(a) A sponsor undertaking introducing activities for a listing applicant or an issuer must comply with the guidelines in this Practice Note, in order to assess the suitability of a listing applicant or the continued listing of an issuer on Catalist.
2. Understanding the Listing Applicant/Enlarged Group (Rules 225(1)(a) and 226(1)(a))
(a) To achieve a thorough understanding of a listing applicant/enlarged group and its business, the sponsor should do the following.
(i) Ensure that it has, or has access to, appropriate experience in the listing applicant's/enlarged group's sector. (ii) Use in-house specialists or external experts where necessary.
(iii) Consider the listing applicant's/enlarged group's sector, proposition, business plan or similar, historical financial information and other corporate information, including the due diligence performed further to the due diligence requirements.
(iv) Consider any issues relating to its country of incorporation and operation and any other issues that might affect its appropriateness.
(v) Undertake a visit of the listing applicant's/enlarged group's material site(s) of operation and meet the directors and key managers. The necessity of meeting any other relevant material stakeholders (e.g. key shareholders) should also be considered.
(vi) Consider appointing its own legal advisers who are independent from the listing applicant/enlarged group to assist in the sponsor's understanding of the listing applicant/enlarged group and to provide advice to the sponsor that is independent of the listing applicant/enlarged group.
(vii) Consider and advise on the suitability and competence of other professional advisers involved in the admission, including consultants.
3. Listing Applicant's/Enlarged Group's Directors and Board (Rule 225(1)(b) and 226(1)(b))
(a) To assess the appropriateness of a listing applicant/enlarged group and its securities for Catalist, the sponsor should do the following.
(i) Investigate and consider the suitability of each director and proposed director of the listing applicant/enlarged group and consider the efficacy of the board as a whole for the company's needs.
(ii) Issue and review directors' questionnaires and review directors' CVs.
(iii) Test the information revealed by the above questionnaires and CVs, for example by conducting third party checks, press searches, Accounting and Corporate Regulatory Authority (ACRA) checks and taking-up references. For directors who are not Singapore-based, other appropriate investigations should be undertaken.
(iv) Extend these investigations and considerations as appropriate to key managers and consultants who are disclosed in the offer document.
(v) Consider undertaking such investigations in relation to substantial shareholders at admission as appropriate, especially where there is uncertainty as to their identity or where they are not established institutions, in particular to ascertain the existence of shadow or de facto directors.
(vi) Analyse any issues arising from these investigations, in particular as to how they could affect the listing applicant's/enlarged group's appropriateness to be admitted to Catalist and be publicly traded.
(vii) Consider each director's suitability and experience in relation to their (proposed) company role.
(viii) Consider the board of directors as a whole in relation to the listing applicant's/enlarged group's needs, for example given its type, size, expected profile and that the listing applicant/enlarged group will be admitted to a Singapore-based, English-language public market.
(ix) Consider, with the directors of a listing applicant/enlarged group, the adoption of appropriate corporate governance measures.
4. Due Diligence (Rule 225(1)(c))
(a) When preparing a listing applicant for admission or advising an issuer in a very substantial acquisition or reverse takeover, the sponsor should do the following.
(i) Undertake due diligence including at a minimum, complying with the SIBA Due Diligence Guidelines where applicable, or such other satisfactory and no less strict due diligence guidelines or processes, in addition to any other appropriate due diligence.
(ii) Exercise its own judgment on the nature and extent of due diligence work needed to satisfy itself as to suitability to list and have knowledge of all relevant facts and circumstances concerning a listing applicant's/enlarged group's ability to meet the Exchange's listing requirements.
(iii) Take all reasonable steps to verify the facts and, if requested, be readily able to confirm them to the Exchange. The sponsor must be in a position to substantiate its opinions, such as in respect of the integrity of the management and controlling shareholders or that the accounts are genuine and conform to applicable standards.
(iv) Oversee the entire due diligence process, satisfying itself that it is appropriate to the listing applicant/enlarged group and transaction being done.
(v) Ensure that any material issues arising are dealt with or otherwise do not affect the suitability of the listing applicant/enlarged group for Catalist.
(vi) Look at the connection to Singapore of every foreign applicant. This is to ensure sufficient local representation and the ability to take steps in the event of a problem. A foreign issuer is required to have a resident director. To meet the objective of sufficient connection, residence means either citizenship or permanent residence status.
(vii) Ensure appropriate professional firms are engaged as needed — particularly for financial and legal due diligence.
(viii) Be able to satisfy the Exchange that it has conducted due diligence through independently-sourced information, by a reputable agent, on the applicant or its management or controlling shareholders. The Exchange may request a sponsor to furnish the results of any independent verification undertaken.
(ix) Exercise due care to prevent any leakage of confidential information to persons not entitled to receive it.
(x) Continually review its due diligence procedures to see how they might be refined or improved.
(b) Without affecting the sponsor's obligation to undertake due diligence, the Exchange may conduct checks using an agency the Exchange appoints. However, the Exchange will usually make inquiries of the sponsor before it decides to conduct such checks. The cost would be borne by the listing applicant/enlarged group. If the Exchange undertook such a check, it would be likely to involve (as circumstances warranted):
(i) 2 or 3 key persons, and their personal and business backgrounds and integrity, role in the listing applicant's/enlarged group's business, interests in other companies, and any criminal or other records or links to money laundering or organized crime.
(ii) The listing applicant's/enlarged group's history, structure, accounts, business reputation and development, its related companies, its other businesses, and the influence of key persons.
5. Preparing the Offer Document or Very Substantial Acquisition/Reverse Takeover Circular (Rule 225(1)(d))
(a) To properly oversee the preparation of the offer document or circular, the sponsor should:
(i) Be actively involved in the preparation of the document.
(ii) Satisfy itself that the document has been prepared in compliance with the Regulations under the Securities and Futures Act and relevant Rules and that the statements and information in it have been made after due and careful enquiry.
(iii) Lead the drafting of the sections of the document that relate to the business of the listing applicant/enlarged group and the risk factors, being satisfied that they take account of matters raised by due diligence.
(iv) Be satisfied that the financial and additional information sections have been appropriately prepared.
(v) Consider whether any specialist third party reports are required.
(vi) Be satisfied that appropriate verification of the document and any related notifications has taken place.
(vii) Liaise with the Exchange to the extent that any rule interpretation may be required.
(viii) Ensure the sponsor's declaration is on the cover (or first page if no cover) of the document.
6. Rule Compliance (Rule 225(1)(e) and 226(1)(c))
(a) To satisfy itself that the listing applicant/enlarged group has in place sufficient systems, procedures and controls, the sponsor should:
(i) Be satisfied that procedures within the listing applicant/enlarged group have been established to ensure compliance with the Rules.
(ii) Be satisfied that the listing applicant's/enlarged group's directors understand their obligations under the Rules.
(iii) Be satisfied that the listing applicant's/enlarged group's directors have been fully advised of both their own and the entity's continuing responsibilities and obligations under the Rules.
(iv) Be satisfied that the listing applicant's/enlarged group's directors are aware of when they should consult with, or seek the advice of, the sponsor.
(v) Be satisfied that the listing applicant's/enlarged group's directors are aware of the practical consequences of the rule requirements.
7. Listing Applicant's/Enlarged Group's Professionals and Consultants (Rule 225(1)(f))
(a) When considering and advising on the suitability and competence of other professionals and consultants, the sponsor should also assess the suitability of the listing applicant's/enlarged group's reporting and ongoing auditors, including their reputation, track record, relevant experience and adequacy of resources.
8. Suitability for Listing (Rule 225)
(a) Under Rule 225
, a sponsor conducting introducing activities must be satisfied, having made reasonable due diligence enquiries and having considered all relevant matters, that a listing applicant is suitable to be listed, or in the case of a very substantial acquisition or reverse takeover, that the issuer is suitable for continued listing. Apart from addressing the Rule in detail, the sponsor must also address whether the entity's structure or operations are suitable for the marketplace.
(b) Entities that may be involved in or connected with any money laundering, terrorist financing, or other illicit activities should not be listed. Other entities may be unsuitable because their businesses are not currently addressed by the Rules (e.g. companies engaged in scientific research and development with no established financial track record, investment funds, trust structures or structured warrants), or because their structures are not currently addressed (e.g. differential voting rights). A sponsor should consult the Exchange if in doubt as to the suitability of an entity.
Amended on 1 February 20111 February 2011.
9. Conditions to be Fulfilled After Listing
(a) There may be conditions imposed by a sponsor on a listing applicant/enlarged group that the listing applicant (issuer) must meet after it is admitted. Such conditions should not be material to the suitability of the listing applicant for listing or the issuer for continued listing, e.g. conditions related to interested persons transactions.
(b) Proposed conditions must be disclosed to the Exchange as part of Appendix 4A