3-11-2023 (SINGAPORE) Singapore is set to introduce a new law aimed at regulating significant investments in “a handful of critical entities,” which will require these companies to seek approval for certain changes in ownership or leadership. The move aligns with a global trend where countries are increasingly scrutinizing investments to safeguard industries vital to their economies and societies.
The legislation, known as the Significant Investments Review Bill, will encompass both local and foreign investments in entities deemed “critical to Singapore’s national security interests.” Although these entities have not been specified yet, the Ministry of Trade and Industry (MTI) clarified that the law would apply to individual entities rather than entire sectors.
This measure will complement existing sector-based legislation that imposes ownership and control safeguards on entities in sectors such as telecommunications, banking, and utilities. The first reading of the Bill is scheduled to take place in the upcoming parliamentary session, with the second reading expected in January 2024. If passed, the law will come into effect a few months later.
Minister for Trade and Industry, Gan Kim Yong, emphasized the need to manage the risks arising from significant investments in critical entities within the evolving economic landscape. He noted that while most critical entities in Singapore are already covered by sectoral legislation, there are exceptions that may not have sufficient coverage or fall outside these rules.
In a crisis scenario, the current legal requirements may prove insufficient for ensuring business continuity for these entities. MTI anticipates that only a few critical entities will be designated under the new law.
Under the proposed investment management regime, critical entities will need to adhere to several key requirements:
- Buyers and sellers must notify and seek approval for specific changes in ownership or control. Buyers must inform the Minister when they become a 5% controller in an entity and seek approval before reaching 12%, 25%, or 50% control. They also need approval before becoming indirect controllers or when acquiring an entity as a going concern. Sellers must seek approval when they cease to be 50% or 75% controllers.
- Critical entities must seek approval for the appointment of key officers. The Minister has the authority to remove key officers in the interest of national security.
The legislation also includes provisions that prevent designated entities from being voluntarily wound up or dissolved without the Minister’s consent. In case of national security concerns or disruptions in the delivery of essential services, MTI can assume control of an entity’s affairs, business, and property to ensure business continuity.
The Bill’s provisions do not have retrospective effects and will apply to entities only after their designation. Even entities not designated can have their ownership or control transactions reviewed if they act against Singapore’s national security interests.
The MTI specified that there would be clear processes for affected parties to request the Minister to reconsider his decisions, and they can also appeal to an independent Reviewing Tribunal.
Minister Gan reiterated Singapore’s commitment to remaining an open and connected economy. The country aims to strengthen its position as a trusted hub for investors to ensure they can invest with confidence.
Nicholas Fang, Executive Director of Security and Global Affairs at the Singapore Institute of International Affairs, highlighted that this legislation aligns Singapore with global best practices. Several countries, including Australia, China, Ireland, Japan, the UK, and the US, have introduced similar investment screening policies.
Lim Ming Yan, Chairman of the Singapore Business Federation, viewed this approach as balanced and supportive of Singapore’s objectives while maintaining its status as an open and competitive business hub. He noted that such measures would strengthen Singapore’s reputation as a safe and trusted location for business and investments.
