On November 3, 2023, Singapore announced plans to introduce a new law aimed at scrutinizing “significant investments” in “critical entities” that are not currently governed by existing legislation. Trade and Industry Minister Gan Kim Yong indicated that if passed, this law would require approval for major ownership changes in designated entities, which are expected to number only “a handful.”

Gan highlighted that while some of these entities may already be subject to licensing regulations or contracting conditions, these measures are insufficient for ensuring the continuity of essential services during crises. The proposed Bill is set to be introduced in Parliament on November 6 and, if approved, will be implemented in 2024.

The Minister emphasized the need for Singapore to monitor significant investments in critical sectors. He noted that existing laws govern sectors such as telecommunications, banking, and utilities, but the increasingly complex economic environment necessitates a broader perspective on managing risks associated with these critical entities.

The new law aims to ensure the continuity of essential services and bolster Singapore’s reputation as a “trusted business and investment hub.” This move follows indications made in August when Gan mentioned exploring new tools for managing such risks, though he did not specify their nature at that time.

Entities may be designated under the law if they are incorporated in Singapore, operate within the country, or provide goods and services to residents. Designated entities would face ownership and control requirements, such as notifying or seeking the Minister’s approval for significant ownership changes. Remedial actions may be mandated if compliance conditions are violated, including potential orders to dispose of ownership stakes.

Additionally, designated entities would need approval for key appointments, such as those of chief executive officers and board members. If any appointed officers were put in place without the necessary approval, or if conditions are breached, they may be removed from their positions. Furthermore, entities cannot dissolve or wind up voluntarily without the Minister’s consent.

In the event of national security concerns or disruptions to essential services, the government has the authority to intervene. However, affected entities may appeal decisions to an independent Reviewing Tribunal consisting of three appointed individuals, including a Supreme Court judge as chairperson.

The Bill also grants the government targeted powers over entities that act against national security interests, even if they are not designated. Should any such incidents arise, the government may review transactions from the past two years that resulted in changes in ownership or control. For instance, the entity involved may be directed to divest its equity interest.

To assist stakeholders, an Office of Significant Investments Review will be established as a centralized point of contact for affected parties. Minister Gan mentioned that over the coming weeks, authorities will engage various industry stakeholders, particularly those being considered for designation, to provide details on the Bill and address their concerns.

Observers view the proposed law as a significant step toward ensuring national security while maintaining a level playing field for both local and foreign investors. This targeted approach aims to alleviate concerns among businesses about the potential regulatory burden while effectively addressing national security risks.