New SGX rules welcome but much more to be done

Conrad Raj

Conrad [at] mediacorp.com.sg

EDITOR-AT-LARGE

The Singapore Exchange (SGX) has announced it would introduce new rules to promote greater transparency at general meetings and encourage greater participation by shareholders of listed companies and trusts.

This is a step in the right direction. Indeed, the call for all general meetings to be held in Singapore from the beginning of next year, except where the laws prevent companies from doing so, is long overdue.

Where there are legal constraints to holding meetings in Singapore, the SGX has called on such companies to provide alternative modes of engagement, such as webcasts, so that shareholders can meet up with board members and senior management.

This should apply to companies like Thailand’s Total Access Communication (TAC) and Thai Beverage, which under Thai law have to hold meetings in their home base. But under current rules, Singapore shareholders of these two companies are represented by the Central Depositary (CDP), which is neither obliged to vote nor to attend meetings on behalf of shareholders of the foreign securities.

The situation is similar to shares bought using your savings with the Central Provident Fund (CPF) and from which you have to obtain a proxy before being able to attend a listed company’s meetings - and only as an observer. A CPF account holder must go through the CPF to use his vote. Calls to change the rules to recognise CPF account holders as any other ordinary shareholder have so far appeared to have fallen on deaf ears.

So, will Singapore shareholders of TAC and Thai Beverage have to go through the CDP to obtain clearance to attend meetings if they are held here?

What penalties do the listed companies face should they decide not to hold their meetings here?

As Ms Yeo Lian Sim, SGX’s chief regulatory and risk officer said: “We encourage listed companies and trusts to embrace greater shareholder participation at general meetings, dialogue with the board and transparency and fairness of process.”

The operative word here is “encourage,” not that they “must” embrace greater shareholder participation.

If Ms Yeo and the SGX want greater shareholder participation, they must first address the concerns of CPF account holders. The authorities must make it easy and convenient for CPF account holders to participate in meetings of companies whose stock they bought. After all, it is they who are risking their savings, not the CPF Board.

And has the SGX addressed the transparency concerns regarding substantial shareholder holdings and transactions of the two Thai companies?

TAC had stated in its annual report: “Unlike Singapore-incorporated companies which are listed on the SGX, the company does not maintain a register of substantial shareholders or a register of directors’ shareholdings. The shareholders of the company are not required under the Singapore Companies Act to provide the company with notices of substantial shareholding or of changes in substantial shareholding.”

Shouldn’t the playing field be levelled?

And as to the requirement to conduct voting by poll, where shareholders are accorded rights proportionate to their holdings, I wonder if this will bring about greater shareholder participation.

Shareholder participation here appears to be more driven by issues than the counting of every vote. Where the issues are mundane, few would care if a show of hands is carried out. Cost and time matter too. Perhaps the rule should be applied in a more calibrated fashion and restricted to important issues.

In Singapore, a large number, if not the majority of companies and trusts, are under the control of one major shareholder, or a coterie of substantial shareholders, which make the outcome of a poll vote a foregone conclusion. Might that then discourage greater shareholder participation?

And if it is so important a matter, why allow companies two years to implement the poll voting processes and disclosure of voting processes? Shouldn’t a year be enough?