Singapore Designates Nine Entities Critical to National Security Under New Investment Law

Singapore’s government has issued a list of nine entities that are deemed critical to national security. These companies have been designated as critical under the country’s new Investment Review Act, which was enacted in March this year.

Under the act, entities described as critical are required to seek approval from the government for any ownership or control changes. Prior, Singapore relied on sector-specific laws in which foreign investors must seek approval from the relevant regulators in sectors such as utilities, banking, and telecommunications.

The COVID-19 pandemic, which caused border restrictions and supply shortages, and geopolitical tensions are key factors necessitating this change. Singapore is not alone, many countries are now prioritizing domestic needs, leading to near-shoring and reshoring of supply chains.

What companies are deemed critical to Singapore’s national security?

The list includes:

1. ST Logistics;
2. Sembcorp Specialized Construction;
3. ST Engineering Marine;
4. ST Engineering Land Systems;
5. ST Engineering Defense Aviation Services;
6. ST Engineering Digital Systems;
7. ExxonMobil Asia Pacific;
8. Shell Singapore; and
9. Singapore Refining Company.

What are the requirements in the Act?

Ownership and control changes

The mentioned entities will need to seek approval from the Singapore government for changes in ownership. Any transaction that occurs without approval will be deemed void.

• Buyers must notify the Ministry of Trade and Industry (MTI) within seven days after becoming a 5 percent controller;
• Buyers must seek approval from the MTI before becoming a 12 percent, 25 percent, or 50 percent controller or indirect controller;
• A seller must notify the MTI if they cease to be a 50 or 75 percent controller in the entity; and
• The MTI retains the authority to direct remedial actions in case of non-compliance with approval conditions, potentially leading to the disposal of stakes in the designated entity.

Entity based designations

The Act defines an entity as any corporation, partnership, sole proprietorship, or other body of persons, which includes a trust.

The MTI can designate the following types of entities;

• An entity that is incorporated or established in Singapore;
• Any entity that undertakes activities in Singapore; and
• Any entity that provides goods and services in Singapore.

A designated entity cannot be wound up voluntarily or terminated without the MTI’s approval. Any party that wishes to enforce a court order over a designated entity must give prior advance notice to the MTI. Further, the MTI has the power to takeover controls of the businesses and property of the designated entity.

Calling-in powers

The MTI has been given calling-in powers to take targeted actions at any entity that has acted against Singapore’s national interests. These may include instructing the transacting party to divest its equity interest in the entity or directing the entity to limit the disclosure of confidential information to specific individuals.

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