Voluntary delistings: Need to better protect minority shareholders' interest

I REFER to the article "SGX mulls new rule to protect minority shareholders in delistings" (BT June 12). The article raises questions about whether the delistings thus far have been generally done on a low-ball price and whether the major shareholder should be allowed to vote on the delisting.

Delisting is a serious topic to shareholders as it could mean either an opportunity to take profit or as often is the case, a possibility that they are being arm-twisted into selling their shares at a perceived less-than-fair-value price. Since the major shareholders are almost always the ones making the offer, the likelihood that they will offer a generous price is low.

Major shareholders typically control the board and the management. This means that there is information asymmetry as the offerors know better the true value and potential of a company and its assets than minority shareholders. The offer can be also made at a timing decided by the offeror perhaps coinciding with a cyclical low. In addition, the price is also determined by the offeror which is likely to be a price which discounts and perhaps even significantly discounts the fair value of the company. Moreover, they are also in the position to appoint the independent directors as well as to hire the advisers and asset valuers. Minority shareholders are often not fully convinced that all these parties are independent.