SGX focuses on shareholder value as it proposes rules to facilitate shareholder-requisitioned meetings

SINGAPORE Exchange Regulation (SGX RegCo) proposed new rules on Tuesday (Apr 23) requiring listed issuers to assist with enabling shareholder-requisitioned meetings, as part of a broader push on the importance of creating shareholder value.

The frontline regulator is also working on other initiatives that are similarly focused on the creation of shareholder value, given that such concerns seem to be “front and centre” in investors’ minds.

“We are working on improving the quality of the board, empowering shareholders, and changing market mechanisms to drive value-focused behaviour,” said Tan Boon Gin, chief executive of SGX RegCo during a press briefing at the launch of a public consultation on facilitating shareholder-requisitioned meetings.

SGX RegCo has identified key areas of work, including enhancing board effectiveness and encouraging market discipline. 

As part of the push, the regulator is seeking feedback on proposed rules requiring boards to help enable shareholder-requisitioned meetings in a timely manner.

SGX RegCo noted that there has been an increased number of shareholders requisitioning for general meetings to table resolutions. 

Under section 176 of the Companies Act, a shareholder holding at least 10 per cent of the paid-up shares of the company can requisition for a general meeting, and the directors are required to take steps to convene the meeting. Meanwhile, section 177 allows for two or more shareholders that hold at least 10 per cent of the issued shares of the company to call the meeting themselves.

At least 10 SGX companies faced such boardroom challenges between 2021 and 2022, data compiled by The Business Times previously showed.

Requisitionists, however, may face challenges amid disagreements over the validity of requisition notices due to technical objections. Boards may also sometimes regard such requisitioned meetings as unwelcome, creating a tense relationship with the requisitionists.

Other challenges for requisitionists include the inability to release announcements and documents on SGXNet, and difficulty to give notice to each shareholder at their registered address.

Tan noted that this has previously led to protracted delays with high costs and uncertainty, which also distracted management from running the company.

“What we are hoping to do is to introduce measures that will enable the meeting to take place so that shareholders can exercise their rights, everyone can vote, and then the company can move on,” he said.

Under the proposed rules, issuers must commence facilitative efforts within 21 days of deposit of the requisition notice.  An issuer who disputes the validity of the requisition notice must apply for a court ruling within that timeline.

Issuers should provide help to requisitionists in areas including releasing announcements and documents on SGXNet and securing the board’s attendance at the shareholder-requisitioned meeting.

Tan said: “If investors have a stronger say, companies will be more motivated to consider their interests by improving both operational performance and shareholder returns. By enabling the convening of general meetings, we empower shareholders to drive change and exercise market discipline.”

The public consultation on the proposed rules is open until May 23. 

Ong Hwee Li, chief executive of SAC Capital, noted that requisitionists may be right or wrong about the capabilities of existing board members or proposed directors, but it is the shareholders’ right to have a say in who they want to operate the listed company.

“Independent directors should encourage the board to accede to the requisitionists’ proposal instead of taking it too legalistic... subject to all requisition requirements being met,” he said. “Once investors know that their voice can be heard and their interest protected, we should expect a better equity market in Singapore.”

David Gerald, chief executive of the Securities Investors Association (Singapore), or Sias, said: “All shareholders are part-owners of the company and deserve to be heard when they raise legitimate concerns.”

He added that Sias shares the objectives of active investors and wants listed companies to do better on both the governance and growth fronts.

Tan said the latest consultation is just one of the initiatives that SGX RegCo is working on and intends to unveil progressively over the coming months.

He noted that Sias has said it is studying whether it can pose additional questions to boards of undervalued companies on plans to improve valuations.

“We support this initiative and encourage companies to respond meaningfully and comprehensively to such questions,” Tan said.

Other areas of focus may also touch on how companies can unlock value through corporate actions to focus on more strategic priorities.

“We have received feedback that enhancing investor confidence in the valuations of the businesses to be acquired or disposed of could help to facilitate these transactions. We are therefore looking at ways to enhance the robustness of valuations, again in consultation with our industry partners,” Tan said.

SGX RegCo has also received feedback that trading queries may affect companies’ ability to carry out value-focused activities such as share buybacks.

It is reviewing the regulatory queries posed to listed companies and exploring how it can be done in a way that creates “less noise” for the market, while ensuring material information continues to be available to investors.

Tan emphasised that it would take the entire market community to improve the state of the securities market in Singapore.

“Companies need to hear what the market is asking for. At the same time, the market needs to reward the companies that listen and act. We have already seen some evidence of this,” he said.