eOASIS is Rajah & Tann Singapore LLP's legal information website for clients, containing business and legal information prepared from a practitioner's viewpoint. It has four different modules, updated regularly, and materials range from commentaries on the latest legal developments to key legal and business information.

What's new on eOASIS

Further Extension of Alternative Meeting Arrangements Beyond 30 June 2021
On 6 April 2021, the Ministry of Law ("MinLaw") announced that it has further extended the duration of various subsidiary legislation which were previously issued to enable various types of entities to hold meetings via electronic means, beyond 30 June 2021, until the same is revoked or amended by MinLaw.

In this Update, we provide a brief highlight of this extension concerning alternative meeting arrangements in respect of companies, variable capital companies, business trusts, unit trusts that are authorised or restricted collective investment schemes, and holders of a series of debentures governed by Singapore law.  

High Court Issues Largest Award for Fraudulent Trading in Singapore
If the business of a company has been carried on with the intent to defraud creditors, directors and officers who were knowingly a party to the carrying of business in that manner may be liable for fraudulent trading. Under Singapore's restructuring and insolvency regime, they may be held personally liable for all or any the company's debts. In Tendcare Medical Group Holdings v Gong Ruizhong [2021] SGHC 80, the High Court issued the largest award for fraudulent trading in Singapore so far, holding a company director (and a company owned and controlled by him) liable for substantially all the debts of the company in the sum of US$65,207,538.03. In addition, the Court found the director to be liable for breaches of fiduciary duties for US$35 million and S$500,000.

The plaintiffs in this case were successfully represented by Lee Eng Beng S.C., Mark Cheng, Chew Xiang, Priscilla Soh, Tan Tian Hui and Darren Lim of Rajah & Tann Singapore LLP. This Update provides a summary of the Court's decision, as well as the key principles regarding the law of fraudulent trading.


Singapore Ratifies the Regional Comprehensive Economic Partnership Agreement
Singapore has ratified the Regional Comprehensive Economic Partnership ("RCEP") Agreement, making it the first RCEP Participating Country to complete the official ratification process. The RCEP is an economic partnership that builds on existing ASEAN agreements with its five Free Trade Agreement ("FTA") Partners (Australia, China, Japan, New Zealand and South Korea). Comprising about 30% of global Gross Domestic Product and close to a third of the world’s population, the RCEP is the world’s largest FTA to date.

The RCEP Agreement further broadens Singapore's economic linkages and connectivity within the region, which will open up considerable opportunities by, amongst other means, providing businesses with preferential access. In this Update, we look at the key elements and benefits of the RCEP Agreement. 

Transition to SORA: New Timelines to Cease Issuance of SOR Derivatives and SIBOR-linked Financial Products and Others
To reinforce the shift to a Singapore Overnight Rate Average ("SORA")-centered SGD interest rate landscape and provide additional guidance on cessation timelines, the Steering Committee for SOR & SIBOR Transition to SORA ("SC-STS") published a report on 31 March 2021 ("Report") announcing the following new timelines for financial institutions ("FIs"):

  1. FIs to cease usage of Swap Offer Rate ("SOR") in new derivatives contracts by end-September 2021 and recommend FIs to cease usage of Singapore Interbank Offered Rate in financial products by end-September 2021;
  2. SC-STS to retain the original end-2024 end-date for Fallback Rate (SOR) despite SOR now set to be discontinued later in mid-2023 and that a Fallback Rate (SOR) publication period of three years is not necessary. The Fallback Rate (SOR) was designed as an interim fallback solution for residual contracts which are unable to transition to SORA in time; and
  3. FIs to aim to substantially reduce their SOR exposures (both cash and derivative) to corporates to 20% by end 2022. All contracts that continue to reference SOR as at end-2022 should minimally incorporate appropriate contractual fallbacks.

These new timelines are in addition to the earlier timelines announced by SC-STS in October 2020 for shifting new cash market use away from SOR into SORA.

In this Update, we provide a summary of the above three key implications following recent developments globally and locally concerning SORA transition for FIs set out in the Report. 

Challenges to the One-Proxy Rule in a Recent Trust Scheme of Arrangement
Since 2017, there has been a wave of consolidation and privatisation of real estate investment trusts ("REITs"), business trusts, and stapled trusts which have been effected through trust schemes of arrangement ("Trust Schemes").

In Singapore, while there is a prescribed statutory framework for schemes of arrangement involving companies ("Company Schemes"), there is no prescribed statutory framework for Trust Schemes.The market practice to date has therefore been to follow closely the established practice and process for Company Schemes for similar M&A transactions. This often includes the application of the one-proxy rule in voting, where each unitholder (i) shall be entitled to appoint only one proxy to vote at the Trust Scheme meeting, and (ii) may only cast all the votes it uses at the Trust Scheme meeting in one way.

Although the one-proxy rule is consistent with industry practice (for Company Schemes as well as Trust Schemes), an issue which may arise is whether its application distorts the voting results, in particular, where investors hold units indirectly through a custodian or nominee ("Relevant Intermediary").

In this Update, we look at how commercial parties can mitigate the risk of challenge to a Company Scheme/Trust Scheme on the basis that the one-proxy rule should not have been applied. 

Are "Pay When Paid" Provisions Unenforceable under the SOPA Even for Terminated Contracts?
In Frontbuild Engineering & Construction Pte Ltd v JHJ Construction Pte Ltd [2021] SGHC 72, the Singapore High Court considered the issue of whether certain provisions take primacy over the other provisions in the Building and Construction Industry Security of Payment Act ("SOPA"). In particular, section 4(2)(c) provides that the SOPA will not apply to a terminated contract in the specified circumstances, while section 9 renders "pay when paid" provisions in a construction contract unenforceable and of no effect.

The Court held that section 4(2)(c) does not take primacy over section 9. Therefore, if a contractual provision engages both section 9 and section 4(2)(c), the Court will first consider if the provision is rendered unenforceable under section 9; if the provision is not found to be unenforceable, the Court will then consider if section 4(2)(c) applies to exclude the application of the SOPA. 

Singapore Ratifies the ASEAN Trade in Services Agreement
On 5 April 2021, the Ministry of Trade and Industry announced that Singapore has ratified the ASEAN Trade in Services Agreement ("ATISA"), becoming the first of the ASEAN Member States to do so, and that other ASEAN Member States would be continuing their internal procedures to ratify the ATISA within the year.

The ATISA reduces barriers for services suppliers and creates a more stable and predictable environment for trade in services in ASEAN. It seeks to benefit businesses and workers by further promoting trade in services in the ASEAN region and improving business confidence for businesses and service suppliers in all sectors. In this Update, we look at the key elements and benefits of the ATISA.


SGX Proposes to Permit Listing of SPACs in Singapore
The Singapore Exchange Limited ("SGX") is seeking comments on the proposed regulatory framework for the listing of Special Purpose Acquisition Companies ("SPACs") on the Mainboard of the Singapore Exchange Securities Trading Limited ("SGX-ST Mainboard") set out in its consultation paper titled "Proposed Listing Framework for Special Purpose Acquisition Companies". The consultation closes on 28 April 2021.

After weighing the benefits and risks of SPACs, SGX concludes that SPACs may generate benefits to capital markets participants and may be a viable alternative to traditional IPOs for fund raising in Singapore and the region.

The SGX consultation paper seeks feedback on the key features of the proposed listing framework for SPACs to be listed on the SGX-ST Mainboard ("SGX SPACs") which aim to balance safeguarding investors' interests against certain concerns posed by the unique features of SPACs and the capital raising needs of the market.

This Update highlights the proposed admission criteria, listing requirements and key safeguards to protect the minority shareholders' interests of the SGX SPACs. 

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