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A reverse takeover (RTO) is a corporate transaction in which a private firm acquires a public firm, ensuing in the private company turning into the listed entity. RTOs are a preferred way for private firms to realize access to the public market without having to undergo the traditional initial public offering (IPO) process.

RTOs are also turning into more and more standard in Singapore, as they offer a number of advantages over IPOs, including:

A faster and more efficient route to the general public market

Lower costs

Better flexibility in deal structuring

The ability to retain control of the listed entity

Nevertheless, RTOs are also complex transactions that contain a number of legal and compliance considerations. This article will talk about the key legal and compliance issues that parties to a Singaporean RTO must be aware of.

Regulatory Framework

RTOs in Singapore are regulated by the Securities and Futures Act (SFA) and the Listing Manual of the Singapore Alternate Securities Trading Limited (SGX-ST). The SFA and the Listing Manual set out a number of requirements that parties to an RTO should comply with, together with:

The acquirer must make a compulsory supply to all shareholders of the goal firm to purchase their shares.

The acquirer must provide a circular to target company shareholders setting out the phrases of the supply and the reasons for the RTO.

The goal firm must hold an additionalordinary general assembly to approve the RTO.

The acquirer and the target company must acquire approval from the SGX-ST for the listing of the acquirer's shares on the SGX-ST.

Due Diligence

It's essential for each the acquirer and the goal company to conduct thorough due diligence on one another before entering into an RTO agreement. This is because RTOs are complex transactions that contain a number of risks, including:

Monetary risks: The acquirer should be certain that the target company is financially sound and that it will be able to generate sufficient profits to service its debt and pay dividends to its shareholders.

Regulatory risks: The acquirer should ensure that the target company complies with all applicable laws and regulations.

Litigation risks: The acquirer must ensure that the goal company shouldn't be dealing with any significant legal claims.

Corporate Governance

RTOs may elevate a number of corporate governance concerns. For example, it is vital to ensure that the acquirer and the goal company have impartial boards of directors that can provide objective oversight of the transaction. It's also necessary to ensure that the acquirer will not have a controlling interest within the listed entity after the RTO, as this might lead to conflicts of interest.

Securities Law Considerations

In addition to the general legal and compliance considerations mentioned above, there are a number of securities law considerations that parties to a Singaporean RTO needs to be aware of. These embody:

The acquirer's offer to focus on company shareholders should be fair and reasonable.

The acquirer must disclose all materials information about itself and the target company to target firm shareholders.

The acquirer must not engage in any insider trading or market manipulation activities.

Conclusion

RTOs can be a advanced and difficult process, but they'll additionally offer a number of advantages to both acquirers and target companies. It is necessary for parties to a Singaporean RTO to seek legal and financial advice early on within the process to ensure that they comply with all applicable laws and regulations.

Additional Considerations

In addition to the general legal and compliance considerations discussed above, there are a number of other factors that parties to a Singaporean RTO ought to consider, including:

Taxation: RTOs can have complex tax implications for both the acquirer and the goal company. It is very important seek tax advice to make sure that the transaction is structured in a tax-efficient manner.

Employment: RTOs can even have implications for the employees of the target company. It is very important consider how the RTO will impact the terms and conditions of employment of goal company employees, and to take steps to make sure that all applicable employment laws are complied with.

Intellectual Property: RTOs may also contain the transfer of intellectual property from the goal company to the acquirer. You will need to be sure that all essential intellectual property rights are transferred to the acquirer, and to take steps to protect the acquirer's intellectual property rights after the RTO.

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