MAS tweaks rules on general offers for firms with dual-class shares

MAS has set out two scenarios when independent investors will not have to make general offers if their interest in a dual-class firm crosses the regulatory takeover threshold.
MAS has set out two scenarios when independent investors will not have to make general offers if their interest in a dual-class firm crosses the regulatory takeover threshold.ST PHOTO: KUA CHEE SIONG

The rules surrounding companies with dual-class shares have been tweaked to clarify the role of independent shareholders and to align offer prices between different classes of investors.

Independent investors will now not be required to make a general offer if their share of voting rights is pushed past regulatory thresholds under certain circumstances.

A general offer for a dual-class share firm must also present the same offer price for multiple voting shares as for ordinary voting shares, according to the new rules outlined by the Monetary Authority of Singapore (MAS) yesterday.

The original takeover code lays out certain thresholds that oblige a shareholder to make a mandatory general offer for the company.

For example, when an investor's control is first increased to 30 per cent or more, that shareholder must offer to buy the rest of the shares not already owned.

But in a dual-class company, there are two scenarios when a shareholder's control might cross the threshold.

The first is when shares that carry multiple votes are converted into ordinary voting shares.

Take a firm that has one superior share that carries five votes and five common shares carrying one vote each. That firm would have a total of 10 voting rights. If the superior share is converted into one common share, that firm's total voting rights would be cut to just six.

For an investor with two common shares, such an event would push his interest from 20 to 33 per cent, which would normally trigger a general offer.

The other circumstance in which a shareholder's stake might cross the threshold is when a company cuts the number of voting rights per multiple voting share. Such an event could push an investor's interest past the mandatory general offer threshold.

The new rule clarifies that a shareholder whose interest crosses the mandatory general offer threshold as a result of either of those scenarios will not need to make a mandatory general offer as long as the investor is deemed to be independent of the conversion or reduction event.

The obligation will still be waived if the shareholder is not deemed to be independent, provided that he or she takes steps to reduce the voting rights to below the mandatory general offer thresholds, or if the shareholder obtains a waiver from independent shareholders.

In another move, the MAS said the requirement for offer prices to be the same between multiple and ordinary voting shares would provide greater certainty.

It would also act as a safeguard for people with ordinary voting shares by ensuring that any premium paid to holders of multiple voting shares are also paid to those with ordinary shares.

A version of this article appeared in the print edition of The Straits Times on January 25, 2019, with the headline 'MAS tweaks rules on general offers for firms with dual-class shares'. Print Edition | Subscribe