Speech by Minister Gan Kim Yong during the Second Reading of the Significant Investments Review Bill

Introduction

1. Mr Speaker, Sir, I beg to move, “That the Bill be now read a Second time.”

Impetus for Bill

2. Singapore is an open economy, well connected to the rest of the world.

3. This has allowed us to become a vibrant business hub and an attractive investment destination.

4. We must remain open and continue to attract new investments, so as to grow our economy and create good opportunities for our businesses and our people.

5. However, we also recognise that the world has become increasingly complex, and the economic environment more uncertain and challenging, creating new risks and vulnerabilities. 

6. We must constantly review and update our regulatory regime, to keep pace with the changes in the global economic landscape and to strengthen the resilience of our economy in the face of new threats. 

7. Doing so will give our investors and businesses added confidence in our economy and our ability to respond to emerging challenges.

8. Indeed, as an open economy, we can be vulnerable to actors that may seek to undermine our national security interests through ownership and control of critical business entities. 

9. Therefore, we must put in place adequate measures to safeguard our national security interests. 

10. In fact, we have been doing so through our sectoral legislation to mitigate such risks specific to the respective sectors.

11. For instance, the Banking Act and Telecommunications Act require approval to be sought before a party acquires 12% of shares or voting power, and before appointment of key personnel such as the chief executive officer.  

12. This will help prevent actors from influencing critical entities in the financial and telecoms sectors to undermine their stability and threaten our national security.

13. We have taken a calibrated and balanced approach, which has enabled us to ride the winds of globalisation and benefit from the growth of the global economy.

14. In recent years, we have seen several global financial crises that threatened to undermine the stability of economies and societies.

15. We have lived through the COVID-19 pandemic that led to border restrictions and shortages of essential medical supplies.

16. There is also increased use of protectionist measures amidst geopolitical contestations.

17. Military conflicts have also brought about disruptions to critical supplies such as energy and food.

18. This has led to many countries prioritising domestic and national security considerations, leaning towards “near-shoring”, “friend-shoring”, and “re-shoring” of supply chains.

19. Against this backdrop, it is timely that we update our investment management toolkit to ensure it remains adequate and effective.

20. We are not alone in doing this.

21. According to a 2023 United Nations report, at least 37 countries have introduced regulatory frameworks for screening of investments on national security grounds since the 1990s.

22. More recently, countries like Australia, China, Japan, Ireland, the United Kingdom and the United States have introduced or enhanced their investment management regimes, with more planning to do so.

Overview of Singapore’s Approach

23. Investors in a critical entity will normally have some form of influence or control of the entity’s decisions or its operations.

24. Investors may then exploit their ownership and control over these entities to disrupt the delivery of essential goods and services, or access and use sensitive information, to threaten our national security.

25. It is therefore important to have adequate and effective investment management measures to safeguard our national security, and to ensure our economy remails resilient.

26. This will provide businesses and investors with continued confidence in Singapore as a stable, trusted, and well-connected global business and investment hub.

27. While the sectoral legislation we have today has served us well, we need to continually assess our security needs and strengthen our safeguards where necessary.

28. The Significant Investments Review Bill is designed to complement the existing suite of sectoral safeguards, by introducing a new investment management regime.

29. In designing this regime, we have studied the investment management legislation of other jurisdictions.

30. We have also taken into account our current sectoral legislation.

31. Allow me to share three key principles in the design of the Bill.

32. First, the legislation should strike a careful balance between protecting our national security interests and minimising adverse impact on businesses and investors.  

33. Second, the Bill should apply to both foreign and local parties, while focusing on national security considerations.

34. Third, the processes should be as transparent as possible, while taking into account national security considerations.  

Key Features of the Bill

35. Sir, let me now explain the key features of the Bill.

36. I will cover three segments.

37. First, provisions that apply only to designated entities.

38. Second, provisions that apply to entities that have acted against Singapore’s national security interests, regardless of whether they have been designated.

39. Third, other general provisions.

(A) Provisions that Apply to Designated Entities

40. I would like to make it clear from the outset that it is not the intention of the Government to directly interfere with the routine commercial decisions and operations of designated entities.

41. The first broad set of provisions relate only to ownership and control over designated entities, to ensure the reliability of critical functions that they provide, as well as to safeguard Singapore’s national security interests. 

(A1) Entity-based designation

42. Clause 17 allows the Minister to designate a specific entity based on national security considerations. 

43. This is quite unique to Singapore, as most overseas jurisdictions generally scope the designation broadly to cover all entities based on either activities they carry out or the sectors they operate in.

44. Common overseas examples of these activities or sectors include those relating to communications, defence-related supply chains, and advanced technologies. 

45.  Most entities within these sectors or performing such activities will be regulated. 

46.  As the majority of critical entities in Singapore are already covered by existing sectoral legislation, we expect to designate only a handful of entities.

47. This approach was deliberately chosen to reduce the regulatory burden of the Bill.

48. Otherwise, every entity that falls within certain sectors or provide certain activities would all be included, regardless of whether the entity itself is critical to our national security interests; this would not only be administratively tedious but also impact Singapore’s position as a business and investment hub.

49. Instead, our targeted approach to designate only specific entities will achieve a better balance between national security and the impact on businesses.

50. In deciding which entities should be considered for designation, various factors will be considered.

51. These include whether the entity provides a critical function in relation to Singapore’s national security interests, such as a key provider of security-related functions, especially where there are few or no alternatives; and whether it is adequately covered by existing sectoral legislation.

52. Conversely, should a designated entity subsequently cease to meet these criteria, its designation may be cancelled.

53. Over the last few months, we have reached out to all the entities that are being considered for designation. 

54. That means if you have not been approached, you are not currently being considered.

55. The engagements will help us to better understand their perspectives and concerns, clarify the obligations should they eventually be designated, and explore ways to mitigate the regulatory impact on their businesses.

56. In the interest of transparency and to provide certainty to the entities and potential investors, Clause 17 provides that all designations or cancellations of designation, will be notified in the Gazette.

(A2) Obligations relating to ownership and control changes

57. Clauses 18 to 20 allow the Minister to exercise oversight over the ownership or control changes involving parties in positions to influence and direct the actions of the designated entities. 

58. These requirements will not apply retroactively, but only to new ownership or control changes after the entities have been designated.

59. Notification or approval obligations will be imposed on prospective controllers, existing controllers, and designated entities; based on specific thresholds that take reference from existing sectoral legislation.

60. Buyers are required to notify the Minister within 7 days after becoming a 5% controller.

61. They will need to seek the Minister’s approval before becoming a 12%, 25%, or 50% controller. 

62. Parties are similarly required to seek Minister’s approval if they are becoming an indirect controller or acquiring parts of the business or undertaking as a going concern.

63. On the other hand, sellers will have to seek Minister’s approval before ceasing to be a 50% or 75% controller.

64. Clause 16 allows the Minister the flexibility to vary such thresholds for specific entities as the situation warrants, and if so, to prescribe them in subsidiary legislation.

65. Under Clause 19, the Minister may approve applications by parties if he is satisfied that all of the following conditions are met. 

66. One, that the prospective acquirors, or controllers and their associates, are fit and proper persons.

67. Two, that the designated entity will be able to continue providing its critical functions if the transaction proceeds after approval is granted.

68. Three, that approving the transaction is not against Singapore’s national security interests.

69. The designated entity has a duty to report changes in ownership or control specified above to the Minister, within seven days of it becoming aware of the event. 

70. This provides an additional safeguard to detect any potential attempts by parties to circumvent the notification and approval requirements, and ensure that the entities stay vigilant to potential threats.

(A3) Void transactions

71. Should prospective or existing controllers proceed with the transactions without seeking the necessary prior approvals from Minister, Clause 21 automatically renders such transactions void. 

72. However, materially affected parties may apply to the Minister to validate the transaction and the Minister may do so by issuing a validation notice.

73. The Minister may also proactively issue such a notice if he is satisfied that it is in the interest of Singapore’s national security to do so.

(A4) Remedial directions

74. Clauses 22 to 24 allow the Minister to issue remedial directions under a variety of circumstances – for example, if conditions of approval have been breached, or false or misleading information was provided in relation to an application for approval. 

75. Such remedial directions may include directing the transfer or disposal of equity interest in the designated entity, or any other direction that the Minister considers appropriate. 

76. Where a remedial direction has yet to be carried out, Clause 25 has provisions to achieve the practical outcome of such a direction. 

77. For example, if an initial remedial direction to divest equity interest has not been carried out, voting rights may not be exercised and no dividends may be paid in relation to  the relevant equity;.

(A5) Appointment and removal of key personnel

78. The Bill also includes oversight over the appointment of key personnel of the designated entities, such as the Chief Executive Officer, Board Directors, and Chairperson of the Board.

79. Such individuals can influence the entity’s policies, decisions, and actions including over the critical functions it provides. 

80. Under Clause 27, a designated entity must obtain prior approval from the Minister to appoint key personnel.

81. The Minister may consider any relevant factor in arriving at a decision.

82. For example, if we receive information that a particular individual has a track record of engaging in conduct or activities that could undermine our national security interests, then this would be taken into consideration in deciding whether approval would be granted.

83. Clause 28 allows the Minister to require the removal of an appointed key personnel of a designated entity if this was done without the necessary approval, or if any condition of approval has been breached.

84. The Minister can also require the removal of any key personnel if deemed necessary in the interest of national security.

(A6) Ensuring continued provisioning of critical functions

85. There are also provisions to ensure the continued performance of the critical functions by the designated entities.

86. Under Clause 26, designated entities cannot be dissolved, terminated, wound up voluntarily, or be subject to judicial management, without the Minister’s consent.

87. In addition, parties cannot enforce security, judgement, or court order over designated entities, unless prior advance notice has been given to the Minister.  

88. This will allow the Minister to take the necessary actions to safeguard our national security interests.

89. If there are court proceedings involved, the Minister will be a party to such proceedings and the court must consider any representations made by the Minister.

90. Clauses 30 and 31 allows the Minister to issue Special Administration Orders – otherwise known as “step-in rights” – to direct the takeover of control of the affairs, businesses, and property of a designated entity by another party.

91. Other orders can also be issued, such as directing the designated entity to immediately take or cease any action; or appointing a person to advise the designated entity in the proper conduct of its businesses or undertaking.

92. I would like to assure Members that such powers will only be exercised in the interest of the continued provisioning of critical functions by the designated entity, or Singapore’s national security interests.

93. When exercising such powers, we will always be mindful of shareholders’ interests.

(B) Provisions that Apply to Entities that Have Acted against National Security Interests

94. The second broad set of provisions relate to powers that can be exercised against any entity that has acted against Singapore’s national security interests, regardless of whether they are designated or not.

95. Currently, there are already existing laws to deal with egregious acts against national security.

96. For example, under the Insolvency, Restructuring and Dissolution Act, the Court may order the winding up of a company if it is being used against Singapore’s national security. 

97. However, winding up an entity could affect the continued provisioning of its functions, and may not be the desired outcome.

98. In the investment management legislation of most overseas jurisdictions, there are similar concepts often referred to as “call-in” powers.

99. The relevant authorities may "call-in" certain types of transactions for review, even though they may not have triggered filing or and pre-approval requirements under the regime.

100. Such "call-in" powers are typically exercised on national interest- or national security-related grounds.

101. In some jurisdictions, they can be based on perceived risks without actual actions being committed by the entity.

102. The time limits of such "call-in" powers also vary across jurisdictions.

103. For example, this could range from five years in the United Kingdom, to ten years in Australia, and there is no time limit in the United States.

104. In Singapore’s case, under Clause 32, the Minister can review ownership or control transactions involving any entity only if two pre-requisites are met.

105. First, the entity must have acted against our national security interests, and not merely pose potential threats to our national security.

106. Second, the ownership or control transaction must have occurred within the two years prior to the above-mentioned action by the entity against our national security interests. 

107. The Minister for Home Affairs, as the Minister-in-charge of Internal Security, can issue a certificate stating that he is satisfied that the entity has acted against the national security interest of Singapore; which will be treated as conclusive evidence for the purposes of this Bill.

108. Following the review of the transaction, a range of directions may be issued, such as directing the transacting party to transfer or dispose of his equity interest in the entity, or directing the entity to restrict disclosure of confidential information to any person.

(C) General Provisions

109. Let me now move on to the last segment on other general and miscellaneous provisions under the Bill.

(C1) Parties that may be subject to provisions under the Bill

110. Under Clause 12, powers under the Bill can be exercised against any individual regardless of their citizenship or residency status, and any entity regardless of the type or domicile location.

111. As mentioned earlier, this takes into account that threats may emanate from various sources or channelled through various entities, and we will need sufficient flexibility to exercise our legislative levers.

112. Further, under Clauses 17 and 32, entities that may be classified as designated entities, or for which post-transaction powers may apply, would include those that are incorporated, formed, or established in Singapore; carry out activities in Singapore; or provide goods and services to persons in Singapore.

(C2) Enforcement powers

113. Clauses 47 to 50 provide a range of enforcement powers that authorised officers, Police officers, and Commercial Affairs officers may exercise.

114. All of them have powers to require any individual or entity to provide information relating to the Bill.

115. Police officers and Commercial Affairs officers will also have powers to enter premises for investigation under the Bill. 

(C3) Penalties

116. Penalties will be differentiated depending on whether the party guilty of the offence is an individual or an entity.

117. Fixed monetary penalties may be insufficient deterrence for certain offences that are meant to safeguard our national security interests.

118. This is especially so as the Bill would cover transactions across a wide range of values, as well as entities in diverse sectors, and of different sizes as well as varying financial abilities.

119. For high-value transactions or large businesses with significant revenue, a fixed penalty quantum may neither be a sufficient deterrent nor result in a proportionate penalty in the event of non-compliance.

120. On the other hand, for low-value transactions or small-sized businesses, going with the transaction value or annual turnover alone could translate to penalty amounts that run into similar issues.

121. As such, for both individuals and entities, the maximum applicable penalty will be based on the higher of an absolute quantum cap or the transaction value where applicable.

122. If there is no transaction value, for entities, the maximum penalty will be based on the higher of an absolute quantum cap or 10% of the annual turnover.

123. For individuals, imprisonment is also a possible penalty.

124. While the penalties themselves are significant, they need to be an effective deterrent as we are dealing here with actions that may impact national security. 

(C4) Reconsideration requests and appeals

125. Clauses 38 and 39 set out processes for parties that wish to seek reconsideration from the Minister for his decisions, and to make further appeals to an independent Reviewing Tribunal. 

126. Clauses 40 to 45 provide details of the Reviewing Tribunal, while Clause 46 provides for limited judicial review only on grounds of failure to comply with any procedural requirement of the Act, or the regulations or rules made under the Act.

127. These processes are modelled after similar provisions in other legislation here that deal with Singapore’s national security interests, such as the Foreign Interference (Countermeasures) Act.

Commitment to Stakeholder Engagement

128. Under the Ministry of Trade and Industry, we will set up the Office of Significant Investments Review.

129. The Office will serve as a dedicated one-stop touchpoint to engage affected stakeholders and provide them with guidance and clarifications.  

130. It will also coordinate and oversee the implementation of the Act. 

Conclusion

131. In closing, I would like to take this opportunity to thank various industry representatives – such as those from the law firms, financial institutions, accountancy firms, and general business community, which we have consulted and which have provided valuable input in helping us refine the Bill and take into account potential impact on businesses and investors.  

132. As described, the Bill intends to provide Singapore with an updated toolkit to manage threats posed by significant investments into critical entities.

133. I would like to reiterate that the provisions under the Bill have been intentionally calibrated to protect Singapore’s national security interests, while minimising impact on affected stakeholders so that our corporate landscape remains vibrant and attractive to bona-fide investors.

134. Singapore has always strived to be a responsible partner on the global stage.

135. Our actions are based on clear and consistent principles.

136. We will work closely with the industry and affected stakeholders, and implement this Bill in a calibrated and balanced manner.

137. This approach will allow Singapore to remain a trusted and reliable business hub, where investors can continue to invest and operate with confidence, and create more opportunities for Singapore and Singaporeans.

138. Thank you. Sir, I beg to move.