On 31 March 2021, the Singapore Exchange Limited ("SGX") released a consultation paper 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"). The consultation closed on 28 April 2021. SGX is reviewing the feedback received from the consultation exercise.
After weighing the benefits and risks of SPACs, SGX concluded in the consultation paper titled "Proposed Listing Framework for Special Purpose Acquisition Companies" ("Consultation Paper") that it is of the view that SPACs may generate benefits to capital markets participants and may be a viable alternative to traditional initial public offerings ("IPOs") for fund-raising in Singapore and the region.
By way of background, SPACs, also known as "blank cheque companies", are companies with no commercial operations or revenue-generating businesses or assets. They are formed to raise capital through an IPO by listing on a securities exchange with the sole objective of acquiring another company for a business combination, also known as a de-SPAC transaction, so that the company emerging from the business combination continues as a listed company on the securities exchange.
The Consultation Paper sets out 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. These include the proposed admission criteria (including minimum market capitalisation), listing requirements and some key safeguards to protect the interests of minority shareholders of the SGX SPACs.
There are proposed requirements for at least 90% of the gross IPO proceeds to be placed in an escrow account pending the completion of a business combination and for an SGX SPAC to complete a business combination within a maximum time frame of 36 months from the date of its listing ("permitted time frame"). It is proposed that the business combination must be approved by: (i) a simple majority of the SGX SPAC's independent directors; and (ii) a simple majority of the SGX SPAC's shareholders (excluding the founding shareholders and the management team of the SPAC, and their respective associates). The SGX SPAC would be liquidated if, among other things, the business combination is not completed within the permitted time frame.
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