Nine Entities Critical to Singapore Under New Investment Law
Singapore’s government has designated nine entities as critical to national security under the new Investment Review Act (IRA), enacted in March 2024. These companies must seek government approval for any ownership or control changes, a significant shift from previous sector-specific regulations.
The COVID-19 pandemic and rising geopolitical tensions have highlighted the need for more comprehensive investment safeguards. Singapore’s new law aims to protect critical sectors from foreign influence. Moreover, it aims to ensure the resilience of its national infrastructure. The designated entities include ST Logistics, Sembcorp Specialized Construction, ST Engineering Marine, ST Engineering Land Systems, ST Engineering Defense Aviation Services, ST Engineering Digital Systems, ExxonMobil Asia Pacific, Shell Singapore, and Singapore Refining Company.
The IRA requires entities to seek approval from the Ministry of Trade and Industry (MTI) for any ownership changes. Buyers must notify the MTI within seven days of becoming a 5% controller and seek approval before reaching 12%, 25%, or 50% control. Sellers must also notify the MTI if their investment drop below 50% or 75% control. Transactions without approval will be void. Furthermore, MTI has the authority to enforce compliance, including mandating the disposal of stakes.
Other countries have similar investment laws
This regulatory approach aligns Singapore with other countries that have implemented similar measures. The United States’ Committee on Foreign Investment (CFIUS) scrutinizes foreign investments for national security risks. The United Kingdom’s National Security and Investment Act requires government approval for investments in sensitive sectors. Australia, Germany, and Japan also have stringent foreign investment review processes to protect their critical infrastructure and national interests.
Singapore’s Investment Review Act also includes calling-in powers for the MTI to intervene if an entity’s actions threaten national security. This could involve ordering the divestment of equity or restricting the disclosure of confidential information.
The law covers entities incorporated or operating in Singapore, providing goods or services locally. These entities cannot be voluntarily wound up or terminated without MTI approval. Thus, ensuring continuity in critical services. The MTI can take control of businesses and their properties if national security is at risk.
The new law aims to bolster Singapore’s position as a trusted business hub, offering a stable environment for investors. By integrating comprehensive oversight with existing sector-specific laws, the Investment Review Act enhances Singapore’s ability to manage investments in vital sectors effectively.
Trade and Industry Minister Gan Kim Yong emphasized the importance of this updated regulatory toolkit amid global economic uncertainties. The Act ensures that Singapore can protect its national security while remaining an attractive destination for foreign investment.
