A reverse takeover (RTO) is a corporate transaction in which a private company acquires a public company, resulting in the private firm changing into the listed entity. RTOs are a popular way for private companies to gain access to the public market without having to go through the traditional initial public offering (IPO) process.  
  
RTOs are also turning into increasingly fashionable in Singapore, as they offer a number of advantages over IPOs, together with:  
  
A faster and more efficient route to the public market  
Lower costs  
Larger flexibility in deal structuring  
The ability to retain control of the listed entity  
However, RTOs are additionally advanced transactions that involve a number of legal and compliance considerations. This article will talk about the key legal and compliance issues that parties to a Singaporean RTO must be aware of.  
  
Regulatory Framework  
  
RTOs in Singapore are regulated by the Securities and Futures Act (SFA) and the Listing Manual of the Singapore Alternate Securities Trading Limited (SGX-ST). The SFA and the Listing Manual set out a number of requirements that parties to an RTO should comply with, together with:  
  
The acquirer should make a compulsory offer to all shareholders of the target company to buy their shares.  
The acquirer must provide a circular to target company shareholders setting out the terms of the provide and the reasons for the RTO.  
The goal firm should hold an extraordinary general meeting to approve the RTO.  
The acquirer and the target firm must receive approval from the SGX-ST for the listing of the acquirer's shares on the SGX-ST.  
Due Diligence  
  
It's essential for each the acquirer and the goal company to conduct thorough due diligence on one another earlier than entering into an RTO agreement. This is because RTOs are complex transactions that involve a number of risks, including:  
  
Monetary risks: The acquirer should be certain that the target company is financially sound and that it will be able to generate sufficient profits to service its debt and pay dividends to its shareholders.  
Regulatory risks: The acquirer must be sure that the goal company complies with all applicable laws and regulations.  
Litigation risks: The acquirer should ensure that the goal firm is just not facing any significant legal claims.  
Corporate Governance  
  
RTOs may increase a number of corporate governance concerns. For example, it is vital to ensure that the acquirer and the goal company have independent boards of directors that can provide objective oversight of the transaction. Additionally it is essential to ensure that the acquirer will not have a controlling interest in the listed entity after the RTO, as this might lead to conflicts of interest.  
  
Securities Law Considerations  
  
In addition to the general legal and compliance considerations mentioned above, there are a number of securities law considerations that parties to a Singaporean RTO should be aware of. These include:  
  
The acquirer's offer to target firm shareholders must be fair and reasonable.  
The acquirer must disclose all material information about itself and the goal firm to target company shareholders.  
The acquirer should not interact in any insider trading or market manipulation activities.  
Conclusion  
  
RTOs generally is a complicated and difficult process, but they will additionally provide a number of advantages to both acquirers and goal companies. It is vital for parties to a Singaporean RTO to seek legal and monetary advice early on in the process to ensure that they comply with all applicable laws and regulations.  
  
Additional Considerations  
  
In addition to the general legal and compliance considerations discussed above, there are a number of other factors that parties to a Singaporean RTO should consider, together with:  
  
Taxation: RTOs can have advanced tax implications for each the acquirer and the goal company. You will need to seek tax advice to make sure that the transaction is structured in a tax-efficient manner.  
Employment: RTOs also can have implications for the employees of the goal company. It is important to consider how the RTO will impact the terms and conditions of employment of goal firm employees, and to take steps to make sure that all applicable employment laws are complied with.  
Mental Property: RTOs may involve the switch of intellectual property from the goal company to the acquirer. It is very important be sure that all mandatory mental property rights are switchred to the acquirer, and to take steps to protect the acquirer's intellectual property rights after the RTO.  
  
If you liked this article and you would like to be given details with regards to SingaporeLegalPractice kindly stop by the website.