Singapore proposes new Significant Investments Review Bill to regulate significant investments in entities critical to national security

3 November 2023

The Significant Investments Review Bill (“Bill”) will be introduced in the next Parliament sitting commencing on 6 November 2023. The second reading of the Bill is expected in January 2024 and, if the Bill is passed, the legislation is set to come into effect a few months later.

The Bill sets out a new investment management regime to regulate significant investments, be it local or foreign, into entities that are critical to the country’s national security interests. This means that those identified as critical entities must notify or seek approval from the authorities for ownership or control changes, among others. Under the Bill, it is expected that the Singapore Government can review ownership or control transactions, and take targeted actions at any entity that has acted against 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”. While speaking on the sidelines of the Ministry of Trade and Industry Economic Dialogue 2023 on 28 August 2023, Minister for Trade and Industry Gan Kim Yong had mentioned that Singapore is exploring new tools to manage significant investments into critical entities to ensure that such investments do not affect Singapore’s economic resilience and national security interest.

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.

What to expect

The Bill proposes that entities can be identified and designated as critical if they are incorporated, formed or established in Singapore, carry out activities in the country, or provide goods and services to people in the country. Such designated entities must then comply with certain ownership and control requirements.

For example, buyers into designated entities have to notify the Minister for Trade and Industry (“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 without the necessary approvals will be rendered void. If conditions of approval are not complied with, the Ministry of Trade and Industry (“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.

The Bill also proposes to allow the Minister to review ownership or control transactions 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.

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 an office which will be set up under MTI as the dedicated one-stop touchpoint.

Reference material

The press release is available on the MTI website mti.gov.sg.

The full text of the Bill will be available on the Parliament website parliament.gov.sg after its introduction in the next Parliament sitting.