Key Takeaways:
- As of 9 January 2024, Parliament has passed the Significant Investments Review Bill (“Bill”). Legislation is likely to come into effect in the next few months.
- The new law aims to protect the national security interests of Singapore by regulating significant investments that affect the ownership and control of critical business entities by both local and foreign investors. Such entities, which can be incorporated in Singapore, carries on any business activity or provides services in Singapore, will be designated by the Ministry of Trade and Industry (“Minister”).
- The Bill empowers the Minister with wide-ranging powers to regulate designated entities and ensure their continuity. This includes requiring approval or notification for changes to their shareholding, issuing remedial directions and rending transactions void. The Minister also has the power to review non-designated entities if they act against national security interests.
Background
Uncertain economic outlooks and recent global disruptions to critical supplies have prompted the Government to review their investment management strategies that enhance the protection of Singapore’s national security interests. The Bill complements existing sector regulation of critical entities. Its targeted approach ensures that the impact on affected stakeholders is kept to a minimum and investor confidence for most entities remains unaffected.
Who is impacted?
Stakeholders of designated entities are impacted by the Bill. However, since most entities with critical functions are already regulated under other sectoral regulations (such as telecommunications and banking), only a selected number of entities will be designated as such. The list of designated entities will be published in the Government Gazette after the law has come into effect. At the reading of the bill, the Minister explained that all entities that are being considered for designation have already been contacted by the Government in the past months. Designated entities may also be removed from the list if it no longer meets the relevant criteria.
While stakeholders of non-designated entities may be reassured that they do not have positive obligations under the Bill, stakeholders should be mindful that the Minister reserves the right to review any entity that has acted against Singapore’s national security interests.
What are the new rules?
Buyers must notify the Minister, within 7 days of becoming a 5% controller of a designated entity. Buyers must seek approval from the Minister before becoming a 12%, 25% or 50% controller, indirect controller, or acquiring a designated entity.
Sellers of designated entities must seek approval from the Minister if they cease to be a 50% or 75% controller.
Additionally, designated entities must seek approval to appoint key officers and to be voluntarily wound up or dissolved. Officers may be removed if appointed without approval or if approval conditions are breached.
The Minister may also make a special administration order to manage the designated entity during a period which the order is in force. The purpose of the order is to ensure the survival or security of the designated entity’s business.
The Minister has the discretion to issue remedial directions to designated entities and void transactions in contravention of the Bill. The Minister’s powers extend to allowing targeted action against any entity that has acted against Singapore’s national security interests by reviewing such transactions within a two-year period since the occurrence of the transaction. Appeals can be made to a reviewing tribunal, whose members are appointed by the president of Singapore on advice of the cabinet of Singapore.
What’s next?
An Office of Significant Investments Review will be set up under the Ministry of Trade and Industry as a dedicated one-stop touchpoint for stakeholders. While the Bill omits a clear definition of “national security interest” despite concerns raised during parliamentary debates, the Minister has reiterated that it be judicious in exercising its powers, thereby minimising overall impact on businesses and investors. Business and investors, especially those with activity in security-related functions, should continue to watch developments in this space but may be reassured that their interest would not be gravely affected.
Reference material
The Bill is available at https://www.parliament.gov.sg/docs/default-source/default-document-library/significant-investments-review-bill-38-2023.pdf
Press release by the Ministry of Trade and Industry at https://www.mti.gov.sg/Newsroom/Press-Releases/2023/10/Introduction-of-the-Significant-Investments-Review-Bill
This article is produced by our Singapore office, Bird & Bird ATMD LLP. It does not constitute legal advice and is intended to provide general information only. Information in this article is accurate as of 10 January 2024.
