August 31, 2016

RHTLaw Taylor Wessing Head of Capital Markets Ch’ng Li-Ling was quoted in The Business Times

RHTLaw Taylor Wessing Head of Capital Markets Ch'ng Li-Ling was quoted in The Business Times article titled “Industry watchers split over move on dual-class shares”. The article was first published in The Business Times on 31 Aug 2016. Industry watchers split over move on dual-class shares One camp says it makes SGX attractive for IPOs; the other is wary about the safeguards and setting a precedent Source: The Business Times © Singapore Press Holdings Ltd. Date: 31 Aug 2016 Author: Kenneth Lim Now that the Singapore Exchange (SGX) has opened up the issue of dual-class share listings, it seems inevitable that a significant portion of the market will be disappointed, whichever way the regulations head. Those supportive of allowing dual-class structures point to the potential for SGX to beat out its rivals in attracting initial public offerings (IPOs), especially for high-profile tech companies, and to the various safeguards proposed that would help to address governance risks. As DBS head of capital markets Tan Jeh Wuan put it: "This will add to the options available to international companies that are considering listing on the SGX." But the critics are just as adamant that dual-class shares are bad news waiting to happen, citing doubts about the efficacy of the proposed safeguards and the risk of setting a precedent. Aberdeen Asset Management Asia head of corporate governance David Smith said: "I understand why SGX proposed it. I don't necessarily follow that we as shareholders should support it." The Listings Advisory Committee (LAC), an industry-dominated, independent body that advises SGX on unusual listing matters, has told the SGX that it is in favour of allowing dual-class share listings, subject to certain safeguards. Those safeguards include a maximum 10-to-1 differential in voting power; no conversion to dual-class structures for already listed companies with a single class of shares; loss of multiple voting power when preferred-class shares are sold or when owner-managers cease their executive roles; only one vote per share when electing independent directors; and mandatory adherence to the Code of Corporate Governance's recommendations on board independence and composition. SGX has said that it would gather more feedback; a public consultation process will take place if SGX decides to amend the listing rules. The feedback is likely to reflect a divided public. Allowing dual-class shares is a matter of keeping the market competitive and vibrant, the structure's proponents say. Credit Suisse head of equity capital markets in South-east Asia Cheun-Hon Ho said: "It opens up the universe of prospective companies wanting to list on SGX, to company owners who would like to retain control while raising cash to fund growth, as well as provides investors with broader investment options while maintaining high standards of transparency and corporate governance." RHTLaw Taylor Wessing's Ch'ng Li-Ling, who heads the law firm's corporate practice, said that there was a reasonable amount of interest among business owners for structures that allow greater control without having to account to shareholders for short-term results. She said: "A lot of the small caps are owner-managed, so they do have very strong views on where they want to take their business. They have a certain vision for where they want their business to be. A lot of clients find that having to seek shareholder approval does hamper their plans in some way. The common refrain is 'I can't wait for shareholder approval; the business opportunity will be lost by then'." DBS's Mr Tan said that the safeguards recommended by the LAC are a step in the right direction, although fine-tuning might be necessary upon implementation. "As the dual-class share structure is new in this part of the world, SGX will need to see how the implementation of these safeguards work in practice and if necessary, tweak the rules to ensure that proper corporate governance is observed," he said. PropertyGuru co-founder and chief executive Steve Melhuish told The Business Times that, while obstacles for listing tech companies, such as a lack of comparables and research, still had to be overcome in Singapore, accommodative rules would put SGX "on parity with other exchanges". But not all are convinced that parity means allowing dual-class shares. In fact, Australia, Hong Kong and London's main board have all considered - and rejected - dual-class structures, National University of Singapore associate professor Mak Yuen Teen pointed out to The Business Times. The corporate governance advocate also voiced concerns about the robustness of a system that relies on independent directors as safeguards, when such directors have had a spotty track record and it has been difficult to hold them accountable. Aberdeen's Mr Smith was concerned that SGX may set a precedent for other exchanges to follow. "Once SGX does it, everyone else will want to do it," he said, adding: "Every exchange of size will have this, and then when you ask, 'Who's more competitive?', well, no one, because everyone else has it. "The people who will be worse off are the investors, because we have the same amount of companies, but worse governance." He said that he believed neither in the need for dual-class shares - "If you're so fabulous at your job, why would we want to kick you off the board?" - nor in the ability of LAC's safeguards to protect minority investors. "The perversity is that the more safeguards you put in place, the less attractive it is for an issuer," he said. From an investor's standpoint, dual-class shares make it harder to invest in a company even if its business is good, Mr Smith said. Institutional investors such as passive-fund managers also have no control over the investments they make and are therefore highly dependent on single-class structures to exert their influence. "Investors will have to do a hell of a lot of research to understand why a company needs to have dual-class shares," he said.
August 30, 2016

RHTLaw Taylor Wessing Deputy Managing Partner and Head of Corporate Practice Azman Jaafar authored an article titled “Asean’s regional integration: Look beyond the South China Sea” for The Business Times

RHTLaw Taylor Wessing Deputy Managing Partner and Head of Corporate Practice Azman Jaafar authored an article titled “Asean's regional integration: Look beyond the South China Sea” for The Business Times. The article was first published in The Business Times dated 30 August 2016. Asean's regional integration: Look beyond the South China Sea SMEs in Singapore have reason to stay the course on the Asean Economic Community despite simmering South China Sea tensions. Source: The Business Times © Singapore Press Holdings Ltd. Date: 30 August 2016 Author: Azman Jaafar Recent developments have not been too kind to Asean's efforts towards regional economic integration, but small and medium enterprises (SMEs) in Singapore should not lose faith in the region and the vision of the Asean Economic Community (AEC). The Brexit vote in the United Kingdom and anti-globalisation rhetoric from the United States may have indirectly affected Asean's integration efforts by making the political conditions for integration more challenging. Asean's recent struggle to find common ground in the South China Sea dispute has raised questions about the unity and political will of Asean leadership. Despite the challenges, there is a silver lining in these developments. We must understand that Asean is a unique regional grouping unlike the European Union (EU). Asean member states retain national sovereignty. Asean does things the "Asean Way", with consultation and consensus as its central pillars. Without unanimous agreement, no decision or action will be made or taken by Asean. Despite criticisms, the Asean Way has been credited with fostering close economic and socio-political cooperation in a region that is far more diverse in culture, religion and ethnicity than any other part of the world. Over the course of time from its inception in 1967, Asean has emerged as the most successful regional economic cooperation outside of the EU with trade growing from US$123.8 billion in 1995 to US$609 billion in 2013. The perceived lack of political clout in relation to the South China Sea dispute should not be confused as a lack of political will to pursue the agenda of economic integration. Asean leaders recognise the economic benefits that regional integration will bring to its people. It is only a question of when - and not if - the AEC will be fully implemented. To this end, Asean has given itself to the year 2025 to achieve the vision of a highly integrated and cohesive regional economy. SMEs in Singapore should remain confident of the positive outlook in the region. The Asean leadership has shown its commitment in pursuing deeper regional integration by constantly seeking ways to improve connectivity. Action plans issued by the Asean leadership are increasingly more detailed and definitive. Efforts in engaging the private sector, in response to survey findings which showed a general lack of awareness of the AEC within the business community, have also increased. The Asean leadership views the development and progress of SMEs to be an essential aspect of the regional integration agenda. To this end, Asean has already implemented action plans to support Asean SMEs. Recent initiatives include the Asean Technology and Business Incubator and the Asean SME Guidebook. The Asean focus on the development of SMEs complements our national initiatives to support Singaporean SMEs, by both government and non-government bodies. The provision of financial support to SMEs has always been a key item in the Singapore government's Budget. Non-government entities are also stepping up support for SMEs as part of their corporate social responsibility. For example, OCBC Bank has been very active in supporting its SME customers through financial and non-financial initiatives. While there is still more to be done to lower non-tariff barriers in the AEC, the virtually zero-tariff environment today provides the impetus for Singapore SMEs to move production to Asean member states with lower production costs. With the streamlining of customs procedures, the costs of outsourcing will be reduced further. SMEs engaged in the high-value services and investment sectors would benefit from the progressive implementation of initiatives towards freer movement of capital and services. In addition, improving infrastructure and education levels, and a rising middle class in emerging Asean economies are also motivating SMEs to expand into the region. One of the fast-emerging markets in Asean today is Vietnam, where a "tech boom" is manifested by the rise in the number of high-technology parks and the emergence of a thriving tech startup sector. If these trends continue, Vietnam will soon realise its ambition to be the "Silicon Valley" of South-east Asia. Likewise, Myanmar, considered to be among the "last frontier" economies in Asia, has pursued political and economic reforms that are fast attracting foreign investment. Indonesia, the largest economy in South-east Asia, has also been moving away from protectionist policies with the recent revision of its Negative Investment List. Other macro-economic factors are also sharpening the international investment focus on the Asean region. Rising manufacturing costs in China are driving foreign investors southwards. The uncertainty in Europe following Brexit, and the possibility of the establishment of mega-regional free trade areas through the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership have also put Asean under the spotlight. Singapore SMEs are well placed to draw on the potential of the AEC, given the strong reputation that goes with the Singapore brand and Asean. Singapore SMEs need to constantly monitor regional trends and developments so as to capitalise and leverage them. Economic integration will bring about not only greater opportunities and market access but also unprecedented levels of competition within the region. Singapore SMEs must constantly innovate and review their strategies, or risk falling behind. While concrete steps have been taken towards deeper economic integration at the government-to-government level, it may take a longer time for the reality on the ground to reflect the effects of the establishment of the AEC. The private sector is a key driver of Asean economic growth and integration. SMEs form the backbone of the Singapore economy. The road to regionalisation can be very painful for SMEs without adequate professional support. To facilitate the various initiatives, professional advisers must also be ready and willing to support the integration agenda. The ability to deliver multi-jurisdictional practical and specialised advice to our SMEs will give them the edge in their expansion into Asia. The writer is deputy managing partner and one of the founding members of RHTLaw Taylor Wessing LLP. He heads the firm's Indonesia Practice and manages the Asean Plus Group
August 30, 2016

RHTLaw Taylor Wessing Deputy Managing Partner and Head of Corporate Practice Azman Jaafar quoted in The Straits Times

RHTLaw Taylor Wessing’s Deputy Managing Partner and Head of Corporate Practice, Azman Jaafar, was quoted in The Straits Times article titled “Insolvency cases running high”. The article was first published in The Straits Times on 30 August 2016. Insolvency cases running high Source: The Straits Times © Singapore Press Holdings Ltd. Date: 30 Aug 2016 Author: Rennie Whang The number of firms in Singapore being wound up after encountering financial trouble is set to be on a par with last year's number, which was the highest in 11 years. These figures may even understate the levels of distress as such a formal procedure is always the last resort, industry observers note. More companies seem to be going under, and the number of these cases could creep up to higher levels than during the global financial crisis, said Mr Chua Beng Chye, partner in the restructuring and insolvency practice at Rajah & Tann. "What we are seeing now is a confluence of factors from various sectors leading up to a perfect storm - including escalating costs, record low oil prices, dampened property market and a slowing Chinese economy," he noted. A total of 118 court winding-up petitions were filed in the first half of this year, compared with 129 in the same period last year, according to Ministry of Law figures. And a total of 85 firms were actually wound up in the first half, compared with 97 previously. In all, 255 court winding-up petitions were filed last year, while 189 firms were wound up. Both were the highest figures since 2004. The continuing high figures come as no surprise amid a slowdown in economic growth. The Singapore economy grew 2 per cent last year, the slowest pace since the global financial crisis, and is tipped to grow just 1 to 2 per cent this year, noted UOB economist Francis Tan. Six applications for judicial management - a less drastic step, leaving open the chance of regrouping - were filed in the first half of this year, compared with five in the same period last year. Five of these orders were granted, up from four previously, according to figures from the Supreme Court. Companies to have been wound up recently include boutique developer C&C Development. California Fitness is in liquidation. Others which have opted for judicial management or are looking to restructure debt include energy sector victim Swiber Holdings, Technics Oil & Gas, interior design firm Serrano, Mercator Lines (Singapore) and Sembawang Engineering and Constructors. Also, locally-listed China Fishery Group and its Hong Kong parent Pacific Andes Resources Development have filed for bankruptcy protection in the United States. The sectors affected include shipping, oil and gas, commodities , construction and retail, said Mr Peter Greaves, restructuring leader at PwC Singapore. Most of these sectors are set to face more heat in the coming months, he added. "Many of the current difficulties are rather unprecedented. Globally, shipping for example, is probably in its worst position since the early 1970s." On a positive note, though, companies and their creditors appear to be more prepared to weather the storm, compared with during the global financial crisis. "Complaints about the challenging global conditions have been on the cards since early last year. Many companies have already been preparing for the worst... (This) has helped both creditors and debtors," said Mr Azman Jaafar, deputy managing partner and head of corporate practice at RHTLaw Taylor Wessing. Still, the number of cases of liquidation and its alternatives may not fully reflect the number of firms under financial pressure, said Mr Thio Shen Yi, senior counsel and joint managing director of TSMP Law. "When times are very bad, companies just don't have the money. If creditors wind them up, and there is nothing, they still incur legal fees. So the creditors may not bother." But in a situation where the economy is a bit better, creditors may make a court winding-up application as it could be an effective way of getting a debtor to pay up. "In this environment, liquidation might be a last resort, or resorted to when there is suspicion of management wrongdoing. Certainly, among the local banks at least, you see greater sensitivity to the different types of restructuring options available," Mr Thio added. So, to get a fuller picture of the levels of distress, we need to consider other negative indicators such as increasing debt levels or falling revenues or profits; and also consider when a firm's debt is maturing, noted Mr Greaves of PwC. "The increasing trend in defaults in Singapore dollar denominated bonds also reflects the pain felt across a number of industries. Companies have to face a new normal of trading conditions, such that they may not be able to service existing debt levels."
August 26, 2016

RHTLaw Taylor Wessing Head of Capital Markets Ch’ng Li-Ling quoted in The Business Times

RHTLaw Taylor Wessing Head of Capital Markets Ch'ng Li-Ling was quoted in The Business Times article titled “JTC makes early-buyback offer for Jurong Country Club notes”. The article was first published in The Business Times on 26 Aug 2016. JTC makes early-buyback offer for Jurong Country Club notes But it draws noteholders' ire by offering S$35,800 less than par value Source: The Business Times © Singapore Press Holdings Ltd. Date: 26 Aug 2016 Author: Lee Meixian JTC Corporation has agreed to buy back some S$23.5 million worth of debentures from noteholders, who are also Jurong Country Club (JCC) members, 17 years ahead of the maturity date - but at a discount. In an offer letter seen by The Business Times, which was sent out to all 196 JCC debenture holders, JTC said it is offering each person S$84,200. The notes - which are due in September 2033 - were issued at the par value of S$120,000 in 1993, when the club was raising funds to refurbish its facilities. The notes came in a package with a membership, costing S$150,000 altogether - which implicitly suggests that the membership cost S$30,000. The early redemption now stems from the fact that the land on which JCC sits will soon be taken back by the government for the building of the Singapore terminus of the Singapore-Kuala Lumpur High Speed Rail. JTC said that it had arrived at the purchase price of S$84,200 after engaging KPMG Services to determine a range of offer prices for its voluntary buyback. In its letter, JTC also provided details of its methodology, revealing that KPMG had used the discounted cash flow method to estimate the present value of the amount to be received in September 2033. KPMG had used statutory boards' and Singapore government securities' zero-coupon rates as the discount rates. JTC added that noteholders have a choice to monetise their notes now, or continue to hold them until the redemption date in 2033. Nothing in the offer will change the conditions in the notes. But this failed to appease the Debenture Note Working Committee (DNWC). When contacted, DNWC chairman Lim Hung Siang said in an email response: "The Debenture Note Working Committee is deeply disappointed with the JTC repurchase offer, which we feel is unfair and has not addressed the facts in the claim raised by the DNWC. (These claims were also published in a letter to the editor in BT on Aug 4.) The DNWC will be meeting our lawyer to discuss the matter further." In his earlier letter, Mr Lim (who was group business development and special projects officer at ComfortDelGro before he retired) had said: "JTC needs to understand that the 2003 JTC note is an interest-free loan and is not an investment product which generates a yield and can be freely traded like JTC corporate bonds. "The subscription of the JTC notes was conditional upon a subscription of a JCC membership in 1993 and these notes cannot be freely traded in themselves, unless sold together with the JCC membership. The notes are, in substance, debts owed and guaranteed by JTC to the noteholders that must be repaid in full." He added that noteholders are merely asking for the redemption of the notes at par when the club closes this year. "We believe our request is fair and not at all unreasonable." Checks show that JCC memberships were trading in the open market at around S$100,000 in 1993, making a S$30,000 membership a good deal. Even after paying a transfer fee to the club, members would have pocketed a good profit had they sold their membership in the mid-1990s. In response to noteholders' unhappiness, a JTC spokesman said on Thursday evening: "We understand that some noteholders may not want to hold the notes till maturity in 2033 and want to sell the notes before that. As such, we have decided to provide noteholders with an option to do so by making a repurchase offer that is consistent with market practice. "In arriving at the offer price, we have engaged KPMG to advise us on what would be the market practice for such a repurchase. For noteholders who wish to hold on to the notes, we continue to honour our obligation to redeem the notes at their maturity in 2033." The offer expires at 5pm on Sept 23, which is also by when acceptance forms must be submitted. JTC will hold a briefing next Thursday at its Jurong office to address noteholders' questions on the offer. Weighing in on the case, Ch'ng Li-Ling, partner at RHTLaw Taylor Wessing, said: "This is indeed a human interest story, with the funds of members who are retirees being tied up in the notes. Without the benefit of the notes documents, it is futile to speculate on which party is right. If the matter goes to court, the court will review the terms and conditions of the notes." Henry Heng, a partner at Kennedys Legal Solutions, added: "Given that JTC is considering an earlier redemption of the bonds, parties should perhaps consider alternative dispute resolution, such as mediation, to explore an amicable resolution of the matter."