Significant Investments Review Bill passed to regulate significant investments in entities critical to Singapore’s national security interests including “calling-in” powers : Allen & Gledhill

10 January 2024

The Significant Investments Review Bill (“Bill”) was passed in Parliament on 9 January 2024. The Bill, first introduced in Parliament on 6 November 2023, sets out a new investment management regime to regulate significant investments, be it local or foreign, into entities that are critical to Singapore’s national security interests.

Entities designated as critical to Singapore’s national security interests must notify or seek approval from the authorities for ownership or control changes, among others. Under the Bill, the Singapore Government also has “calling-in” powers within a two-year period of any transaction, and may take targeted actions at any entity that has acted against Singapore’s national security interests.

Designated entities

The Bill provides for the designation by the Minister for Trade and Industry (“Minister”) of designated entities. Any entity incorporated, formed or established in Singapore, any entity that carries out any activity in Singapore, or any entity that provides any goods and services to any person in Singapore may be designated as a designated entity, if the Minister considers that the designation is necessary in the interest of Singapore’s national security. According to the Bill, “entity” means any sole proprietorship, partnership, corporation or other body of persons, whether corporate or unincorporate, and includes a trust.

All other entities not designated

The Minister has “calling-in” powers to review transactions, within a two-year period, involving an entity that was not designated as critical but has acted against Singapore’s national security interests. In such cases, targeted actions can be taken, such as directing the transacting party to dispose of its equity interest in the entity.

The list of designated entities will be published in the Government Gazette after the law comes into force, which is expected to be in a few months’ time. The Ministry of Trade and Industry (“MTI”) will continuously review and re-assess the list of designated entities.

National security interests

“National security interests” is not yet defined. It was clarified in Parliament by Minister for Trade and Industry Gan Kim Yong as broadly covering areas critical to Singapore’s sovereignty and security, including its economic security and resilience; and the continued delivery of essential services. The broad definition was intended to give Singapore the flexibility to respond to unanticipated circumstances promptly as national security issues will evolve over time. As an example, a provider of security-related services, especially where there are few or no alternatives is an entity that could be designated under the Bill.

Other key features

Set out below is a summary of the other key features of the Bill:

Buyers into designated entities must notify the Minister after they become a 5% controller in the entity. They will have to seek approval before becoming a 12%, 25% or 50% controller.
Buyers will also have to seek approval before they become indirect controllers, or when they acquire the business, or parts of it, as a going concern. Sellers will need to seek the Minister’s approval when they cease to be a 50% or 75% controller.
Transactions completed without the necessary approvals will be rendered void. If conditions of approval are not complied with, MTI may direct parties to take remedial actions, such as disposing of a stake in the designated entity.
Designated entities must also seek approval for the appointment of key positions, such as the chief executive officer, directors and chairperson of the board. The Minister may also remove key officers in the interest of national security.
Designated entities will also be subject to other provisions. For example, should national security issues arise or should the delivery of essential services be disrupted, orders can be given to direct the assumption of control of the designated entities’ affairs, business and property, to ensure business continuity.
Provisions under the Bill are not expected to affect current or existing arrangements and will only apply to entities after they have been designated. Stakeholders may refer to the Office of Significant Investments Review which will be set up under MTI as the dedicated one-stop touchpoint.

Currently, there are sector-specific laws to manage entities in regulated sectors, including telecommunications, banking and utilities, which provide legislative restrictions on foreign ownership and licensing regimes where investors must seek approvals from relevant regulators. The Bill does not supersede the sectoral legislation but will complement them and focus on Singapore’s national security interests.

This development comes against a global backdrop where countries are implementing foreign investment controls to safeguard national assets and critical industries. For practical tips and more information on key legal trends impacting foreign investments around the world, please read our article titled “Practical tips and key legal trends impacting foreign investments in 2023”.

Reference materials

The following materials are available on the MTI website www.mti.gov.sg and Singapore Parliament website www.parliament.gov.sg: