Singapore introduces Significant Investments Review Bill to regulate critical entities

The bill will set out a new investment management regime that applies to local and foreign investors.

The Ministry of Trade and Industry (MTI), on Nov 3, announced that it will introduce the Significant Investments Review Bill.

The bill will set out a new investment management regime to regulate entities that are critical to Singapore’s national security interests in a bid to ensure the continuity of such critical entities.

Entities which have acted against Singapore’s national security interests will also have their transactions reviewed under certain circumstances even if they have not been designated under the regime. The regime will apply to both local and foreign investors.

“Singapore currently relies on a range of sectoral legislation, which include ownership and control safeguards, to monitor and manage entities in regulated sectors such as telecommunications, banking and utilities. The Bill will complement existing legislation by regulating entities which are not adequately covered under the legislation,” says the MTI.

Under the new regime, designated entities will be required to notify or seek approval for specified changes in ownership or control of designated entities will be imposed on buyers, sellers and the designated entities. Buyers into designated entities are required to notify the minister for trade and industry after becoming a 5% controller. They will need to seek the minister’s approval before becoming a 12%, 25% or 50% controller, an indirect controller, or acquiring as a going concern (parts of) the business or undertaking. Sellers are required to seek the minister’s approval when ceasing to be a 50% or 75% controller.

The ministry may also issue remedial directions under certain circumstances. For example, a party may be ordered to transfer or dispose of equity interests held in the designated entities, if conditions of approval have not been complied with.

Designated entities will be required to seek approval for the appointment of key officers such as the CEO, directors and the chairperson of the board. These officers may be removed if approval is not given or sought.

Designated entities will also be subject to other provisions to ensure the security and reliability of their critical functions. This means that such entities cannot be voluntarily wound up or dissolved without the minister’s consent.

The bill will also empower the minister to review ownership or control transactions involving an entity that has acted against Singapore’s national security interests even if the entity has not been designated. It will allow the ministry to enforce targeted actions such as directing the transacting party to dispose his equity interest in the entity.

According to the MTI, the bill is designed to be business-friendly. It also sets out clear processes for parties that wish to seek reconsideration for decisions by the minister, and for further appeals to an independent Reviewing Tribunal.

The proposed legislation has been developed in consultation with industry representatives to take into account its potential impact on businesses and investors. The MTI has also set up an office of significant investments review as a dedicated one-stop touchpoint for stakeholders.

“It is critical for Singapore to remain open and connected to the world, and as such we must continually strengthen our position as a trusted hub for businesses to invest with confidence. Singapore has long had legislative powers to manage ownership and control of critical sectors such as telecommunications, banking and utilities. As most critical entities in Singapore are already adequately covered by existing sectoral legislation, we expect only a handful of critical entities to be designated under this Bill. Stakeholders will continue to be closely engaged, to ensure that the overall impact on affected businesses will be minimised and our ecosystem remains vibrant,” says Gan Kim Yong, the minister for trade and industry.

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