Singapore New Bill to Regulate Investments in Critical Entities

Singapore has proposed the Significant Investments Review Bill to increase oversight of ownership changes in critical entities, which it now considers a matter of national security.

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On November 3, 2023, the Ministry of Trade and Industry (MTI) announced Singapore’s proposal to introduce the Significant Investments Review Bill (hereinafter referred to as the “Bill”). The Bill is designed to oversee substantial investments, regardless of their origin, in entities crucial to the nation’s security interests. Its primary objective is to establish a comprehensive framework for monitoring ownership and control changes within these essential entities, fostering a secure and equitable investment environment.

The Bill was formally introduced during the Parliamentary session that took place on November 6, 2023. The second reading is scheduled for January 2024, and if approved, it will come into effect a few months thereafter.

What are the requirements proposed in the Bill?

Ownership and control changes

The Bill mandates a stringent notification and approval process for ownership and control alterations. It emphasizes transparency and accountability, ensuring that all stakeholders are kept informed about significant changes. Key points include:

• Buyers and sellers must notify the MTI at various control thresholds, such as 5 percent, 12 percent, 25 percent, and 50 percent.
• The MTI retains the authority to direct remedial actions in case of non-compliance with approval conditions, potentially leading to the disposal of stakes in the designated entity.
• Critical entities bear the responsibility of timely notification to the minister regarding any changes in ownership and control.

Appointment of key officers

The Bill emphasizes the significance of appointing suitable “key officers” aligned with Singapore’s national security interests. It ensures that critical entities are led by individuals who prioritize the nation’s security. Notable points encompass:

• The Bill specifies key officers, including CEOs, directors, and chairpersons in corporations, as well as managers and partners in limited liability partnerships and partnerships.
• The MTI retains the power to intervene and remove key officers in cases where national security may be compromised.

Provisions for designated entities

Other proposed provisions in the Bill serve to maintain the stability and continuity of critical operations within designated entities. They aim to ensure that these entities continue to function seamlessly, especially during periods of national security concerns. Examples include:

• The Bill prohibits designated entities from voluntary dissolution without the explicit consent of the minister.
• It grants the minister the authority to direct the transfer of business and property during critical situations, ensuring the uninterrupted functioning of these pivotal entities.

Review of transactions and actions

The Bill extends its oversight to non-designated entities that may engage in activities contrary to Singapore’s national security interests. It introduces measures to mitigate risks associated with entities posing potential threats to the nation’s security. These include:

• The government holds the power to intervene in ownership or control transactions, directing the disposal of equity interests in entities that pose significant risks.
• Clear procedures for affected parties to request reconsideration or appeal decisions, promoting transparency and fairness in the regulatory process.
• An independent reviewing tribunal, including a Supreme Court judge and appointed individuals, established to ensure an impartial and just appeals process for all stakeholders involved.

How will the Bill impact Singapore’s investment climate?

As several key global economies (such as China, Australia, the UK, and the US, to name a few) implement similar investment screening measures, Singapore’s latest strategic move reflects its commitment to align with global best practices and enhance its regulatory framework.

On one hand, the introduction of oversight measures for designated entities underscores Singapore’s commitment to reinforcing national security interests. At the same time, by establishing a robust framework that safeguards the security and reliability of critical entities, the country also aims to fortify its position as a secure and reliable business hub, thus further enhancing its attractiveness for global investments.

Moreover, the proactive engagement with entities being considered for designation, along with efforts to minimize the overall impact on affected businesses, demonstrates Singapore’s commitment to addressing potential concerns. By tailoring the implementation process to the unique nature of each entity, Singapore aims to mitigate any potential adverse effects on the broader investment landscape, ensuring a smooth transition to the new regulatory framework.

Trade and Industry Minister Gan Kim Yong reiterated himself the importance of Singapore maintaining its global connectivity and openness. Emphasizing the collaborative approach with industry stakeholders to address concerns, he highlighted the government’s commitment to fortifying Singapore’s status as a trusted investment hub, ensuring businesses can operate with confidence in the country’s secure and conducive business environment.