Ousting directors in Singapore is about to get easier

Proposed listing rule changes will address logistical hurdles faced by shareholders who call a general meeting but 10% voting rights threshold remains, writes ACGA Head of Research Jane Moir

Singapore will force issuers to aid shareholders who requisition a general meeting on their own accord under planned listing rule changes. The proposed move comes after several attempts to call meetings to remove board members at listed companies were stymied by procedural barriers.

Under listing rule changes proposed by Singapore Exchange Regulation (SGX RegCo) issuers would be required to lend support to shareholders electing to call a meeting themselves, such as sending notices, circulars, and proxy forms on their behalf, and securing the board’s attendance.

There are two ways to requisition a general meeting in Singapore: by requesting directors to do so on shareholders’ behalf, or solely by investors’ own endeavours. The requisitionists in both circumstances need to hold voting rights of at least 10% of total shares in issue.

Shareholders opting to bypass the board and go it alone have run into procedural hurdles. Investors in semiconductor firm Asti Holdings tried to call an EGM to remove three directors of the company in May 2023 but had to postpone the meeting twice after the company failed to provide an electronic shareholding list. The meeting eventually went ahead in August that year and 95.5% of shareholders voted to oust the directors, but the EGM was subsequently ruled invalid by a court after the requisitionists failed to allow the incumbent directors to attend.

In October 2022, shareholders in troubled marine distribution firm USP Group sought to remove the entire board. The requisitionists asked the company to convene an EGM but they refused. The shareholders tried to press ahead on their own accord, but a court ruled that notwithstanding the “barrage of excuses” the company gave for not holding the meeting, the requisitionists did not have standing. None of their names appeared on the company’s Register of Members, as their interests were held by brokerage firms. At the time the judge noted “I would very much prefer to have allowed the democratic process of USP Group to operate.’’

In a consultation paper, SGX RegCo said it plans to introduce listing rule amendments “in light of the impediments that requisitionists may face in the course of convening, and conducting a shareholder-requisitioned meeting, due in part to the existing staututory position in Singapore…”

This would include the board releasing announcements and documents on SGXNET on requisitionists’ behalf, sending documents and circulars to shareholders, enabling the scrutineer to discharge their duties, and instructing share registrars to provide assistance. The consultation runs until 23 May 2024.

The consultation however does not broach other impediments to shareholders in calling a meeting, notably the 10% voting right threshold required under the Companies Act. In Hong Kong, shareholders with 5% of total voting rights can request directors to call a general meeting.