The Singapore government passed the Significant Investments Review Bill (the SIRB) on 9 January 2024. This Bill was first introduced on 6 November 2023 and seeks to safeguard Singapore’s national security interests by screening investments in critical entities that have the potential to threaten Singapore’s national security. This development is similar to the approach taken in leading jurisdictions, such as the UK having the National Security and Investment Act 2021. The SIRB is expected to come into force in mid-2024.
Definition of national security
The SIRB does not define the concept of national security. Addressing parliament, the Minister for Trade and Industry (the Minister) mentioned that national security “would cover areas critical to Singapore’s sovereignty and security”, including economic security and the continued delivery of essential services in Singapore. He further explained that “providing a specific definition of national security or specific examples of such threats would not only constrain our ability to act quickly to address new risks that may emerge over time but also expose Singapore’s vulnerabilities”.
Who are the affected entities?
The SIRB allows the Minister to designate specific entities as critical entities. Any entity “incorporated, formed or established in Singapore and any entity (whether local or foreign) which carries out any activity in Singapore or provides any goods and services to any person in Singapore” that the Minister considers is in the interest of Singapore’s national security may be designated as a critical entity. Such a targeted approach aims to achieve a better balance between national security and the impact on business. In considering whether an entity is a critical one, the Minister will assess various factors, such as whether the entity plays a critical role in relation to Singapore's national security interests and whether there is already sector-specific legislation in place.
Entities that are being considered for designation have already been contacted by the Singapore government. The list of designated entities will be published in the Government Gazette once the SIRB comes into force. The Ministry of Trade and Industry (the MTI) will periodically review and assess the list of designated entities.
How are the entities affected?
Designated entities are required to notify or seek approval from the Minister for ownership or control changes.
- Buyers are required to notify the Minister within seven days of becoming a 5% controller and will need the Minister’s approval before becoming a 12%, 25% or 50% controller.
- Buyers must also seek approval if they are becoming an indirect controller or acquiring parts of the business or undertaking as a going concern.
- Sellers must seek the Minister’s approval before ceasing to be a 50% or 75% controller.
Transactions that are completed without the necessary approvals will be rendered void. If the parties to the transaction do not comply with the approval conditions, the Minister may direct the parties to take remedial actions such as the buyer to dispose the acquired stake in the designated entity.
Designated entities shall also seek approval for the appointment of key officers, such as the directors and the chief executive officer, and the Minister has the power to remove such key officers.
Additionally, the Minister can review ownership or control transactions of non-designated entities that have acted against Singapore's national security interests, provided the transaction occurred within the two years preceding the act against national security.
Further developments: Stakeholder engagement
An Office of Significant Investments Review will be set up under the MTI as a dedicated one-stop touchpoint for stakeholders to address stakeholders’ concerns and minimise their impact.
The SIRB does not supersede the existing sector-specific laws which currently manage regulated entities in the telecommunications, banking and utilities sectors but will complement them and focus on Singapore’s national security interests.
Concluding thoughts
This legal development seeks to enhance Singapore’s economic resilience and strengthen its national security amid a rapidly evolving and increasingly complex operating landscape and it is heartening to note that the Singapore government has taken a balanced approach to having adequate supervision of the ownership and control of critical entities while ensuring that Singapore’s economy remains open and investor-friendly.
Reed Smith LLP is licensed to operate as a foreign law practice in Singapore under the name and style Reed Smith Pte Ltd (hereafter collectively, "Reed Smith"). Where advice on Singapore law is required, we will refer the matter to and work with Reed Smith's Formal Law Alliance partner in Singapore, Resource Law LLC, where necessary.
Client Alert 2024-011
