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Initial Public Offering for a Private Company in Singapore

Private companies in Singapore decide to publicly offer (sell company shares) for many reasons, such as raising additional capital, enhancing the company’s status and improving its financial situation, increasing public awareness of its business and raising public interest in the company and its products.

Not all private companies are qualified to become publicly listed* companies. Publicly offered companies are generally stable companies with a long history of operations, usually dominant in a particular market sector and having a significant growth potential. Usually, such companies are on everyone’s lip, as they say.

* Listing means including the company’s shares in the list of shares listed on the exchange for admitting to exchange trading only those shares that have passed expert verification.

The transformation of a private company into a joint stock company, a public company, in Singapore, may be optional or forced.

Optional placement occurs when the shareholders of a company decide to issue shares for public offering (sale). This process is called the initial public offering (IPO).

Forced placement is when the company registrar announces that a company has ceased to be the private company if it no longer meets the recognition criteria of a private limited liability company (e.g. the number of shareholders exceeds 50). From now on, the company will be governed by the laws that apply to public companies.

The purpose of this article is to present a brief overview of the executives’ steps towards voluntarily transforming your private PTE Ltd company into a public listed company in Singapore. I will talk about the advantages and disadvantages of converting a private company into a public company in Singapore so that you could decide whether publicity is the best choice for your company.

Public Companies and Private Companies in Singapore

Singapore recognizes two main types of companies, public and private. The main features of private companies compared against public companies in Singapore are given in detail below.

If your company is private:

— your company has 50 or fewer shareholders;
— your company has no right to engage the public to invest or contribute to your company (capital increase);
— additional capital can be raised through shareholder contributions or debt financing.

If your company is being transformed into a public company:

— your company can have more than 50 shareholders;
— your company can raise capital by offering shares or debt instruments for sale to the public;
— your company will be listed on the Singapore Exchange after due approval by the Singapore Exchange Limited.

If your company issues the shares for public offering for the first time, the process is called an initial public offering (IPO). IPO is selling of the company’s shares usually in the form of common shares through an investment firm. These shares are subsequently traded on a recognized stock market, such as the Singapore Stock Exchange.

From a Private to the Public Company. Are You Really Ready?

Transformation of your company from a private limited liability company to a public company is a serious step, and it requires taking into account many important points. You should carefully consider the pros and cons of obtaining publicity before deciding to make your Singapore company a public one.

Advantages of making a company public in Singapore:

— access to capital, i.e. in Singapore, just as in any other jurisdiction, companies mainly go public for a financial gain in the form of capital raising. Capital can be raised through the initial public offering (IPO).

IPO is the initial sale of shares of a company. This capital can be used to finance further growth, investment, or repayment of the company’s debts. The IPO is accompanied by publicity, making the company’s products known to a new group of potential clients and expanding its geographical presence. Public companies are usually better known than private firms. This leads to an increase in market share of such a company. The funds raised may also be used to increase the company’s share capital.

— unblocking the exchange value of a share, becoming public is an excellent way to make shares valued according to the fair market value. Firstly, the shares will have real value, and secondly, an increase in their value (return on investment) will bring additional profit to the company’s shareholders.

— compensation, i.e. public companies in Singapore may issue their securities as compensation to their directors, employees and workers. As a rule, the public company securities have a set fair market value at which they may be sold on the stock exchange.

— liquidity, i.e. in order to sell the private company shares, a shareholder must find a person who would be interested in purchasing such shares. This process becomes much easier when a Singapore company goes public because the company creates a public market for its shares that involves buyers and sellers.

— prestige, i.e. a public offering of shares can help a Singapore company gain credibility by creating an image of stability. The company founders, co-founders and managers get a lot of personal prestige from being associated with a client who goes public. Such prestige can be very useful in hiring leading employees, and marketing products and services.

— image is the perception of a company, and attitude to public companies is usually more positive. This is particularly important in such industries where the long-term commitment of clients and suppliers are important for the company’s success.

— openness, i.e. public offering brings prestige, publicity and visibility. They are effective in marketing the Singapore companies and attracting public attention.

This can sometimes lead to new development directions and strategic alliances. It becomes easier to attract attention of potential candidates for mergers of companies or partners.

— mergers and acquisitions, i.e. the company’s shares are valuable as liquid assets and can be used to acquire other firms.

It is impossible to perceive publicity one-sidedly, so there are negative arguments to the process of transformation of a private company into a public one.

Disadvantages of making a company public in Singapore:

— loss of confidentiality, i.e. public companies must disclose most of the information about their operations as they work under close supervision of public shareholders and relevant authorities.

— added value, i.e. the IPO offer value as well as compliance with regulatory requirements may be very high. For example, IPO costs can rise by as much as 25 percent of the public offering agreement value. Certain additional costs include accounting costs, legal fees, various fees and professional fees of the advisor.

— additional liability requirements, i.e. there is an increased risk of civil liability exposure for public companies, their managers and directors. Officials may be liable for misrepresentation in reports filed with the relevant Singapore Stock Exchange department – SGX**.

** SGX, Singapore Exchange

— labor-intensity, i.e. transformation into a public company is a rather lengthy procedure. This procedure can take considerable time if senior management actively intervenes in the IPO process.

— loss of control, i.e. public companies face market pressure. This would likely force them to focus more on short-term results rather than long-term growth. In addition, joint-stock companies are exposed to the risk of takeover due to public share trading.

— reporting and fiduciary responsibility, i.e. public companies must continuously submit reports with SGX and bring their operations in line with the legal requirements. This is not only an expensive procedure, but it also entails the consequences of transferring public information (not confidential!) to certain competitors.

The issue of becoming a public company and entering the IPO is resolved by each private company individually based on their operations, strategic goals and opportunities. Of course, all benefits and advantages should be compared against the risks and disadvantages. Yet the procedure of public offering of shares is clear and understandable.

How Can My Company Go Public in Singapore?

Once a public offering decision is made, you will need to follow the procedure outlined below to transform a private limited liability company into a public one. The process of transformation into a public company is concentrated around preparing the registration papers and other relevant documents.

What does a private Singapore company needs to achieve public status:

1. Undergo the Due Diligence procedure;

The first step of transforming a private company into a public one involves the due diligence procedure. This means assessment and evaluation of the company, and it is usually performed by a professional accounting firm. Almost every area of the business will be given a comprehensive view. Due Diligence is a foundation that for all the information made available to the public. The company is being assessed and the corresponding number of shares is issued.

2. Initial Public Offering – IPO;

At this stage, the public is offered to buy the company’s shares. This is called the Initial Public Offering — IPO. When a broker starts this process, they are said to sign up for an IPO. Signing up is a procedure where the guarantor of the shares placement brings a new issue of shares in the form of an offer. By signing up for an IPO, brokers guarantee the company that they will promote and sell all the shares that are being offered. In turn, the listed company pays a commission to the placement guarantor for each share sold.

3. Listing.

The issuer initiates the listing procedure by making a Singapore financial institution, or an SGX affiliate, investment bank or other similar institution its sponsor and lead manager. In addition to managing the IPO launch, the lead manager also submits the listing application and liaises with SGX on all matters arising from the listing application.

Participants of the IPO Procedure

In addition to the lead manager, the company must appoint a lawyer to oversee the legal aspects of the listing. Apart from that, a designated certified public accountant will provide the company with an initial assessment of its preparedness to becoming public, assistance in upgrading its management capabilities and preparing for the launch. Before and during the IPO, the company must contact PR specialists to establish public relations.

Components of the company’s listing procedure:

Before applying for a listing, companies are advised to consult SGX on any ambiguous issues to reduce possible delays. In general, the listing procedure consists of two parts. Pre-submission preparation and post-submission approval and listing.

On average, it will take approximately four to nine months to get prepared before applying for public offering, while the last round will take approximately 5 to 7 weeks. Depending on the complexity, the listing procedure may take from four months to two years.

Singapore Exchange Listing

The main task of the Singapore Stock Exchange is to ensure a fair, honest and transparent market for trading in securities.

There are two methods of listing, Mainboard listing and Catalist.

A listing list on the Mainboard involves a potential listing applicant who meets certain quantitative requirements. Its key benefits include the following: an established Mainboard announcement; access to a wider range of institutional investors; and openness to more product types.

The main feature of Catalist is its “sponsor-controlled” market model. Companies come to Catalist with sponsor approval. No quantitative entry criteria are required by SGX. Instead, sponsors decide whether an applicant is suitable for listing or not.

Sponsors are qualified professional companies with a vast experience in corporate finance, carrying out advisory work. It is them, not the Exchange, who perform control functions regarding the public companies’ operations in the market.

Сatalist works well for fast-growing companies. Its key benefits include faster market entry; easier follow-up fundraising, acquisitions & disposals; and continued sponsor leadership.

Key differences between the sponsor and the Exchange as regulatory authorities for public companies:

Sponsor*** – controlled marketExchange*** – controlled market
When a company is admitted to a public offering, the sponsor decides whether the company is suitable for listingWhen admitting a company, the Singapore Exchange will review the IPO documents and confirm the company’s listing 
After the IPO, the Singapore Exchange will hold the right to regulate listed companies, but not direct control is envisagedAfter the IPO, the Singapore Exchange will directly control listed companies 
The control function regarding the companies is performed by an organizer authorized and regulated by the Singapore Stock ExchangeCompanies offered for listing by issue managers are not formally recognized by the Singapore Stock Exchange Managers do not perform any control functions 
The activity of sponsors and their registering professionals is regulated by the Exchange Managers are not subject to the Singapore Exchange rules

** The IPO procedure sponsor oversees the company and plays a leading role in its asset allocation process, as well as advises the company’s executives on the corporate structure and placement, assesses the company’s listing eligibility criteria.

Search for the right professionals

The transformation of your private limited liability company into a public company listed on the Singapore Stock Exchange is a lengthy process involving competent and experienced professionals.

If you are considering your private limited liability company for a public listing, you should consult a professional firm that could review your situation in detail and advise you on a better course of action.

Should you have any questions regarding business organization in Singapore, please do not hesitate to contact us at info@offshore-pro.info.

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