Suspensions of trade should be kept short: Singapore SGX
Companies under suspension incur expenses, delay cash return to investors
By WINSTON CHAI
(SINGAPORE) Extending the suspension of a company’s share trading is not doing shareholders and the market any favour, the Singapore Exchange (SGX) said in its regulator’s column yesterday.
‘If the suspended company is unable to find an investment within the timeframe granted, cash should be returned to shareholders who can deploy the funds or re-invest according to their preference.’
- Singapore Exchange
According to SGX, a firm should keep its suspension as short as possible. As time elapses, it becomes more challenging for companies to acquire suitable assets as viable options would already have been exhausted.
‘A longer suspension is not necessarily helpful in the search for viable alternatives. Companies under suspension incur expenses, draw down on assets and delay the return of remaining cash to investors,’ SGX said.
‘Proposals hurriedly put together near the delisting deadline, in our experience, are unlikely to satisfy SGX listing criteria. The prolonged wait for shareholders would have been in vain,’ it added.
A firm’s share trading may be suspended if it is facing financial difficulty or if it is deemed to be a ‘cash company’ with no viable core business. In the first scenario, a business is given a maximum of 24 months to submit and implement its resumption proposals.
Cash companies, on the other hand, have 12 months to find a new business, and an additional six-month extension may be granted on some occasions.
‘If the suspended company is unable to find an investment within the timeframe granted, cash should be returned to shareholders who can deploy the funds or re-invest according to their preference,’ the regulator said.
SGX added that suspended firms hoping to resume trading through major acquisitions and reverse takeovers (RTOs) should be aware that their proposals will be subjected to the same stringent standards that apply to IPO (initial public offering) applications. ‘Otherwise, unqualified listing applicants may obtain listing status by acquiring suspended companies,’ it said.
In addition, it urged companies that are mulling RTOs to weigh it carefully against the option of returning cash to shareholders. This is because ‘RTOs often involve substantial dilution of shareholding level of the incumbent minority shareholders’, it explained.
‘For the reasons outlined above, the Exchange does not have strong grounds for granting extensions of time without clear signs of distressed and cash companies submitting viable resumption proposals,’ it concluded.
Source : Business Times - 28 Aug 2008
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