Legal Updates for December 2020
MAS Consults on Management of Outsourced Relevant Services for Banks and Merchant Banks
The Monetary Authority of Singapore ("MAS") is conducting a consultation exercise on proposals set out in the Consultation Paper on Notices to Banks and Merchant Banks on Management of Outsourced Relevant Services ("Consultation Paper") from now until 29 January 2021. The Consultation Paper which was issued on 18 December 2020 seeks feedback on proposed changes to the requirements governing the outsourcing arrangements by a bank and a merchant bank ("MB") relating to material ongoing outsourcing arrangements and other arrangements which involve the disclosure of customer information.
The Consultation Paper sets out the proposed requirements in relation to the management of such outsourcing arrangements in the proposed new MAS Notice to Banks on Management of Outsourced Relevant Services. The corresponding requirements for a MB would be set out in a separate MAS Notice to MBs (collectively "Proposed Notices").
This Update highlights the scope of application of the Proposed Notices, and provides a summary of the key proposed requirements relating to the register of outsourced relevant services, material ongoing outsourced relevant services and other outsourced relevant services involving the disclosure of customer information as well as the proposed effective dates of the Proposed Notices.
MAS Consults on Draft Legislation to Implement Changes to Banking Act and Anti-Commingling Framework for Banks
The Monetary Authority of Singapore ("MAS") is conducting a public consultation exercise to seek feedback on draft Regulations, MAS Notices, and Guidelines to:
- Implement key changes in the Banking (Amendment) Act 2020 concerning the (1) removal of the requirement for banks and merchant banks to maintain two accounting units: Domestic Banking Unit and the Asian Currency Unit, and (2) regulation of merchant banks under the Banking Act ("BA");
- Refine the anti-commingling framework for banks in Singapore; and
- Extend MAS' composition powers of offences relating to privacy of customer information under the BA and the Trust Companies Act.
The draft legislative changes are set out in the MAS Consultation Paper titled "Proposed Amendments to Regulations, Notices and Guidelines Arising from the Banking (Amendment) Act 2020 and Other Changes" that was issued on 2 December 2020. Comments on the consultation paper must be submitted to MAS by 15 January 2021.
This Update provides a summary of the consultation paper, highlighting the foregoing salient aspects.
The Court's Flexible Scope of Relief in the Enforcement of Arbitral Awards
The court system often plays an important part in the arbitral process, especially in the enforcement of arbitral awards. However, what is the scope of relief that a court may grant in the enforcement of an award? Is the court limited by the scope of the award itself, or may it grant wider relief and alternative remedies?
These questions were considered by the Hong Kong Court of Final Appeal ("CFA") in Xiamen Xinjingdi Group Co Ltd v Eton Properties Limited & Others  HKCFA 32 in the context of a common law action of enforcement. The CFA rejected the argument that it was limited to "mechanistically" converting an award into a judgment in terms of the award, instead adopting a more flexible approach to the remedies it could employ to achieve enforcement. In this Update, we look at the key elements of the CFA's decision.
What Constitutes Valid Substituted Service of a Statutory Demand
If a creditor is unable to effect personal service of a statutory demand, he may effect substituted service of the same. In Koh Kim Teck v Shook Lin & Bok LLP  SGCA 118, the Singapore Court of Appeal considered whether service of a statutory demand by (a) advertising a notice of the statutory demand in a local newspaper and (b) emailing the said notice which was advertised to the debtor's solicitors, constituted valid substituted service.
The decision provides further guidance on the factors that the Court will take into account when determining the validity of the substituted service of statutory demands. This Update provides a summary of the key aspects of the Court's decision.
MAS Issues Environmental Risk Management Guidelines for Banks, Insurers and Asset Managers
On 8 December 2020, the Monetary Authority of Singapore issued three sets of Guidelines on Environmental Risk Management (collectively, "Guidelines") that apply to the following entities (collectively, "FIs"):
The Guidelines set out sound practices for FIs in the following key areas:
- banks, merchant banks and finance companies;
- insurers; and
- fund management companies and real estate investment trust managers.
- Governance and strategy;
- Risk management;
- Disclosure of environmental risk information;
- Underwriting and investment (for insurers only); and
- Research and portfolio construction, portfolio risk management, stewardship and disclosure obligations (for asset managers only).
Each set of Guidelines is tailored to each sector based on its business activities and risk management practices. The FIs are given a transitional period to implement the Guidelines within 18 months from 8 December 2020.
This Update provides an overview of the Guidelines highlighting the scope of application and a summary of the salient features of the Guidelines for FIs to note, along with some practice insights.
Court Establishes Test for When It Will Review the Decision of a Trustee in Bankruptcy
While a trustee in bankruptcy is given control and management of the bankrupt's estate, the Court has the power to review the trustee's decisions. In Zhang Hong En Jonathan v Private Trustee in Bankruptcy of the estate of Zhang Hong’En Jonathan  SGHC 262, the Singapore High Court clarified the proper approach in an application to review a trustee in bankruptcy's decisions, highlighting that it would give deference to the decision of the trustee unless the decision was so perverse that a reasonable trustee would not have made the same decision. This Update highlights the key points of the Court's decision.
A Guide to Private Mergers & Acquisitions in Asia
With Asia becoming more economically integrated with the signing of the Regional Comprehensive Economic Partnership (RCEP) Agreement, we share with you our Regional Guide to Private Mergers & Acquisitions in Asia. The Guide provides a brief comparative overview of certain key regulatory requirements relating to mergers and acquisitions of private companies in Cambodia, China, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. It also highlights and summarises the key merger control issues in some of these jurisdictions.
A key pillar to our strength in cross-border transactions is our Rajah & Tann Asia network with offices in Cambodia, China, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, as well as dedicated desks focusing on Brunei, Japan and South Asia.
We hope that the Guide will be useful in helping you navigate the key legal and regulatory issues in carrying out cross-border private mergers and acquisitions transactions in Asia.
Is a Severance Payment Taxable Income or Non-Taxable Retrenchment Benefit?
For gains or profits from employment to be taxable, the sum must come within the ambit of section 10(2)(a) of the Income Tax Act ("ITA"). For instance, salary would be taxable, while retrenchment benefits would not be. Which side of the equation would a severance payment fall under?
The High Court examined this issue in the recent case of Comptroller of Income Tax v Forsyth, John Russell  SGHC 258 in an appeal against a decision of the Income Tax Board of Review ("Board"). It held that in this case the severance payment constituted compensation for loss of income, despite the Comptroller of Income Tax submitting that it should be deemed taxable income.
In this Update, we examine the grounds on which the Severance Payment was determined not to be taxable income.
Launch of Public Consultation on the Postal Services (Amendment) Bill to Deploy Public Parcel Locker Network
The COVID-19 whirlwind has seen a major shift in business and consumer patterns and behaviour, including a huge uptick in e-commerce coupled with a drop in letter mail volumes due to the increasing prevalence of email and e-invoicing among others. Against this backdrop, the Ministry of Communications and Information ("MCI") and the Infocomm Media Development Authority ("IMDA") launched a public consultation on 2 December 2020 to seek views on proposed legislative amendments to the Postal Services Act ("PSA"), which was last revised in 2007.
The proposed amendments would result in the deployment of a new nationwide network of public parcel lockers ("Network"), as well as strengthen the regulatory oversight of IMDA (in its capacity as the appointed Postal Authority) of the postal sector. The amendments may be broadly grouped into four categories, which are:
The public consultation closes on 23 December 2020.
- providing IMDA with the powers to install, own, and operate the Network at specified premises and appoint a Network operator, and establishing offences and their accompanying penalties in relation to the Network;
- imposing new requirements on building owners and developers of specified premises to provide space and access for the Network;
- expanding administrative powers or procedures for existing postal services under the PSA to include the Network, such as IMDA's powers to make regulations and to provide for an appeal procedure against IMDA's decisions on the Network; and
- updating the PSA by way of clarifications and enhancements.
Singapore High Court Lays Down Sentencing Framework for Unlawful Provision of Singapore-Based Remote Gambling Services
In a recent landmark decision, the Singapore High Court in Koo Kah Yee v Public Prosecutor  SGHC 261 laid down a comprehensive sentencing framework for the offence of providing Singapore-based remote gambling services under section 11(1) of the Remote Gambling Act ("RGA"). As the RGA is a relatively new piece of legislation which came into force on 2 February 2015, there has until now been a dearth of reported cases and consequently a lack of a clear sentencing framework in relation to various offences under the RGA. This ruling, handed down by the Honourable Chief Justice Sundaresh Menon, provides much needed clarity as to how offences under section 11(1) of the RGA will henceforth be dealt with by the Courts. More significantly, it is expected that this sentencing framework will be adapted for application to other offences under the RGA.
ABS Launches New Code of Best Practices for Commodity Financing
On 30 November 2020, the Association of Banks in Singapore launched the "Code of Best Practices – Commodity Financing" ("Code") that sets out main principles governing prudent commodity trade financing practices and provides a benchmark for lending standards for banks in the commodity trading sector. The Code is intended to apply to any financial institution regulated by the Monetary Authority of Singapore offering any loan, advance, credit or other financial accommodation to a trader ("Lender").
The key general principles espoused by the Code are:
- Ascertaining that traders have good corporate governance policies and practices;
- Ascertaining that traders have good risk management policies and practices;
- Conducting proper and adequate business due diligence on traders;
- Imposing measures to ensure sufficient transparency and control over financed transactions, goods and receivables; and
- Participating in industry collaborative initiatives to enhance risk identification and mitigation.
This Update provides an overview of the key principles that Lenders should consider, as well as broad considerations which Lenders should bear in mind when considering whether or not, and to what extent, to incorporate the Code as part of their lending business practices.
Enhanced ABS Due Diligence Guidelines for Issue Managers, Sponsors Effective From 13 November 2020
With effect from 13 November 2020, issue managers and full sponsors will be subject to enhanced standards under the revised Association of Banks in Singapore (ABS) Listings Due Diligence Guidelines ("Guidelines") when conducting due diligence work during the initial public offering ("IPO"), reverse takeover ("RTO") and listing by introductions in advising prospective issuers ("issuers") for listing on the Mainboard and Catalist of Singapore Exchange Securities Trading Limited ("SGX-ST").
Key updates from the last version of the Guidelines pertain to:
- enhanced focus on and assessment of the adequacy and effectiveness of an issuer's internal controls;
- heightened evaluation of the sustainability and viability of an issuer’s business and compliance issues, including in respect of challenges posed by the prevailing economic climate; and
- targeted guidelines for issuers operating in restricted or niche industries and/or higher risk jurisdictions.
This Update provides an overview of these key changes which issue managers and full sponsors should consider in conducting due diligence work during the IPO, RTO and listing process on SGX-ST.