On 9 January 2024, the Parliament of Singapore passed the Significant Investments Review Bill (“Bill“).
This Bill strengthens the Singapore government’s regulatory toolkit for investments in local and foreign entities that are significant to Singapore’s national security interests and ensures greater regulatory flexibility in safeguarding Singapore’s evolving national security interests. At the same time, the Bill has been designed to align with international norms and preserve Singapore’s open and investment-friendly economy.
This Bill complements existing sectoral legislation with ownership and control safeguards for critical entities.
Under the Bill, entities deemed critical based on national security considerations may be designated and subject to approval requirements for changes in ownership, control and key personnel, and other related restrictions.
National security interests
“National security interests” is intentionally undefined in the Bill to provide the Singapore government with flexibility to respond to unanticipated circumstances, as national security issues are bound to evolve over time. The Minister for Trade and Industry Gan Kim Yong (“Minister“) clarified in Parliament that this may cover areas critical to Singapore’s sovereignty and security, including its economic security and resilience and the continued delivery of essential services.
Entity-based designations
The Minister can designate the following types of entities:
Any entity incorporated, formed or established in Singapore
Any entity that carries out any activity in Singapore
Any entity that provides any goods and services to any person in Singapore, if the Minister considers that the designation is necessary in the interest of Singapore’s national security
An entity is defined under the Bill to mean any sole proprietorship, partnership, corporation or other body of persons, whether corporate or unincorporated, and includes a trust.
A designated entity that ceases to satisfy any of the criteria may have its designation cancelled. The Ministry of Trade and Industry (MTI) will continuously review and reassess the list of designated entities. This list of designated entities will eventually be published in the Government Gazette after the law comes into force.
Notification and approval requirements
A buyer into a designated entity must notify the Minister within seven days after becoming a 5% controller.
A buyer into a designated entity must seek the Minister’s approval prior to becoming a 12%, 25% or 50% controller or indirect controller.
A seller must seek the Minister’s approval when ceasing to be a 50% or 75% controller.
If the necessary approvals are not sought, the transactions may be rendered void, and a party may be directed to dispose of or transfer their stake in the designated entity.
A designated entity must also seek the Minister’s approval prior to the appointment of key personnel (e.g., CEO or director). If deemed necessary in the interest of national security, the Minister’s approval may also be required prior to the removal of any key personnel.
Other key provisions
To ensure the continued performance of a designated entity:
A designated entity may not be wound up voluntarily, terminated or be subject to judicial management without the Minister’s approval.
A party that wishes to enforce security, a judgment or a court order over a designated entity must give prior advance notice to the Minister.
The Minister has the power to direct the takeover of control of the affairs, businesses and property of a designated entity by another party.
Calling-in powers
The Minister has “calling-in” powers to take targeted actions at any entity, designated or not, that has acted against Singapore’s national interests, within a two-year period of any transaction.
In these cases, the Minister can issue a range of directions, such as directing the transacting party to dispose of its equity interest in the entity or directing the entity to restrict disclosure of confidential information to any person.
Stakeholder engagement
An Office of Significant Investments Review will be set up under the MTI to provide affected stakeholders with the necessary guidance and clarifications.
The Bill is a forward-looking amendment seeking to safeguard Singapore’s evolving national security interests in an increasingly complex geopolitical environment. The Bill would have benefited from greater clarity on the definition of “national security”, but the challenge that the Singapore government faced was ensuring the Bill could be flexible and effective without spooking investors and Singapore’s international trading partners. In this regard, it has done so by deliberately leaving “national security” undefined and by ensuring the Bill’s provisions are largely similar to analogous overseas legislation and to existing local sectoral legislation, which Singapore’s key investors and international trading partners are already familiar with.
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