REITs – BT

MAS seeks views on mandatory AGMs for Reits

It says compulsory AGM would improve corporate governance

THE Monetary Authority of Singapore (MAS) has proposed to make annual general meetings (AGMs) mandatory for real estate investment trusts (Reits).

Under the proposal, all Reits regulated as collective investment schemes (CIS) in Singapore will have to, with effect from Jan 1, 2010, hold AGMs once every calendar year and not more than 15 months from the last preceding AGM.

AGMs will also have to take place within four months from the end of the financial year, in line with Singapore Exchange’s rule on the timing of AGMs for other listed issuers.

Currently, all public companies and business trusts are required to hold AGMs and extending the practice to Reits would keep standards consistent, said MAS in a consultation paper yesterday.

Mandating AGMs for Reits would also improve corporate governance by creating an important communication channel between Reit managers and unitholders, it added.

Furthermore, Reit managers can use AGMs to obtain or renew general mandates from unitholders to issue new units in the coming year, said MAS. This would give Reits more flexibility in fundraising.

‘Reits would not face the problem of market speculation arising from convening an extraordinary general meeting (EGM) specifically for the purpose of obtaining such a mandate,’ MAS highlighted.

Several industry watchers had welcomed the mandating of AGMs for Reits when the plan was mentioned briefly in February. The New York Stock Exchange, for instance, already requires Reits to do so each fiscal year.

Suntec Reit manager’s CEO Yeo See Kiat also told BT yesterday that he supported the idea. ‘Reits are like all listed companies,’ he said. ‘AGMs would provide Reits with an additional communication platform with unitholders.’

Mak Yuen Teen, co-director of NUS’ Corporate Governance & Financial Reporting Centre, also agreed that the move will raise the accountability of Reit managers. However, he did not see the need for MAS to pass such a rule to increase flexibility for Reits in fundraising.

In June 2005, MAS had consulted the public on making AGMs mandatory for Reits but decided against the idea. Most people had felt that AGMs were not cost-effective as Reits were already holding EGMs regularly to seek approval for acquisitions.

MAS said that its Property Fund Guidelines today allow for general meetings ‘at the request in writing of not less than 50 participants or participants representing not less than 10 per cent of the issued units of the property fund’.

But MAS recognises that Reits are hardly holding EGMs nowadays because of the dearth of acquisitions. Also, Reit managers gave feedback that EGMs for certain matters, such as a general mandate to issue new units, may create market speculation and hit unit prices.

Interested parties can share their views on the proposal with MAS by June 26.