “Doing away with cash and cheques” 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 5 September 2016. Doing away with cash and cheques Source: The Business Times © Singapore Press Holdings Ltd Date: 5 Sep 2016 THIS WEEK'S TOPIC: How ready is your organisation for an electronic payments society? What challenges do businesses face in going cashless? Tan Chong Huat Managing Partner RHTLaw Taylor Wessing LLP MAS's focus in promoting a national electronic payments architecture is timely, aligned with Singapore's aspiration to be have a smart financial centre, and a smart economy. An efficient and secure payment system is a key infrastructure for both the financial system and the broader economy. MAS's proposed single regulatory framework for the licensing, regulation and supervision of all payments services, including stored value facility holders, remittance companies, and virtual currency intermediaries is conceptually sound, perhaps a little overdue. A more efficient national payment infrastructure will bring tangible benefits for both businesses and consumers. Businesses should see transitioning into more efficient payment mechanisms as sound investment.
September 4, 2016

RHTLaw Taylor Wessing Partner Napolean Rafflesson Koh featured in The Straits Times

RHTLaw Taylor Wessing Partner Napolean Rafflesson Koh was featured in The Straits Times article titled "Support from family and friends helps". The article was first published in The Straits Times on 4 September 2016. Support from family and friends helps Source: The Straits Times © Singapore Press Holdings Ltd. Date: 4 Sep 2016 Author: Zhaki Abdullah While many mid-career lawyers are dropping out, some that stay on are thriving. Mr Napolean Rafflesson Koh is eight years into his career and in July, the 32-year-old was made a partner at RHTLaw Taylor Wessing, which he joined two years ago as a senior associate. Mr Koh, who specialises in building construction, infrastructure and engineering disputes, graduated in 2009 from the National University of Singapore and worked at WongPartnership, one of Singapore's Big Four law firms, for the first five years of his career. He acknowledged that the job comes with a steep learning curve. Shortly after being called to the Bar in 2009, he had to fly to the Middle East every two weeks to help resolve an airport dispute. "Lawyers need a lot of good support from their families, friends and the work environment," said Mr Koh, adding that his parents saw him off at the airport every time he had to go overseas. He said the job got easier after the first three years when he better understood his work, learnt how to better achieve his targets in terms of billable hours and how to better handle clients. It also helped that he got to practise an area of law that he preferred. Mr Koh developed an interest in construction law after having been an intern on the construction team at an international law firm in 2005. Given the amount of time spent at the office, he believes it is essential that the workplace be a "collegiate" environment. "It's important to have a network of friends who understand what you're going through and whom you're able to share your problems with," said Mr Koh, who is single. He said young lawyers should not dwell too much on trying to achieve work-life balance. "Work is very much a big part of who you are. "If you don't try to differentiate between your work and private life, I think it makes things easier." He admitted though that the long hours could take their toll. "Sometimes, you have to stay past midnight for months on end," he said, adding that lawyers needed to learn how to pace themselves so as not to get burned out. "If you can go home early, just go home."