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MAS clarifies takeover rules on general offers for dual-class shares

THE Monetary Authority of Singapore (MAS) has revised Singapore's Code on Take-overs and Mergers to clarify that independent shareholders of dual-class companies will not be required to make a general offer if their share of voting rights is pushed past regulatory thresholds under certain circumstances.

A general offer for a dual-class share company must also present the same offer price for multiple-voting shares as for ordinary-voting shares, according to the new rules.

The original takeover code lays out certain shareholding thresholds that oblige a shareholder to make a mandatory general offer for the company. For example, when a shareholder's control is first increased to 30 per cent or more, that shareholder must offer to buy the rest of the company's shares not already owned.

But there are two scenarios in a dual-class company when a shareholder's control might cross the threshold. The first is when shares that carry multiple votes are converted into ordinary voting shares. Take for example a company that has one superior share that carries five votes and five common shares that carry one vote each. That company would have a total of 10 voting rights. If the superior share is converted into one common share, that company's total voting rights would reduce to just six. For a common shareholder who holds two common shares, such an event would push the shareholder's interest from 20 per cent to 33 per cent, which would normally trigger a general offer.

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The other circumstance in which a shareholder's interest might cross the threshold is when a company reduces the number of voting rights per multiple voting share. As with the previous example, such an event could push a shareholder's interest past the mandatory general offer threshold.

The new rule clarifies that a shareholder whose interest crosses the mandatory general offer threshold as a result of either of those scenarios will not be required to make a mandatory general offer as long as the shareholder is deemed to be independent of the conversion or reduction event. The obligation will still be waived if the shareholder is not deemed to be independent, provided that the shareholder takes steps to reduce his or her voting rights to below the mandatory general offer thresholds, or if the shareholder obtains a waiver from independent shareholders.

With regards to the requirement for offer prices to be the same between multiple and ordinary voting shares, MAS said that doing so would provide greater certainty, and act as a safeguard for holders of ordinary voting shares by ensuring that any premium paid to holders of multiple voting shares are also paid to holders of ordinary shares.

The revisions were made on the advice of the Securities Industry Council, and incorporates feedback received from the public consultation in July last year, MAS noted.