Clifford Chance

Singapore passes new law to regulate significant investments into entities critical to Singapore's national security, including "calling-in" powers against persons who have acted against Singapore's national security interests.

The Significant Investments Review Act 2024 (the "Act") was first passed by Parliament on 9 January 2024, assented to by the President on 6 February 2024 and published in the Government Gazette on 14 February 2024. The Act is likely to come into effect in the next few months, but the commencement date has yet to be published.

Entities regarded as critical to Singapore's national security interests may be designated and subject to approval requirements for changes in ownership, control and key personnel, and other related restrictions. Under the Act, the Singapore Government also has "calling-in" powers within a two-year period of any transaction, and may take targeted actions at any entity that has acted against Singapore's national security interests.

The Act applies to both local and foreign investors, and is meant to complement existing sector-specific laws.

National security interests

The Act does not expressly define the term "national security", although it was clarified in the Singapore Parliament that "national security" is intended to broadly cover areas critical to Singapore's sovereignty and security, including its economic security and resilience, and the continued delivery of essential services. Similar to some other jurisdictions with a national security filing regime, the lack of an express definition was a deliberate decision to provide flexibility required to deal with the complex and evolving nature of national security issues.

Designated entities

Under the Act, the Minister for Trade and Industry (the "Minister") can designate: (i) any entity incorporated, formed or established in Singapore; (ii) any entity that carries out any activity in Singapore; and (iii) 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.

The Minister may consider several factors when determining such designation, including: (i) whether the entity provides a critical function in relation to Singapore's national security interests; (ii) whether the entity undertakes business activities in sectors where there are few or no alternatives; and (iii) whether national security interests are already adequately covered by existing sectoral legislation.

This list of designated entities has not yet been published (although it has been reported that the Singapore Government has already reached out to all entities that are being considered for designation) but will eventually be published in the Government Gazette after the law comes into force. The Ministry of Trade and Industry (the "MTI") will periodically review and reassess the list of designated entities.

Provisions in the Act will only apply to entities after they have been designated, and will not apply to transactions entered into before such designation.

Key provisions

Some key features of the Act include:

• Buyers must notify the Minister after they become a 5% controller in the designated entity. Approval needs to be sought before becoming a 12%, 25% or 50% controller.
• Buyers will have to seek approval before they become indirect controllers, or when they acquire the business (or parts thereof) as a going concern.
• Different from many other countries' regimes where the filing obligation usually lies with the buyer, sellers will also need to seek approval when they cease to be a 50% or 75% controller.
• Transactions completed without the requisite approvals will be void. If approvals contain conditions which are not complied with, parties may be directed to take remedial actions (e.g., disposal of their stake in the designated entity). There are also penalties under the Act for the failure to notify or seek approval, including fines or imprisonment for a term not exceeding three years (if the offender is an individual).
• Designated entities must seek approval for the appointment of key positions. The Minister may also remove key officers in the interests of Singapore's national security.
• Designated entities are subject to various other restrictions. For example: (i) orders can be given to direct the assumption of control of the designated entities' affairs, business and property, to ensure business continuity if national security issues arise or if delivery of essential services are disrupted; (ii) a designated entity may not be wound up voluntarily, terminated or be subject to judicial management without the Minister's approval; and (iii) 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.

"Calling-in" powers

The Minister has broad cross-sector "calling-in" powers to review transactions involving entities (even if not designated) that have acted against Singapore's national security interests. The right of review applies for a two-year period after the relevant transaction. The Minister is empowered to take various targeted actions, including: (i) directing the transacting party to transfer or dispose of their equity interest in the entity; (ii) specifying restrictions on the transfer or disposal of their equity interest in the entity; or (iii) directing the transacting party to transfer or dispose of their control or voting power in the entity.

Appeals and requests for reconsideration

The Act sets out the processes for parties that wish to seek reconsideration for decisions by the Minister and for further appeals to an independent tribunal for review (the "Reviewing Tribunal"):

• Requests for reconsideration: A party may appeal a decision taken by the Minister within 14 days from the date of such decision. The Minister has the authority to cancel the initial decision, substitute it with an alternative decision, or reaffirm the initial decision. Once the Minister issues a subsequent decision, no further reconsideration requests are permitted, although the party retains the right to appeal to the Reviewing Tribunal.
• Reviewing Tribunal: Should the decision still be affirmed, a party has 30 days to appeal to the Reviewing Tribunal. The Reviewing Tribunal will consist of three individuals appointed by the President of Singapore on the advice of the Cabinet of Singapore, including a chairperson who holds the position of a Supreme Court judge. The Reviewing Tribunal can either dismiss the appeal and affirm the appealed decision or overturn the appealed decision. The determination of the Reviewing Tribunal is final and only subject to review by a court in relation to compliance with any requirement under the Act or other rules or regulations governing the determination, order and other decision.