What is a Private Placement?
As an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion, a private placement is a sale of stock, shares or bonds to pre-selected investors (institutional or accredited) and institutions and is a common way for start-ups to raise financing privately while avoiding the full glare of public scrutiny that typically accompanies an IPO.
The issuance of new convertible shares, warrants and bonds are examples of common forms of placements. In Singapore, offers of securities or securities-based derivatives contracts are possible without authorisation from the MAS or preparation a Singapore prospectus provided the placements are not made to more than 50 offerees within a 12-months period pursuant to section 272B of the Securities and Futures Act 2001 (“SFA”).
An offer of securities or securities-based derivatives contracts to an institutional investor does not require authorisation from the MAS nor the preparation of a local prospectus pursuant to section 274 of the SFA.
An offer of securities or securities-based derivatives contracts to an accredited investor or relevant person requires the fund to be included in the list of “restricted schemes” and the MAS must be notified. A short prospectus is also required.
What is the requirement for a Prospectus?
Generally, a prospectus is required where a person (principal), in relation to offers of securities or securities-based derivatives contracts:
- makes an offer to any person in Singapore (personally or through an agent), and upon acceptance of the offer, gives rise to a contract for the issue or sale of those securities or securities-based derivatives contracts by him or another person with whom he has made arrangements for that issue or sale; or
- invites any person in Singapore (personally or through an agent) to make an offer, and upon acceptance of the offer would give rise to a contract for the issue or sale of those securities or securities-based derivatives contracts by him or another person with whom he has made arrangements for that issue or sale.
Our Services
A private placement is complex as it entails several legal considerations, especially if it is deemed to be regulated by the MAS. Our lawyers have experience in private placement matters, including drafting of a prospectus in compliance with the SFA, liaison with the MAS and making the necessary lodgements.
