SINGAPORE - Listed companies may soon need to start making efforts to facilitate general meetings within 21 days of shareholders delivering a requisition notice, under a change proposed by the Singapore Exchange Regulation (SGX RegCo).

If the company disputes the validity of the requisition notice, it must apply for a court ruling within the same timeline, the regulatory arm of SGX said on April 23.

This proposed change to listing rules is aimed at improving board-shareholder engagements and helping shareholders exercise their rights, said SGX RegCo chief executive Tan Boon Gin.

“If investors have a stronger say, companies will be more motivated to consider their interests by improving both operational performance and shareholder returns. By enabling the convening of general meetings, we empower shareholders to drive change and exercise market discipline,” he said.

Currently, the listing rules do not impose any specific obligations on issuers when their shareholders have requisitioned a general meeting.

Mr Tan said: “Shareholder-requisitioned meetings are a key channel for shareholders to seek and obtain support of their proposals for companies. This may be particularly important if what they want differs from the current board and management’s thinking.”

The proposed rule change on shareholder-requisitioned meetings is also part of SGX’s “value-focus” approach to improve the state of the securities market in Singapore by encouraging market discipline, he said.

Any requisition notice must meet requirements set out by the Companies Act, including that the requisitionists must hold at least 10 per cent of the total number of paid-up shares. The requisition notice should also minimally have the names and shareholdings of the requisitionists, and a description of the resolutions that they propose should be tabled at the meeting.

When a company board gets such a requisition notice, it should immediately inform shareholders using SGXNet, the platform for listed companies to upload announcements. Any other subsequent material developments, which include applications filed to court, should be immediately announced, SGX RegCo said.

It added that companies should also help requisitionists in other ways, such as sending the shareholders documents and securing board attendance at the meeting.

SGX RegCo has put together a consultation paper on the proposed new rules and is calling those interested to comment.

The proposed changes come after a regulator’s column in 2023 that called on boards and shareholders to ensure that the interests of shareholders are protected. Mr Tan said the column followed a series of cases where SGX RegCo saw shareholders facing challenges in trying to requisition meetings.

“What we saw was two things – the first was that shareholders faced some technical or administrative sort of difficulties in being able to hold these meetings. (The second) was that the companies would raise some sort of technical objections to the holding of these meetings. What this resulted in were very long-drawn-out affairs, which I think is really in nobody’s interest,” he said.

“It leads to a protracted situation where there’s a lot of cost involved and uncertainty for the shareholders. It also distracts management and the board in their running of the company. All in, it’s not a good state of affairs, and what we’re hoping to do is introduce measures that will enable a meeting to take place so that shareholders can exercise their rights. Everyone can vote, and then the company can move on,” he added.

For example, Kitchen Culture – now called SDAI – rejected a requisition to remove five directors in 2022. But the requisitioning shareholders held an extraordinary general meeting (EGM) and approved the appointment of five new directors. Kitchen Culture’s existing board denied the validity of the meeting and its resolutions.

Other recent requisitioned meetings include one by Sabana Industrial Real Estate Investment Trust, whose manager said it intends to convene the EGM on or before May 25.

Cord-blood bank Cordlife, which is at the centre of a probe after thousands of cord blood units were damaged, also received requisition notices to hold meetings to remove directors in March.

Industry experts said the proposals will help shareholders’ voices to be heard.

Ms Claudia Teo, Harry Elias Partnership head of corporate and financial services practice group, said: “These proposals will give shareholders greater confidence in the requisition process if they are more certain that the measures will help see to it that the extraordinary general meeting is announced and conducted rather than defeated on technicalities. This will augment shareholder activism in voicing their concerns for the direction of the company.”

She noted that shareholder-requisitioned meetings are often complicated by the companies seeking to delay the conduct of the meeting using various technicalities and procedural roadblocks.

“For instance, the company may refuse to announce receipt of a notice of meeting received from requisitionists on the basis that it is ‘seeking legal advice on the matter’. They may also deny shareholders access to the register of shareholders or subject such access to overly formalistic or legalistic processes,” she said.

SAC Capital CEO Ong Hwee Li said: “Shareholder-requisitioned meetings should be treated fairly by the board as it is a democratic process to address requisitionists’ concerns on the management of the listed group. There were a few cases where boards deemed the requisition as invalid and therefore refused to cooperate with the requisitionists.”

He added that the onus should be on the company to prove the validity of the requisition, which makes the new rule to get the company to apply for a court ruling the most legitimate outcome.

“However, boards should opt to convene the EGM expeditiously rather than spend shareholders’ funds to pay for legal expenses to prove otherwise,” he said.

Securities Investors Association (Singapore) CEO David Gerald said: “All shareholders are part-owners of the company and deserve to be heard when they raise legitimate concerns. Ultimately, they want a company that is sustainable and thriving even when facing disruption, increased uncertainty and new challenges.”

The public consultation is open till May 23 at https://regco.sgx.com/public-consultations