TRUSTEES (AMENDMENT) BILL

Order for Second Reading read.

The Minister for Law (Prof. S. Jayakumar): Sir, I beg to move, "That the Bill be now read a Second time."

This is a third area where amendments are proposed on the basis of recommendations of the Law Reform Committee of the Academy of Law.

In finalising the amendments, my Ministry has also taken into consideration the views of the Ministry of Finance and the Monetary Authority of Singapore.

The most significant amendment concerns the manner in which trustee investments authorised by the Act may be modified or updated. Trustee investments authorised by the Act will now be listed in the First Schedule and any amendment to the Schedule can in future be made by the Minister by order published in the Gazette. This is a more flexible arrangement than the present position when an amendment by Parliament is needed each time trustee investments are to be updated. This amendment would enable the Minister, after consulting relevant bodies like the Ministry of Finance, Monetary Authority of Singapore and the Public Trustee, to maintain an up-to-date list of trustee investments.

The Bill will amend the trustees' powers of investment to enable them to invest in the following:

(a) bank bills and trade bills denominated in Singapore currency which are endorsed by a bank in Singapore and which will mature not later than three months after the date of investment;

(b) fixed income securities of foreign governments having a Triple A credit rating or equivalent given by specified credit rating agencies, such as Moody's Investor's Service, Inc., or Standard and Poor's Corporation in the United States, well-known agencies. A maximum of 30% of the funds belonging to the trust may be invested in such investments. This limit is necessary as the trust funds in Singapore are mainly denominated in Singapore dollars and investments in foreign government securities pose significant risks in view of the exchange rate volatility.

As for the existing provision in the current Act for investments in leases (other than mining leases), which have an unexpired term of 60 years or more, the amendments change this to an unexpired term requirement of 30 years because the trend in Singapore is to grant shorter leases.

The Bill also revises the present qualifying criteria governing trustee stocks in view of major changes which have taken place in the Singapore stock market. The criteria laid down many years ago are now inadequate. At the same time, some safeguards are incorporated. Safeguards are necessary to protect the interests of beneficiaries of trust funds. Hence, the following will be the minimum criteria for trustee stocks:

(a) The minimum total issued and paid-up capital of a company incorporated in Singapore shall be $15 million or more, while the minimum total issued and paid-up capital of a company incorporated elsewhere (foreign company) shall be $30 million or more. This two-tier system seeks to confine the status of trustee stocks to established and reputable foreign companies.

I would add that this upward revision of paid-up capital from $5 million under the present law to $15 million for Singapore companies is in line with the Stock Exchange paid-up capital requirement of $15 million which took effect in 1988. It is necessary to require foreign companies which are trustee stocks to have a higher paid-up capital because the Stock Exchange of Singapore has no powers to regulate foreign companies and cannot compel them to disclose material information promptly to Singapore investors.

(b) The company must have paid a dividend in each of the three financial years immediately preceding the financial year in which the investment is made. In other words, the amendment here has reduced the dividend payment period from five years to three years, as the previous requirement was found to be too stringent. Furthermore, there are other factors determining a company's financial viability.

(c) The company must have a minimum shareholders equity (ie, its total assets less its total liabilities in its last audited accounts) of $30 million; and

(d) The company must have reported a profit (excluding any extraordinary item) in its profit and loss account in its annual accounts in the financial year immediately preceding the financial year in which the investment is made.

Sir, a grace period of three years will be given to those existing trustee stocks which, I understand, are very few in number which are unable to meet the revised requirement on minimum paid-up capital and shareholders equity, after which time they will lose their trustee status if they still fail to meet the new requirements.

As for the other amendments, Sir, I might mention a few.

(1) Trustees have the discretion now, under the amendment, to purchase a dwelling house in Singapore for any beneficiary of the trust.

(2) Interest-bearing deposits may be held in Singapore currency in the Post Office Savings Bank or a bank or finance company in Singapore.

(3) Trustees must obtain proper advice from an investment adviser licensed under the Securities Industry Act or a bank licensed under the Banking Act or a merchant bank approved under the Monetary Authority of Singapore in relation to investments in an authorised unit trust scheme, company securities or bank bills or trade bills.

Sir, this Bill is a timely and useful measure of law reform which I commend to this House.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Prof. Jayakumar].

Bill considered in Committee; reported without amendment; read a Third time and passed.