Singapore Corporate Lawyer

Lam & Co.

25 years of wide-ranging legal experience
An MBA degree
Tie-ups with deep expertise specialists

Shareholders' Agreements
Distribution & Franchise Agreements
Commercial & Business Contracts
Regulatory Compliance
Mergers & Acquisitions

Why Choose UsEmployment Act Essentials

About Us

M & A and corporate law are complex areas of the law.
You want the right blend of experience and expertise in order to get the best deal.

  • Mr Philip Lam has been practicing law for more than 25 years (since 1990). 
    • He worked at Drew & Napier for about 8 years before striking out on his own with two partners.
    • In 2005, he started Lam & Co.
About Us image

Services Provided

Services Provided image
  • Our services come at a competitive price and include:
    • Mergers & Acquisitions
    • Sale & Purchase of Companies & Businesses
    • Term Sheets for Share Acquisitions
    • Commercial & Business Contracts
    • Startup & Partnership Agreements
    • Shareholders Agreements
    • Investment & Joint Venture Agreements
    • Distribution & Franchise Agreements
    • Employment Agreements
    • Contract Review
    • Regulatory Compliance

Why Choose Us

For M & A and corporate matters, Mr Lam brings:
  • 1.  his vast legal experience, 
  • 2.  his MBA degree in Banking & Finance; and
  • 3.  his access to a broad panel of deep domain specialists. 
Our deep domain specialists include:
  • specialists in a broad range of corporate and commercial matters, including listings (IPOs) in Singapore and Hong Kong, banking, corporate finance, conveyancing and trust, cross-border transactions, dispute resolution including litigation, mediation and international arbitration and also direct investments in the region
  • specialists with offices not only in Singapore, but also in the region, including Hanoi, Ho Chi Minh City, Jakarta and Timor-Leste
  • specialists in Singapore company incorporation, statutory & other compliance, tax & accounting, immigration & work visas, offshore incorporation and international expansion
Ms Sharon Yeow's litigation experience and dispute resolution expertise complements the specialists' skill sets.
Together, all the above enable us to strive for the very best outcome in all your transactions.
Call 6535 1800 now for a short discussion and a face to face meeting so we can understand your situation better and you can see us in action.
We address the following:
  • What are two sure ways to increase the value of your company's shares?
  • Will the sale (or purchase) of the company be in breach of the Competition Act or not?
  • What four ways are there to pay for a company's shares and have you considered the best combination (of these four) for your transaction?
  • How can you ensure that you pay ONLY WHEN the company you have bought performs as promised and not before that?
  • Apart from the value of the company's shares, what else should you factor into the price if you were the seller?
  • If you were the buyer, how can you get the seller to agree to a lower price?
  • If you were the buyer, why is it you should NEVER borrow up to the upper limit of what your banks are prepared to lend?
  • What obligations can you impose on the sellers to ensure they do not straddle the company you are buying with undisclosed accounts payable, liabilities and/or debts?
  • What obligations can you impose to ensure that the buyers properly perform the obligations that they have promised to take over from you?
  • What are (a) triangular forward mergers; and (b) triangular reverse mergers; and what are their advantages and disadvantages?  How can you apply either of them to your situation for your benefit?

Company Incorporation Essentials

Introduction
  • To incorporate a private limited company in Singapore, there are some minimum requirements.
  • We list these requirements below.
Minimum Requirements
  • One shareholder (can be an individual or a company; can be foreigner)
  • One director (can be foreigner; must be resident in Singapore: Singapore citizen, Singapore permanent resident, employment pass holder or EntrePass holder (with Singapore residential address); must be 18 and above; not bankrupt; no criminal malpractice conviction)
  • One company secretary (must be ordinarily resident in Singapore; must be competent)
  • Initial paid-up capital of at least S$1.00
  • A physical Singapore registered office address (cannot be PO box)
Company Name Check
  • Company name 
    • must be unique: to check, click here
    • must not be undesirable
Information Required: Detailed
  • Your name:
    • Your telephone number (including country code):
    • Your email:
  • Proposed company's name:
  • Company's registered address (leave blank if you want us to provide this service):
  • Description of company's business:
    • Country(ies) where company will operate:
    • Source(s) of funding:
  • Shareholder's full name:
    • Whether beneficial owner: 
      • YES or NO
    • Whether Singapore resident or not: 
      • SP CITIZEN or SP PR or FIN NO
    • ID number:
    • Telephone number (including country code):
    • Email:
    • Whether a Politically Exposed Person (see Note 1): 
      • YES or NO
  • Director's full name:
    • Whether nominee director: 
      • YES or NO
    • Whether Singapore resident or not: 
      • SP CITIZEN or SP PR or FIN NO
    • ID number:
    • Telephone number (including country code):
    • Email:
    • Whether a Politically Exposed Person (see Note 1): 
      • YES or NO
  • OPTIONAL
    • Total number of shares:
    • Paid up capital:
    • Currency:
To Open Bank Account: Requirements
  • Company board of directors' resolution
  • Certified true copy (see Note 2) of company’s certificate of incorporation
  • Certified true copy of company’s business profile
  • Certified true copy of company’s constitution
  • Certified true copy of passport or Singapore national registration identity card or FIN no. card of company director
  • Evidence of director's residential address
  • Evidence of address of ultimate beneficial owner of the company


Note 1
  • A Politically Exposed Person is defined as an individual who:
    • is or has been entrusted with any prominent public function in Singapore (domestic PEPs) or in a country or territory outside Singapore (foreign PEPs). In this context, “prominent public function” includes the role held by a head of state, head of government, government minister, senior civil or public servant, senior judicial or military official, senior executive of a state-owned corporation, senior political party official, or a member of the legislature but excludes the role held by middle-ranking or more junior officials; or
    • is or has been entrusted with any prominent public function by an international organisation (PEPs of international organisations). In this context, “prominent public function” includes the role held by a director, deputy director,
      member of the board and member of the senior management of an international organisation, but excludes the role held by middle-ranking or more junior officials.      
Note 2
  • Certified true copy by
    • company director; or
    • company secretary
Company Incorporation Essentials image

Employment Act Essentials

Introduction
  • The Employment Act is the main piece of labour law in Singapore.
  • It states the minimum terms and conditions for employees covered by the Act.
Who is Covered?
  • Subject to some exceptions, all local and foreign employees under a contract of service with an employer are covered.
    • For an example of an exception, managers and executives are not covered by Part IV of the Act which deals with rest days, hours of work, etc.
  • NOTE: Foreign workers under work pass are also covered by the Employment of Foreign Manpower Act.
  • NOTE: Employees who work less than 35 hours a week are part-time employees and they are also covered by the Employment of Part-Time Employees Regulations.
  • NOTE: The following classes of employees are not covered:
    • seafarers
    • domestic workers
    • statutory board employees
    • civil servants
Contract of Service
  • A contract of service is an agreement in which
    • one person agrees to employ another person as an employee; and
    • the other person agrees to serve the employer as an employee.
  • It can be:
    • in writing;
    • verbal;
    • express; or 
    • implied.
  • It may be in any form, including
    • letter of appointment
    • letter of employment (or employment letter)
    • letter of acceptance or nomination
    • trainee agreement 
    • internship agreement
    • apprenticeship agreement
Key Employment Terms
  • All employers must issue Key Employment Terms (KETs) in writing to all employees who
    • enter into a contract of service on or after 1 April 2016.
    • are covered by the Employment Act.
    • are employed for 14 days and above (length of contract, not number of days worked).
  • The KETs must be issued within 14 days from the start of employment.
  • MOM (Ministry of Manpower) blank KETs sample form.
  • MOM KETs sample form - with explanations.
  • Unless an item is not applicable, the KETs must include the following items:
    • employer's full name
    • employee's full name
    • job title
    • main duties and responsibilities
    • start date of employment
    • if a fixed term contract, duration of employment
    • working arrangements such as
      • daily working hours
      • number of working days per week
      • rest day(s)
    • salary period
    • basic salary (For hourly, daily or piece-rated workers, indicate basic rate of pay, eg, $x per hour, $y per day or $z per piece)
    • fixed allowances
    • fixed deductions
    • overtime payment period (if different from salary period)
    • overtime rate of pay
    • other salary-related components such as
      • bonuses
      • incentives
    • type of leave such as
      • annual leave
      • outpatient sick leave
      • hospitalization leave
      • maternity leave
      • childcare leave
    • other medical benefits such as
      • insurance
      • medical benefits
      • dental benefits
    • probation period
    • notice period
    • place of work (optional; used when the work location is different from the employer's address)
Employment Act Essentials image

Companies & Businesses For Sale

Companies & Businesses For Sale image
Companies & Businesses for sale
All Listings are Subject To Contract

  • Jewellery Store
    • established since 1982
    • to be sold with client base
    • quality of diamonds used are grade F or above
    • stock worth up to S$1.5 million
    • with good selection of precious stones
    • (buyer can select stock items he (or she) wants to buy)
    • (i.e., no need to buy all the stock)
  • view to offer
  • Please call 6535 1800 if you are interested. Thank you.

  • Spa
    • about 9 individual rooms for massages
    • within CBD
    • inside a mall
    • tenancy has about 4 years to run
    • valid Category One licence
    • able to operate 24-hours
    • current operation: 10 a.m. till past midnight, 7 days a week
    • operating staff: less than 20 pax
    • to be sold with operating company
  • Asking: S$500,000 negotiable
  • Please call 6535 1800 if you are interested. Thank you.

  • Electroplating & Aluminium Anodizing Service Provider
    • provides electroplating and provides aluminium surface treatment
    • specialize in aluminum anodizing (Type II and Type III), aluminum chromate conversion and chemical cleaning
    • fully equipped
    • fully functioning
    • hazardous substances permit renewed, valid up to Oct 2019
  • Asking: $330k negotiable
  • Please call 6535 1800 if you are interested. Thank you.

  • Bakery
    • profitable
    • sells bread in addition to pastry
    • about 3 staff with 1 part-timer to operate
    • located in Geylang
    • tenancy until February 2020
    • Christmas season demand outstrip ability to supply
    • regular customer base established
  • Asking: S$250,000 negotiable
  • Please call 6535 1800 if you are interested. Thank you.

  • Italian restaurant -- Bukit Timah area - SOLD
    • has been around for about 7 years
    • has goodwill
    • has online bookings
    • has online delivery
    • has a skilful & talented team
    • has regular customers
    • has VIPs
    • has celebrities
  • 8-person operation
  • about 45 to 50 seats
  • potential for franchise
  • potential for more outlets
  • Reason for Selling: Husband wishes to retire
  • Asking: $150k negotiable
  • Please call 6535 1800 if you are interested. Thank you.

  • Beauty Salon
    • in operation since about 1992
    • operator was trained in Korea and then by Vidal Sassoon & Yamano in the US & in Japan
    • operator prepared to train person taking over
    • currently still operating
    • to be sold with customer base
  • Asking: S$25,000/- negotiable
  • Please call 6535 1800 if you are interested. Thank you.

  • Language Centre -- teaches 5 languages
    • Centrally located at People's Park Centre, Chinatown
    • Teaches English, Mandarin, Korean, Vietnamese and Japanese
    • 10 to 20 students
    • 3 staff
    • Tenancy has about 2 years to run
    • Profitable
    • Website: Hanrang Interactive Language Centre
  • Asking: $10k negotiable
  • Please call 6535 1800 if you are interested. Thank you.

The M&A Process

Introduction
  • The M&A process often includes numerous steps.
  • However, very naturally, if the transaction was a simple one, some steps may be skipped.
  • And, of course, if it were a more complex transaction, some additional steps would be required.
Strategic Direction
  • Usually, well before buying or selling any company or business, a strategic direction is agreed upon.
  • This decision is best made after a very careful study of the acquirer's goals, options and resources.
  • Also, this decision could be made by the business owner alone or an M&A Executive Committee.
  • We strongly recommend you approach us as early as possible in your search, whether for as a buyer or as a seller.  We can assist you strategize and come up with the best way to achieve your goals.
Target Identification
  • The next step is to generate as comprehensive as possible a list of potential targets in an organized way to ensure that no viable potential target is omitted.
  • From this list, those that are obviously not viable should be discarded from the remainder, the "Top 3" most suitable targets identified.  Usually, this is determined by singling out those with the most synergistic elements as between acquirer and target (and with the least "dis-synergistic" elements).
  • Even at this initial stage, while identifying suitable targets, it is important to look out for the risk of breaching the Competition Act if the M&A went through.
  • Generally, we do not recommend contacting numerous potential targets at once.  Pick the very best potential target and put your resources there.  If that does not work out, only then, consider the next one on the list.
Confidentiality Agreement
  • Once contact is made and both parties wish to explore the prospects of the transaction further, a Confidentiality Agreement should be signed to protect both parties from the other side abusing the confidential information that is to be exchanged in the course of discussions.
  • By this stage, we strongly recommend you should have approached us already as the Confidentially Agreement should be carefully drafted to adequately protect both sides in the event the transaction goes through and also in the event it does not.
  • Once the Confidentiality Agreement is in force, the parties usually exchange top level (very high level) confidential information to determine whether and on what terms the transaction will proceed.
  • Only if all these exchanges of confidential information result in both sides being satisfied that they want to go ahead, only then will they move on to the next step.
Letter of Intent
  • Usually, the Letter of Intent is not binding but it will state the parties' intention to undergo the transaction at such price, for how many shares (or which assets or businesses), when, etc., etc.
  • It will also often state that the seller will allow and cooperate with the buyer's due diligence efforts which may continue for a period of between 30 to 90 days, depending on the complexity of the deal.
Due Diligence
  • Due diligence is the process where the buyer comprehensively (or rather, as comprehensively as it can) assesses the target's suitability for acquisition, often by a study of the target's key elements such as its assets, liabilities, income, expenses, commercial potential, whether stand alone or synergistic and "dis-synergistic" elements.
  • We would advise that this is normally one of the critical stages of the process  and we should be instructed well in advance to do proper due diligence for our client.
  • The reason is that the next stage (if the client should choose to proceed) would result in be a legally binding and enforceable agreement for the seller to sell shares (assets or businesses) and for the buyer to buy them.  By then, the buyer would have committed to having the funds ready (to buy when the time comes).  Also, by then, both parties must have identified the warranties and representations (promises) that the seller must make for the buyer to go ahead with the M&A transaction.
  • Because of what this entails, by the end of due diligence, ideally, our client, the acquirer, should have been able to satisfy itself as to all the target's key elements (see above) and determine the target's value via a correct valuation model, identified the appropriate deal structure (whether to enter into a Share Purchase Agreement or Asset (or Business) Purchase Agreement, forward or reverse triangular merger, etc.) and so on.
  • Click here for an example where the buyer (who was not our client) failed to properly identify all the target's key elements before signing a binding agreement to acquire the target.  The parties ended up suing each other in court.
M&A Agreement
  • The parties negotiate and then sign the binding M&A Agreement.
  • After the signing, there will often be some time set aside for the seller to get all the necessary documentation, approvals, consents, etc., in time for the completion.
Completion (aka Closing)
  • At completion, all necessary representations, warranties, documentation, approvals, consents, etc., are exchanged, often, for cashier's orders or funds transfer acknowledgements, etc.
Post-completion (or Integration)
  • Post-completion, there will often be numerous other follow up items which will have to be done.
  • Some are as basic as stamping the appropriate documents within 14 days after signing.
  • Others may include integrating two vast organizations, including their work forces, including operations, functions, inventories, infrastructure such as factories and offices, etc., markets including customers, product and service lines, etc.
References
Action
  •  If you have any questions or need any help buying or selling a company or a business, please feel free to call Lam & Co. at 6535 1800.

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Contact: 6535 1800

  • 24 Raffles Place #20-06 Clifford Centre, Singapore 048621

Lam & Co.

6535 1800

Singapore Corporate Lawyer

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How to choose a Singapore M&A lawyer

  • You want to sell your company (or buy someone else's company).
  • Or, you have gotten the offering document (or term sheet) from the sellers and you are interested.
  • Or, you have prepared the offering document (or term sheet) and the buyers have sent over their letter of interest.
How should you go about choosing your lawyer?
You should call us at 6535 1800 because
  • We have a 24 hours (almost), 7 days a week, hotline: 6535 1800.
  • Our hotline is answered personally by Mr Philip Lam who has more than 25 years of legal experience, an MBA in Banking & Finance and also access to a broad panel of deep domain specialists.
  • We make every effort to answer all general information questions. 
  • We arrange an appointment for a no charge, no obligation interview.
  • We are effective and are able to take immediate action.
  • We listen carefully to our clients.
  • We are very easily contactable.  You can get us either on our hotline (6535 1800) or our direct office number.
  • Our deep domain specialists include:
  • specialists in a broad range of corporate and commercial matters, including listings (IPOs) in Singapore and Hong Kong, banking, corporate finance, conveyancing and trust, cross-border transactions, dispute resolution including litigation, mediation and international arbitration and also direct investments in the region
  • specialists with offices not only in Singapore, but also in the region, including Hanoi, Ho Chi Minh City, Jakarta and Timor-Leste
  • specialists in Singapore company incorporation, statutory & other compliance, tax & accounting, immigration & work visas, offshore incorporation and international expansion
Call us now at 6535 1800.

Singapore M&A Lawyer  |  Contact: 6535 1800  |  Return to Home Page  |  Key to All Articles & Links
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Top 10 Tips for a Successful Corporate Acquisition (by Singapore M&A Lawyer)

Top 10 Tips for a Successful Corporate Acquisition (by Singapore M&A Lawyer) image
Introduction
  • In every corporate acquisition, there may be many obstacles to successful integration.  What are the best ways to minimize the risk of failure and maximize the opportunity to succeed?
  • Our top 10 tips for a successful acquisition are as follows:
One: Get the Best Advisors ASAP
  • You should engage the best advisors -- as soon as possible (ie, as early as possible).
  • They will help you do proper:
    • strategic & business due diligence
    • financial due diligence
    • legal due diligence
  • Engaging your advisors early will enable you to avoid fundamental and structural mistakes in your approach to the acquisition.
Two: Do NOT assume perfect post-completion integration
  • In all your analysis (eg, likely economies of scale, expected client base combination, anticipated cost savings, planned branch reduction, etc.), do NOT assume perfection.
  • Recognize that all post-completion integration will inevitably face resistance (from inside as well as from outside), friction, reaction from competitors, etc.
Three: Build in a Margin of Safety
  • When you do your computations, build in a margin of safety.
  • For eg, be conservative when computing anticipated cost savings by targeting lower than what you think can be achieved.
Four: Always be Ready to Walk Away
  • Do NOT adopt a competitive mindset such as:
    • "I must beat the competition and acquire this company before they do."
  • Do NOT think that for some reason or other, you MUST acquire this company at any price or your existing business will be wiped out.  This is highly unlikely to ever be the case.
Five: NEVER over bid.
  • Remember
    • It is always possible to over bid.
    • You should NEVER over bid.
    • You should compute the true value of the target company before even contacting the target company.
    • Your initial offer should be below the true value.
    • Your final offer should NEVER exceed the true value of the target company.
  • Do not think that in the course of negotiations, you suddenly discovered something that made the target company worth more than what you had earlier computed.  This, too, is almost never the case.
  • For an example, click here and here.
Six: Ensure Adequate Time & Resources for Due Diligence
  • We strongly recommend our clients provide in the Letter of Intent:
    • sufficient time for due diligence; and
    • full access to the target company's records to perform said due diligence.
  • The time for due diligence will often range from 30 to 90 days.
  • By the end of this period, you and your team of advisors will have to decide whether or not to enter into a binding agreement to acquire the target company.
Seven: Do Thorough Strategic, Business & Financial Due Diligence
  • This is the opportunity for you and your team of advisors to check and confirm:
    • whether the synergies with the target company exists or not.
    • whether the DIS-synergies (factors that cause the combined entity to be less effective or less valuable) exists or not.
  • You and your team should also check and confirm whether the quality of the target company's earnings (and other financial indices) are as told to you:
    • has it been consistent?
    • for how long?
    • has it been growing or slowing?
    • are projections reasonable?
Eight: Do Thorough Legal Due Diligence
  • Here, the obligations and liabilities of the target company should be meticulously identified.
  • Other factors that can adversely or favourably affect the target company should also be identified.
  • For eg, does the target company (or new entity) require a licence in order to operate?
Nine: Stipulate correct Condition Precedents BEFORE Paying
  • It is vital to ensure that ALL necessary licences are obtained BEFORE paying.
    • For an example where this did not happen, resulting a court case, click here.
    • For another example where this did not happen, resulting in another court case, click here and here.
Ten: Allocate Adequate Time & Resources for Integration
  • Now that you have acquired the target company, the follow through is crucial in order to reap the full benefits of the acquisition.
  • For this, you must assign your best people and set aside the necessary time and resources to make the post-completion integration a success.
Action
If you have any questions or are thinking of acquiring a company or business, please feel free to call Lam & Co. at 6535 1800.

Top 10 Things to Know about Term Sheets (by Singapore M&A Lawyer)

Top 10 Things to Know about Term Sheets (by Singapore M&A Lawyer) image
Introduction
  • You and your partner are raising funds for your startup.  You know the negotiations over the Term Sheet are going to be intense.
  • The most important things you need to know are as follows:
One: Get the Best Advisors ASAP
  • You should engage your advisors -- as soon as possible (ie, as early as possible).
  • They will help you ensure:
    • the best outcome and
    • avoid fundamental and costly errors.
Two: Term Sheets are NOT binding
  • Normally, Term Sheets are not binding.  That's correct, Term Sheets are usually NOT binding. 
  • This is perfectly normal -- so,
    • don’t buy that private jet just yet and
    • don't assume the deal is done once they sign on the dotted line.
Three: See the Big Picture
  • Remember that in terms of timing, the parties typically:
    • do some strategic, business and financial due diligence and then
    • sign the Term Sheet (which is NOT binding) and then
    • perform full due diligence and only after that,
    • enter into a Investment (or other) Agreement (which IS binding).
Four: Formulate & Remember your Objectives
  • What do you want?  You have to determine your goals BEFORE you start negotiating with the investors.
    • Do you want to sell out completely?
    • Do you want to remain a substantial owner of the startup?
    • Do you want to continue working at the startup after the sale?
    • Do you want to retain control no matter what the cost?
  • Discuss with your advisors and decide what you want BEFORE the start of negotiations.
Five: Determine your Limits
  • How much funds do you wish to raise?
  • What is the minimum amount of funds you want out of the sale?
  • What is the maximum proportion of shares you are prepared to sell?
  • Do you want to retain any control over the company?  How much control?
  • Who will appoint the majority of the directors?  You or the Investors?
Six: Understand what the Investors want
  • Typically, investors want to
    • invest in your startup
    • in return for convertible preferred shares
    • that they intend to convert into shares
    • which they will sell for maximum profit
    • when they exit the company.
Seven: Align Both Sides' Goals
  • No matter how intense or even bruising the negotiations, remember:
    • the investment comes into your startup only if the parties come to an agreement.
  • For this to happen, there must be give and take.
Eight: (On the other hand,) Always be Ready to Walk Away
  • As far as possible, line up alternatives so that
  • you are not forced to accept unacceptable terms.
Nine: Ensure Adequate Time & Resources for Due Diligence
  • You must provide in the Term Sheet sufficient time for due diligence; and
    • ensure full access for the investors to perform said due diligence.
  • The time for due diligence often range from 30 to 90 days.
  • By the end of this period, you should ensure that the investors have the information they need to decide
    • whether or not and
    • on what terms
    • to invest in your startup (via a binding agreement).
Ten: Negotiate a Binding Agreement & Satisfy its Conditions for Funds to be Injected
  • This is what the (non-binding) Term Sheet is supposed to lead up to.
  • It is supposed to lead up to:
    • a Binding Agreement and then
    • upon satisfaction of all condition precedents,
    • injection of funds into your start up.
  • To ensure that this in fact happens,
    • first, negotiate a fair and achievable Binding Agreement and
    • then, satisfy all the conditions.
Action
  • If you have any questions or are thinking of raising funds for your company, please feel free to call Lam & Co. at 6535 1800.

Case Study: Minority Shareholder's Right to appoint Director. The Court of Appeal Makes a Ruling

Case Study: Minority Shareholder's Right to appoint Director. The Court of Appeal Makes a Ruling image
Introduction
  • In a recent case, the Singapore Court of Appeal commented on a Minority Shareholder's right to appoint a director.
  • The Court of Appeal pointed out that
    • it is common for shareholders' agreements (and joint venture agreements) to say
    • a shareholder is entitled to nominate (or appoint) a director to the company's board of directors.
  • However, just as often,
    • the company's constitution (memorandum and articles of association) says that 
    • the company's board of directors have the power to appoint directors.
  • (paragraph 1)
Questions
  • Thus, various questions arose in that case:
  • The minority shareholder claims it has a right to appoint any person
    • unless such appointment would be injurious to the company, and
    • that its nomination of that person, ipso facto (that is, that is, by virtue of the nomination itself on its own, without more), 
    • makes its nominee a director with immediate effect.
  • But is this correct?
  • The majority shareholders claim
    • the minority shareholder has a mere right to nominate a person for directorship, and
    • the board of directors retains the discretion not to appoint that person
    • if it would not be in the company’s interests to do so.
  • Which position is correct?
    • Is the company obliged to accept the shareholder’s nominee/appointee without question?
    • If not, what principles (if any) constrain its discretion to reject the nominee/appointee?
    • How does this interact with the company’s constitution which vests the power of appointment in the board of directors?
  • (paragraph 2)
Shareholders' Agreement
  • In that case, several parties entered into a Shareholders' Agreement which said:
    • 5. Board of Directors (of TWG)
    • 5.1 Number: The Board shall comprise three Directors.
    • 5.2 Composition: The Board shall comprise:
    • 5.2.1 two persons appointed by [Paris] and [Wellness]; and
    • 5.2.2 one person appointed by OSIM, for so long as OSIM’s Shareholding Percentage is not less than 25 per cent. That person shall be Mr Ron Sim.
  • (paragraph 4)
  • So, here, the company was
    • TWG whereas
  • the shareholders were
    • Wellness (54.7% of the shares)
    • Paris (10.3%) and
    • OSIM (35%).
  • (paragraph 5)
Counterintuitive Situation
  • Over time, the shareholding changed to as follows:
    • Wellness (30.1% of the shares)
    • Paris (11.3%) and
    • OSIM (58.6%).
  • The situation was counterintuitive because
    • OSIM (which had more than 50%) was entitled to appoint one director whereas
    • Wellness & Paris (which, together, had 41.4%) were entitled to appoint two directors.
  • (paragraph 6)
Lower Court's finding of Implied Term
  • In the lower court (the High Court), the learned Judge found that
    • a term should be implied into the Shareholders’ Agreement because
    • it “omitted to address the situation where [Wellness], whether by itself or with Paris, ceased to be the majority shareholder/s in [TWG]”.
  • The parties had not contemplated this lacuna (gap, hole), and
    • it was necessary in the commercial sense to imply a term in order to give the contract efficacy because otherwise
    • Wellness and Paris would continue to control the TWG Board regardless of how small their combined shareholding came to be and
    • the parties could not have intended such a result.
  • The Judge said that the specific term to be implied was that
    • “the majority shareholder(s) (whoever they may be) would be entitled to appoint two directors, and the minority shareholder(s) would be entitled to appoint one director so long as they hold at least 25% of the shares in [TWG]”
  • Thus, Wellness, being the minority shareholder, was entitled to appoint one director pursuant to the Implied Term.
  • (paragraph 7)
Wellness' Failed Attempts to Appoint Director
  • Wellness tried to appoint Mr Murjani to the Board of TWG.
    • Mr Murjani had previously sat on TWG’s Board before resigning, and
    • Wellness had not appointed another director in his place since then.
  • However, TWG, OSIM and Paris refused to appoint Mr Murjani on the basis that
    • his appointment would not be in TWG’s best interests
  • Instead, they invited Wellness to appoint either
    • Ms Kanchan Murjani, who is Mr Murjani’s wife, or
    • Mr Finian Tan, both of whom were also directors of Wellness.
  • To resolve this impasse, Wellness wrote to TWG 
    • proposing that Associate Professor Mak be appointed to the Board of TWG instead of Mr Murjani.
  • Wellness also requested
    • (a) that the Board authorise Prof Mak to disclose to Wellness information in relation to TWG which he would have access to in his capacity as director, in accordance with s 158 of the Companies Act; and
    • (b) that TWG arrange for Prof Mak to be covered by director and officer insurance to the same extent as TWG’s other directors; and if no such insurance had been purchased for the directors, that it be purchased.
  • These two matters were referred to as “the Ancillary Matters”.
  • TWG did not reply.
  • Wellness wrote to TWG to “request” that 
    • it “immediately take all necessary steps to formalise the appointment of Professor Mak, including the [A]ncillary [M]atters”.
  • TWG did not reply.
  • Wellness wrote again to 
    • “demand” the formalisation of Prof Mak’s appointment,
    • without mentioning the Ancillary Matters.
  • TWG replied to say that
    • it would not appoint Prof Mak because
    • the board of directors was “unable to accede” to the Ancillary Matters, which were in any event not in TWG’s interests.
  • (paragraphs 8 to 11)
Wellness Sues
  • Wellness filed a case in court and applied for:
    • (a) a declaration that it was entitled to appoint one director to TWG’s board as long as it held at least 25% of the shares in TWG;
    • (b) an order that Prof Mak be appointed as a director of TWG; and
    • (c) an order that the three defendants (being Paris, OSIM, and TWG) execute the necessary documents to give effect to Prof Mak’s appointment.
  • (paragraph 12)
Situation in TWG's Board of Directors
  • The board of directors of TWG comprised of
    • Mr Taha Bouqdib (“Mr Bouqdib”) (appointed by OSIM) and
    • Mr Ron Sim Chye Hock (appointed by Paris).
  • Wellness had not been represented on the board of directors for some time already.
  • (paragraph 13)
Issues (Key Questions) before the Court of Appeal
  • The first issue pertains to the nature of Wellness’ contractual right under the Implied Term.
    • In particular, does the Implied Term entitle Wellness to appoint a director to the Board of TWG, or
    • merely to nominate a director whose appointment can only be effected by the Board?
    • If Wellness has only a right of nomination,
    • must TWG accept Wellness’ nominee without question; and if not,
    • what principles (if any) constrain its discretion to reject the nominee?
  • The second issue is whether the Implied Term has been breached.
    • This requires the court to determine:
      • whether the Ancillary Matters were mere requests or conditions attached to Prof Mak’s appointment, and
      • whether the respondents’ refusal to appoint Prof Mak in those circumstances constituted a breach of the Implied Term.
  • The third issue is, if there has indeed been a breach of the Implied Term, what relief ought to be ordered?
    • Wellness wants
      • (a) a declaration that it is entitled to appoint one director to TWG’s Board;
      • (b) an order that Prof Mak be appointed as a director of TWG; and
      • (c) an order that the respondents execute, or procure the execution of, the necessary documents to give effect to Prof Mak’s appointment.
    • The respondents say that
      • specific performance is unavailable for various reasons,
      • including that such relief will not be ordered in respect of a contract for services, and
      • that Wellness did not come to the court with clean hands and therefore is not entitled to the relief.
  • (paragraphs 20 to 22)
The Court of Appeal's Decision
  • The Implied Term gives Wellness a right to nominate one person to be a director of TWG, with a corresponding obligation on the part of the Board of TWG to appoint that nominee as a director, subject to two important caveats.
  • First Caveat: the nomination of a person who is statutorily disqualified under the Companies Act from assuming directorship, or who does not consent to act as a director, would be defective in and of itself. There would clearly be no obligation to appoint such a person.
  • Second Caveat: even if the nomination is not defective, the Board of TWG would not be obliged to appoint the nominee if it is able to establish that the nominee would be obviously unfit for office or that his appointment would be obviously injurious to the company. The burden is not on Wellness to positively establish the suitability of its nominee, but upon the Board to prove his unsuitability. In this regard, it will not suffice for the Board to simply assert that the nominee lacks relevant experience or skills. The fact that he might disagree with the other directors on matters pertaining to the management of the company is also not in itself a basis to refuse appointment. Rather, the Board must adduce clear evidence to show the shortcomings of the nomination, such as if the nominee would be placed in a position of a conflict of interest or a breach of fiduciary duty. This might be the case if, as a more specific example, the nominee operates a business in competition with the company to which he is nominated as director.
  • (paragraph 33)
The Court of Appeal's Comments
  • The purpose of cl 5 of the Shareholders’ Agreement, as well as the Implied Term, is to ensure that the minority shareholder is represented on the Board of TWG and is not totally excluded from decision-making by the majority. Such provisions entitling a shareholder to appoint a director to the board are an important and common feature of joint ventures and serve to guarantee a minimum degree of protection of the shareholder’s interests. The Implied Term would be ineffective if the majority could obstruct or indefinitely delay the appointment of Wellness’ nominee by requiring Wellness to prove the suitability of its nominee to the majority’s subjective satisfaction.
  • (paragraph 35)
  • There is the principle that a power to appoint the directors, “even if conferred on a named shareholder, is not constrained by any fiduciary or similar obligation and may be exercised in the shareholder’s own interests”.
  • (paragraph 36)
  • The fact that Wellness’ right was provided for by contract, rather than in TWG’s Constitution, does not suggest that the parties intended it to have lesser force or effect. There are multiple advantages to creating such a right by contract, rather than by way of constitutional amendment. Unlike a contract binding the shareholders, the articles are vulnerable to amendment by special resolution and cannot be enforced by a person who is not a member of the company. Indeed, a shareholders’ agreement to which all the shareholders are parties can be “fully effective as a constitutional document”. Clause 12 of the Shareholders’ Agreement shows irrefutably that the shareholders intended the Shareholders’ Agreement to take precedence even over TWG's constitution.
  • (paragraph 39)
  • Clause 12 of the Shareholders’ Agreement states:
  • 12. Prevalence of Agreement
  • In the event of any inconsistency or conflict between the provisions of this Agreement and the provisions of the Articles, the provisions of this Agreement shall as between the Shareholders prevail (subject to applicable law) and the Shareholders shall, so far as they are able, cause such necessary alterations to be made to the Articles as are required to remove such conflict.
  • It unequivocally expresses the shareholders’ unanimous intention that the terms of that agreement should prevail in the event of conflict with the Constitution.
  • All the shareholders of TWG are parties to the Shareholders’ Agreement. There is thus no question of the shareholders accomplishing through the Shareholders’ Agreement what they would be unable to achieve at a general meeting for want of unanimity.
  • Paragraph (c) of the preamble to the Shareholders’ Agreement shows that the shareholders fully intended it to govern the operation of TWG:
  • It is the common intention of the Parties hereto to operate the Company as a joint venture company for the purpose of carrying on the Business and to this end, the Parties have agreed to regulate the affairs of the Company and the respective rights and obligations of the Parties as shareholders of the Company on and after the Effective Date, on the terms and subject to the conditions of this Agreement.
  • (paragraph 70)
  • The respondents must accept that the Implied Term curtails the operation of Art 91, since they acknowledge that the board of directors cannot simply appoint whoever it pleases without reference and deference to the choice of the shareholders.
  • Moreover, it has been held that a shareholders’ agreement to exercise their votes in a particular way is valid and enforceable by the courts.
  • If there was any inconsistency between Art 91 and the Implied Term, the shareholders would have been legally obliged to amend the Constitution, and would not be able to take advantage of their breach of cl 12 to avoid their contractual obligation under the Implied Term to appoint Prof Mak.
  • (paragraph 71)
  • On the other hand, the Implied Term does not give Wellness the power to constitute a person a director of the company simply by selecting or nominating its candidate.
  • (paragraph 41)
  • The right that Wellness acquires under the Implied Term therefore lies somewhere between these two poles (a mere right to nominate on one hand, and an unqualified right of appointment on the other).
  • (paragraph 45)
The Court of Appeal's Conclusions
  • Art 91 of the Constitution, states, “The Board of Directors may, at any time, and from time to time, appoint any person to be a Director, either to fill a casual vacancy, or by way of addition to their number.”
  • (paragraph 63)
  • The Implied Term does not give the shareholders the power to appoint directors per se, but rather to determine who they shall be. The power of appointing the directors remains with the Board pursuant to Art 91 of the Constitution, although it must now be exercised in accordance with the shareholders’ wishes pursuant to the Implied Term.
  • (paragraph 64)
  • The Ancillary Matters were never attached as conditions to Prof Mak’s appointment. The breach of duty which Wellness alleges on the part of TWG, both in the OS and on appeal, consists simply in the Board’s refusal to appoint Prof Mak without good reason.
  • (paragraphs 81 and 82)
  • The Court of Appeal ordered that Prof Mak be appointed a director of TWG and that the respondents, their directors and/or their officers execute or procure the execution of the documents necessary to give effect to his appointment.
  • (paragraph 92)
Action
  • The above is not legal advice and should not be considered legal advice. 
  • If you have any questions about shareholders' agreements or minority shareholders' right to appoint a director or other issues, please feel free to call Lam & Co. at 6535 1800.

Case Study: Meaning of "Best Endeavours". Court of Appeal sets out guidelines (by Spore M&A Lawyer)

Case Study: Meaning of "Best Endeavours". Court of Appeal sets out guidelines (by Spore M&A Lawyer) image
Absolute Duty & Best Endeavours Duties: What is the Difference?
  • When a buyer buys a company, the buyer would often want the seller to do certain things.
    • For example, the company already makes (A) computer chips and the buyer wants to buy over the company and continue making computer chips. 
    • At the same time, the buyer is thinking of going into (B) thumb drives sometime in the future and it would be nice if the buyer could do this on the company's premises.
  • Here,
    • (1) the buyer may insist that the seller gets the landlord's consent for the premises to be used to make (A) computer chips; and
    • (2) the buyer may like the seller to get the landlord's consent for the premises to be used to make (B) thumb drives.
  • Thus, there is a difference between:
    • (1) the buyer insisting that the seller has the ABSOLUTE duty to get the landlord's consent for (A) computer chips.  
    • (In other words, the seller MUST get the landlord's consent for (A) computer chips before the buyer would go ahead to buy the company.); but
    • (2) the buyer may NOT insist that the seller has the ABSOLUTE duty to get the landlord's consent for (B) thumb drives.  
    • Instead, the buyer may allow the seller to use his (or her) BEST ENDEAVOURS to get the landlord's consent for (A) computer chips.
Court of Appeal Case
  • The highest Court in Singapore, the Court of Appeal, in a recent case (Lim Sze Eng v Lin Choo Mee [2018] SGCA 84, Decision Date: 30 Nov 2018) gave some important guidance on what BEST ENDEAVOURS actually mean.
    • Earlier, LSE and LCM had a dispute and they went to court.  
    • The Court of Appeal suggested that they attend mediation to try to resolve their differences.  
    • The mediation was successful and resulted in a Settlement Agreement.
  • Under the Settlement Agreement, LCM should get an amount of money but that amount could only be determined once the sale price of a shop unit had been determined. (paragraph 3)
  • However, despite the facts that
    • (i) at multiple auctions of the shop unit at the reserve price of S$2.1m, there were no bids; and
    • (ii) Colliers recommended a reserve price of S$1.6m,
    • LSE refused to reduce the reserve price and 
    • because of this, LCM remain unpaid.
  • Thus, the parties ended up in court again.
The Reasonable Endeavours Term
  • When the case came to court, the parties' pleadings (key, binding documents) said that Settlement Agreement contained an implied term that:
    • the parties “shall take reasonable endeavours and/or do all that may be necessary to give effect to the spirit and intent of the Settlement Agreement and to implement the terms of the Settlement Agreement”, and
    • the “parties would cooperate to enable the sale of the (shop unit) and/or not to prevent performance of the sale of the (shop unit) by their acts and/or omissions”,
    • (both the above were together, referred to as “the Reasonable Endeavours Term”). 
    • (paragraph 23)
Issue
  • At the heart of the dispute was:
    • whether LSE's refusal to reduce the reserve price below S$2.1m despite
      • (i) at multiple auctions of the shop unit at the reserve price of S$2.1m, there were no bids; and
      • (ii) Colliers recommended a reserve price of S$1.6m,
    • was a breach of the Reasonable Endeavours Term. (paragraph 52(b))
Guidelines
  • The Court of Appeal endorsed the following guidelines:
    • (a) The obligor has a duty to do everything reasonable in good faith with a view to procuring the contractually-stipulated outcome within the time allowed. This involves taking all those reasonable steps which a prudent and determined man, acting in the interests of the obligee and anxious to procure the contractually-stipulated outcome within the available time, would have taken.
    • (b) The test for determining whether a ‘best endeavours’ obligation has been fulfilled is an objective test.
    • (c) In fulfilling its obligation, the obligor can take into account its own interests.
    • (d) A ‘best endeavours’ obligation is not a warranty to procure the contractually-stipulated outcome.
    • (e) The amount or extent of ‘endeavours’ required of the obligor is determined with reference to the available time for procuring the contractually-stipulated outcome; the obligor is not required to drop everything and attend to the matter at once.
    • (f) Where breach of a ‘best endeavours’ obligation is alleged, a fact-intensive inquiry will have to be carried out.
    • [emphasis in original] 
    • (paragraph 73)
Further Guidelines
  • The Court of Appeal also set out further guidelines that apply to both “all reasonable endeavours” and “best endeavours” clauses:
    • (a) Such clauses require the obligor ‘to go on using endeavours until the point is reached when all reasonable endeavours have been exhausted’ ... or ‘to do all that it reasonably could’….
    • (b) The obligor need only do that which has a significant ... or real prospect of success ... in procuring the contractually-stipulated outcome.
    • (c) If there is an insuperable obstacle to procuring the contractually-stipulated outcome, the obligor is not required to do anything more to overcome other problems which also stood in the way of procuring that outcome but which might have been resolved ....
    • (d) The obligor is not always required to sacrifice its own commercial interests in satisfaction of its obligations ..., but it may be required to do so where the nature and terms of the contract indicate that it is in the parties’ contemplation that the obligor should make such sacrifice ....
    • (e) An obligor cannot just sit back and say that it could not reasonably have done more to procure the contractually-stipulated outcome in cases where, if it had asked the obligee, it might have discovered that there were other steps which could reasonably have been taken ....
    • (f) Once the obligee points to certain steps which the obligor could have taken to procure the contractually-stipulated outcome, the burden ordinarily shifts to the obligor to show that it took those steps, or that those steps were not reasonably required, or that those steps would have been bound to fail .... 
    • (paragraph 74)
Court of Appeal Decision
  • The Court of Appeal said that the foregoing guidelines should apply to guide the interpretation of the Reasonable Endeavours Term in the case between LSE and LCM.
  • Although the Reasonable Endeavours Term does not expressly state that
    • the parties are to take all reasonable endeavours or 
    • take their best endeavours to sell the shop unit, 
    • it does specifically require the parties to
    • “do all that may be necessary to ... implement the terms of the Settlement Agreement”. 
  • The Reasonable Endeavours Term should thus be construed to
    • impose on the parties an obligation to take all reasonable endeavours or 
    • take their best endeavours to sell the shop unit.
    • (paragraph 75)
  • Applying the guidelines to the case, the Court of Appeal found that
    • LSE had breached the Reasonable Endeavours Term 
    • by failing to agree to lower the reserve price of the shop unit. 
    • LSE had failed to “do everything reasonable in good faith with a view to procuring the contractually-stipulated outcome within the time allowed”, given that
    • he certainly did not take “all those reasonable steps which a prudent and determined man, acting in the interests of the obligee and anxious to procure the contractually stipulated outcome within the available time, would have taken”.
Summary
  • “All reasonable endeavours” and “best endeavours” clauses may include the following:
    • B shall take his (or her) best endeavours to do XYZ.
    • C shall take all reasonable endeavours to do XYZ.
    • D shall do all that may be necessary to implement the terms of the agreement.
  • The Guidelines and the Further Guidelines (see above) apply to
    • “all reasonable endeavours” clauses and 
    • “best endeavours” clauses.
Action
  • The above is not legal advice and should not be considered legal advice.
  • If you have any questions about the “all reasonable endeavours” and “best endeavours” clauses or other issues, 

Term Sheet: What is it and How is it used? (by Singapore M&A Lawyer)

Term Sheet: What is it and How is it used? (by Singapore M&A Lawyer) image
Introduction
  • A Term Sheet is a preliminary summary of the terms on which a company (or business) may be bought by the buyer from the seller.
  • Often, the buyer prepares an initial draft which
    • will undergo several revisions with input from both sides.
  • Typically, the Term Sheet is mainly not binding.
    • It may have certain parts which are binding on the buyer and the seller, for example,
      • the obligation to keep confidential the information disclosed and
      • the obligation for the buyer and the seller to bear their own costs for the preparation of the term sheet.
Purposes
  • To form a foundation for further discussion.  
    • As mentioned, the Term Sheet may undergo several revisions.  
    • The written form of the Term Sheet helps both buyer and seller see where the discussions (or negotiations) are going.
  • To move the discussions (or negotiations) forward.  
    • Since both parties will have a copy of each revision of the Term Sheet, 
    • they will know if there is any backsliding or 
    • sudden increases in demands 
    • compared to earlier revisions.
  • To avoid misunderstanding.  
    • The written form of the Term Sheet prevents 
    • either party from relying on any important term 
    • that does not appear in the Term Sheet.
  • To show commitment.  
    • If the buyer and the seller talk and they are unable to come up with the Term Sheet, 
    • it is unlikely that any deal will happen between them.
  • To bind the parties to certain initial commitments.  
    • As mentioned, both parties may agree to:
      • the obligation to keep confidential the information disclosed and
      • the obligation for the buyer and the seller to bear their own costs for the preparation of the term sheet.
Parts of a Term Sheet
  • A Term Sheet will often have the following parts:
    • Date
    • Parties and Object.  
      • The buyer, 
      • the seller and 
      • what is being sold would usually be identified.
    • Structure of Transaction.  
      • Some where along the several revisions of the Term Sheet, 
      • the parties are likely to agree on the structure of the sale, 
      • e.g., sale of a company or 
      • sale of the assets.
    • Costs of Preparation.  
      • Very often, it will be a binding term of the Term Sheet that 
      • the buyer and the seller will, each bear their own costs of preparing the Term Sheet.
    • Confidentiality.  
      • Again, very often, the buyer and the seller would agree 
      • to keep their discussions and the information exchanged confidential.
    • Land, Assets &/ Personnel.  
      • Significant items that form the commercial purpose of the transaction may be in the form of 
      • the land, 
      • assets and/or 
      • personnel of the company being sold.  
      • If so, these will be mentioned in the Term Sheet.
    • Goodwill, Brands &/ Licences.  
      • Similarly, the purpose of the transaction may be to secure the 
      • goodwill, 
      • brand and/or 
      • licences held by the company being sold.  
      • If so, these will also be mentioned in the Term Sheet.
    • Conditions Precedent.  
      • The buyer may insist on certain items to be in order before the going through with the purchase, for example, 
      • successfully completing due diligence, 
      • successfully raising funding (to pay the purchase price), 
      • governmental approvals, 
      • a certain number of years of audited financial statements, 
      • satisfactory representations and warranties from the seller, etc.
    • Exclusive Period.  
      • It would be a good idea for the buyer to bind the seller 
      • for a specified period of time (often 90 days), 
      • not to approach anyone else to try to sell the same company (or business).
    • Acceptance Period.  
      • The buyer would usually give the seller 
      • a specified amount of time within which to 
      • accept the finalized version of the Term Sheet.
Tailored Product
  • Ultimately, a Term Sheet is tailored to the particular buyer and seller's situation.
  • A well drafted Term Sheet will 
    • move the parties rapidly towards a successful completion of the transaction.
  • If the parties have difficulties settling the Term Sheet, 
    • it is best they settle those difficulties first 
    • before going through with the sale.
Action
  • The above is not legal advice and should not be considered legal advice. 
  • If you have any questions about Term Sheets or other issues, please feel free to call Lam & Co. at 6535 1800.

No Oral Modification Clause: What is it? (by Singapore M&A Lawyer)

No Oral Modification Clause: What is it? (by Singapore M&A Lawyer) image
Introduction
  • The UK Supreme Court recently considered a No Oral Modification Clause in the case of Rock Advertising v MWB. 
  • The Clause in question read as follows:
    • This Licence sets out all of the terms as agreed between MWB and Licensee.
    • No other representations or terms shall apply or form part of this Licence.
    • All variations to this Licence must be agreed, set out in writing and signed on behalf of both parties before they take effect.
Facts of the Case
  • Rock Advertising ("RA") fell behind in paying licence fees.  
  • Its sole director proposed a revised schedule of payments to MWB's credit controller.  
    • There was a telephone discussion between them, in the course of which RA's director contended that MWB's credit controller had agreed to vary the licence agreement in accordance with the revised schedule.  MWB's credit controller denied this.  
    • She proceeded to treat the revised schedule as a proposal in a continuing negotiation, and took it to her boss.  He rejected it.  
  • Later, MWB locked RA out of the premises on account of its failure to pay the arrears, and terminated the licence.  They then sued for the arrears.  
  • RA counterclaimed damages for wrongful exclusion from the premises.  
  • The outcome of the case depended on whether the variation agreement was effective in law.
Example of Entire Agreement Clause
  • In the UK Supreme Court case, the court gave an example of an Entire Agreement Clause:
    • Entire agreement clauses generally provide that they “set out the entire agreement between the parties and supersede all proposals and prior agreements, arrangements and understandings between the parties.”
    • An abbreviated form of the above clause was contained in the first two sentences of the Clause in question.
Decision
  • The UK Supreme Court decided as follows:
    • There was an oral agreement between RA's director and MWB's credit controller.
    • However, the No Oral Modification Clause made the oral agreement invalid because it (the oral agreement) was not set out in writing or signed on behalf of both parties; and
    • the No Oral Modification Clause deprived the oral agreement of any binding force as a contractual variation.
Action
  • If you have any questions about the No Oral Modification Clause or other issues, please feel free to call Lam & Co. at 6535 1800.

I am buying a company (or a business). Is the Competition Act relevant? Singapore M&A Lawyer: Yes

I am buying a company (or a business). Is the Competition Act relevant? Singapore M&A Lawyer: Yes image
Introduction
  • You are buying a company or a business. 
  • How is the Competition Act ("CA") relevant to the transaction?
  • As we will see, the CA applies to essentially all private enterprises and buying a company (or a business) almost always raises questions under the CA.  Because of this, it is vital to study the buying decision in the context of the CA before proceeding.
Aim of the CA
  • The CA aims to promote the efficient functioning of markets in order that they will work well and create opportunities and choices for businesses and consumers in Singapore.
  • It does this by regulating the conduct of market players.
  • Mainly, it prohibits anti-competitive activities that unduly prevent, restrict or distort competition in Singapore.
The CA applies to Whom & What
  • The CA applies to commercial and economic activities by private sector "undertakings".
  • The CA defines “undertaking” to mean:
  • any person, being an individual, a body corporate, an unincorporated body of persons or any other entity, capable of carrying on commercial or economic activities relating to goods or services.
  • It does not matter whether they are owned by a foreign entity or a local entity, or whether or not they are government-linked companies.
  • E.g.'s include individuals, sole proprietorships, partnerships, companies, trade or professional bodies and non-profit organisations.
  • The CA does not apply to the Government, statutory bodies or entities acting on their behalf.
The CA came into Force, When
  • The CA came into force in phases commencing from 1 January 2005.
  • It came fully into force on 1 July 2007.
The CA: Main Prohibitions
  • There are 3 main "Don't's":
  • Anti-Competitive Agreements
  • these are agreements (or concerted practices) that prevent, restrict or distort competition
  • Abuse of Dominant Position
  • this is where companies (or businesses) that have substantial market power prevent or hamper others from competing effectively
  • Mergers that substantially reduce competition
  • these refer to transactions that result in a substantial reduction in competition
The CA: Adverse Consequences of Breaches
  • Breaches of the CA can result in:
Reputational Damage
  • your business may suffer from an adverse hit (or impact) to its reputation and goodwill in the eyes of its customers and/or the public
Operations Interruptions
  • your operations, activities and/or conduct may have to be stopped or adjusted (as required by the CA or as directed by the Competition and Consumer Commission of Singapore ("CCCS"))
Penalties under CA
  • your business may be fined by the CCCS up to 10% of its turnover within Singapore for each year of breach, up to a maximum of three years
Third Party Claim(s)
  • your business can face claims from any party which suffered losses directly resulting from any anti-competitive behaviour that it (your business) was involved in.
Action
  • If you have any questions or wish to review the purchase of any company (or business), please feel free to call Lam & Co. at 6535 1800.

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The Brand New Weinstein Clause. What is it? Singapore M&A Lawyer Explains

The Brand New Weinstein Clause. What is it? Singapore M&A Lawyer Explains image
Harvey Weinstein
  • In October 2017, the press reported that many women accused American film producer Harvey Weinstein of rape, sexual assault and sexual abuse covering a period of 30 plus years.  
  • More than 80 women from the film industry have since then accused Weinstein of such acts.  Weinstein denied "any non-consensual sex".
The Weinstein Company ("TWC")
  • Also in October 2017, Weinstein was dismissed from the company which he and his brother had founded, TWC.  
  • In the turmoil that followed, TWC which had a debt load of about USD520m, looked for a buyer. 
  • However, TWC was not successful and it went into bankruptcy.
Criminal Case
  • On May 25, 2018, Weinstein was arrested and charged with rape and other offenses before being released on bail.
Relevance to M&A
  • Clearly, the behaviour of a top executive of a company can adversely and severely affect the reputation and goodwill of the company.
Weinstein Clause
  • This is a clause usually put into a Share Purchase Agreement to
  • bind the seller to make certain warranties and representations about the company's executives' behaviour; and
  • allow the buyer to get out of buying the company (or get their money back) if sexual misconduct is subsequently discovered.
  • Its purpose is for the buyer to try to protect itself from sexual misconduct that surfaces later as this may adversely impact the company's future earnings.
  • Some clauses provide for part of the purchase price to be put in an escrow account for a specified period before being released at the end of that period to the sellers -- provided no sexual misconduct surfaces.
Warranties & Representations
  • A typical warranty and representation is that specified executives have not been accused by anyone of sexual harassment in, say, the last five years.
Example of Weinstein Clause
An example of such a clause is:
  • To the Knowledge of the Company,
  • (i) no allegations of sexual harassment have been made against
  • (A) any officer or director of the Acquired Companies or
  • (B) any employee of the Acquired Companies who, directly or indirectly, supervises at least eight (8) other employees of the Acquired Companies, and
  • (ii) the Acquired Companies have not entered into any settlement agreement related to allegations of sexual harassment or sexual misconduct by an employee, contractor, director, officer or other Representative.
Action
  • If you have any questions or wish to incorporate or review a Weinstein Clause in an agreement, please feel free to call Lam & Co. at 6535 1800.

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