5 June, 2017
In 2007, a new Part VIIA was introduced in the Banking Act (Cap. 19) (“the Act”) to provide, inter alia, for the voluntary transfer of the business of banks in Singapore.
In Division I of Part VIIA of the Act, section 55B(1) provides that a bank (“the Transferor”) “may transfer the whole or any part of its business (including its non-banking business) to a transferee which is licensed to carry on banking business in Singapore (“the Transferee”)” if certain conditions, including the obtaining of court approval to the transfer, are satisfied.
Section 55B(1) of the Act is, however, qualified by section 55B(2) in that section 55B (1) is “without prejudice to the right of a bank to transfer the whole or any part of its business under any law” [emphasis added]. In Jacob Agam and another v BNP Paribas SA [2017] SGCA(I) 01 (“Jacob Agam”), the Court of Appeal (“CA”) recently considered whether the words:
(a) “without prejudice” required that court approval be obtained for a section 55B(2) bank merger; and
(b) “under any law” required that such a merger be sanctioned by Singapore law only.
Brief facts
The dispute in Jacob Agam arose from proceedings brought by BNP Paribas Wealth Management (“BNPP Wealth Management”) against two guarantors (“the Guarantors”) for partly unpaid loans extended by BNPP Wealth Management to the guarantors’ companies (“the Main Proceedings”).
BNPP Wealth Management was a bank incorporated in France and was a wholly-owned subsidiary of BNP Paribas SA (“BNP Paribas”). In February 2016, BNPP Wealth Management and BNPP Paribas executed a written merger agreement (“the Merger Agreement”) pursuant to French law, under which BNP Paribas succeeded to the assets and liabilities of BNPP Wealth Management (“the Merger”). BNPP Wealth Management surrendered its banking licence in Singapore in October 2016.
It was not disputed that the Merger was effective in France.
Following the Merger, BNP Paribas filed an application in the Singapore International Commercial Court (“SICC”) to be substituted for BNPP Wealth Management in the Main Proceedings (“Application”), which was opposed by the Guarantors on two grounds. The SICC granted the Application, and the Guarantors appealed against the SICC’s order.
This article will only examine the CA’s decision on one of the Guarantors’ grounds of objection–under section 55B of the Act-to the Application.1
The section 55B objection
(1) “Without prejudice”
The Guarantors contended that because of policy reasons, the words “without prejudice” in section 55B(2) did not remove the need for the Transferor to comply with the conditions prescribed under section 55B(1), including the requirement for court approval. These policy reasons related to “Singapore’s standing as an international banking and financial centre, the realities of international banking operations and the supposed policy objectives of the [Monetary Authority of Singapore]”.2
It was suggested that “a bank with Singapore assets might be taken over by some bank which was undesirable or fragile or otherwise not fit and proper without any prudential oversight by the [Monetary Authority of Singapore]”.3
(2) “Under any law”
The Guarantors argued that the phrase “under any law” referred to “under Singaporean law”, based on other provisions in the Act. In addition, the Guarantors advanced a policy reason that to permit a merger to take effect under the law of any country, it would be “open for any merger affecting Singapore banks to take place as long as some jurisdiction whose law (not being Singapore law) permitted it, without any regard to the impact in Singapore”.4
The CA’s decision
The CA dismissed the Guarantors’ section 55B objection. Firstly, on the “without prejudice” point, the CA held that the power of transfer in section 55B granted to the Transferor was “not an unlimited power”, but was “only a power to transfer to a transferee which is licensed to carry on banking business in Singapore” [emphasisin original].5
Hence, the Guarantors’ policy arguments did not support their interpretation because the Transferee could not be “some wholly unsatisfactory legal person operating without surveillance from the [Monetary Authority of Singapore]”.6
Under sections 2 and 7 of the Act, a bank operating in Singapore must obtain a licence from the Monetary Authority of Singapore (“MAS”) and the MAS was empowered to impose, vary or revoke any of the conditions of the licence. As such, the Transferee under section 55B(1) would already have satisfied the MAS that it met the requirements for a licence.
Secondly, the CA held that the phrase “under any law” must be given its ordinary meaning, namely, “‘any law’ can refer to any law in the world”.7
The Guarantors’ policy concerns were addressed by the fact that section 55B(2) only preserved the Transferor’s right to make a transfer to a Transferee already licensed in Singapore, and not to any Transferee not licensed by the MAS.
Conclusion
The CA’s clarification that the saving provision in section 55B(2) only applied to Transferees already licensed in Singapore accords with the plain meaning of the words in dispute. In addition, the CA also offered helpful guidance on the interaction between section 55B of the Act, which governs mergers between a licensed Transferor and a licensed Transferee, and section 14A of the Act, which governs mergers between banks and their wholly-owned subsidiaries.
In essence, the CA held that a Transferor is entitled to proceed with a merger “under any law” under section 55B(2), and is not required to apply to the Minister for approval under section 14A of the Act. This is because section 14A, like section 55B, is not mandatory, but permissive, and does not compel a Transferor to “choose one method or the other”.8
1 The other ground of objection concerned whether the references to the word “subrogated” in the Merger Agreement subrogated Paribas SA’s right to sue the Guarantors to BNPP Wealth Management’s right to the same.
2 Jacob Agam at [33].
3 Ibid.
4 Ibid, at [38].
5 Ibid, at [34].
6 Ibid.
7 Ibid, at [36].
8 Ibid , at [42
Kim Kit, Ow, Partner, RHTLaw Taylor Wessing
