Business Trusts (Amendment) Bill

Order for Second Reading read.

3.04 pm

The Minister of State for Trade and Industry (Mr Alvin Tan) (for the Prime Minister): Mr Speaker, Sir, on behalf of Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of the Monetary Authority of Singapore (MAS), I beg to move, "That the Bill be now read a Second time".

The Business Trusts Act 2004, or BTA, provides a framework for the governance of registered Business Trusts (BTs), which are enterprises that combine the characteristics of both a company and a trust. The BTA also facilitates the use of BTs as listing vehicles and as a new asset class for investors.

But unlike a company that can only pay dividends out of its accounting profits, a key feature of a BT is the ability to pay dividends out of its cash profits. This makes it particularly suited to businesses with stable growth and high cash flow, such as infrastructure businesses.

Many requirements in the BTA were adapted from the Companies Act. The Bill proposes updates to the BTA that are consistent with amendments that have been made to the Companies Act to enhance the regulatory framework for companies. In addition, MAS has also identified other legislative amendments that are needed to maintain the robustness and relevance of the regulatory regime for business trusts registered under the BTA.

Mr Speaker, I will now go through the key amendments in the Bill.

Let me start, first, with the amendments to better align the BTA with the regulatory regime for companies. These are mainly in three areas.

First, is to enhance transparency and corporate governance. The Bill introduces requirements for unlisted business trusts that are registered under the BTA to obtain and maintain information on their controllers, also commonly known as beneficial owners and to also provide such information to MAS and other public agencies upon request.

With these amendments, unlisted registered business trusts will be subject to the same transparency requirements as unlisted companies regarding their beneficial owners. These requirements will help to mitigate the risk of business vehicles being used for illicit purposes, regardless of whether they take the form of a company or a trust.

Currently, directors of trustee-managers of registered business trusts are required to disclose conflicts of interest in transactions as well as their interests in the registered business trusts. The Bill will extend such requirements to CEOs of trustee-managers, in recognition of the influence that they have on the affairs of business trusts. The change is consistent with existing disclosure requirements that are applicable to CEOs of companies under the Companies Act.

The Bill further introduces requirements for auditors of listed registered business trusts and their subsidiaries to seek MAS' consent if they wish to resign before the end of their term. It also sets out procedures for the appointment of a new auditor where the resigning auditor is the sole auditor, including a reserve power for MAS to make such an appointment.

These requirements will allow MAS to prevent a listed BT or its subsidiary from being left without an auditor. Through the application process, MAS may also be alerted to any potential breaches of the BTA and the Accountants Act. This is in line with provisions in the Companies Act in relation to auditors of public interest companies, which include listed companies and their subsidiaries.

The second key area is to strengthen the rights of unit-holders of registered business trusts. Currently, unit-holders holding at least 10% of the voting rights of unit holders present at a meeting have the power to call for a poll. The Bill lowers this threshold to 5%, making it easier for unit-holders to call for a poll on issues that they are most concerned with.

The Bill also expands the scope of the statutory derivative action in the BTA to allow a unit-holder to apply to the Court for leave to commence arbitration on behalf of all unit holders of the BT or to intervene in an arbitration to which the BT is a party. This amendment will align unit-holders' rights to bring a derivative action with that of shareholders under the Companies Act.

In addition, where an application to wind up a registered BT has been filed in Court, the Bill expands the range of orders that the Court may make, including an order to buy out the interests of one or more unit-holders.

Currently, a Court hearing such an application can only make an order for the registered BT to be wound up. The additional remedy helps to protect the rights of minority unit-holders as there may be cases where the company is still viable and it would be a more efficient solution for the majority to buy out the minority or vice versa.

The third key area is to improve the ease of doing business and to reduce administrative burden. These include changes to simplify deadlines for annual general meetings (AGMs) and the filing of annual returns. Currently, registered business trusts are required to hold their AGMs once every calendar year and not more than 15 months after the preceding AGM and are also required to file annual returns within one month after the AGM. These requirements do not refer to the financial year end of the registered BT. The Bill will align these timelines with the business trust's financial year end.

The Bill will also mirror amendments to the Companies Act to reduce the number of documents accompanying a set of financial statements.

To facilitate electronic communications by registered business trusts, the Bill allows for electronic transmission of notices and documents with unit-holders' implied or deemed consent, in accordance with the trust deed of the registered BT. Currently, a registered BT wishing to publish notices and documents on a website can only do so with its unit-holders' express consent. The amendments will help to increase efficiency in this regard.

Mr Speaker, I will now cover the next set of amendments, which are to strengthen governance standards and safeguards for registered business trusts, taking reference from the regulatory regime for Real Estate Investment Trusts (REITs).

Business trusts are structurally similar to REITs in that both are trusts constituted by a trust deed and, unlike companies, are not legal persons. Both are also usually managed by an external manager. Business trusts are managed by trustee-managers and REITs are managed by REIT managers.

This external management model introduces governance risks such as potential conflicts of interest between the external manager and also unit-holders. Unit-holders' ability to vote to remove the external manager is a fundamental safeguard against such risks.

Currently, a trustee-manager can only be removed by unit-holders by way of a resolution passed by not less than 75% of the voting rights of all unit-holders present and voting at a general meeting. For REITs, there is a lower removal threshold of more than 50% which applies.

The Bill will align the removal threshold for trustee-managers with that of REIT managers. This will help strengthen accountability to unit-holders.

In conclusion, the amendments will enhance the transparency and governance of registered business trusts in Singapore. They will streamline regulatory requirements and reduce compliance costs. This will improve the efficiency and robustness of the BT regulatory regime, benefiting the industry and investors. Mr Speaker, I beg to move.

Question proposed.

Mr Speaker: Mr Louis Ng.

3.13 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, this Bill will align provisions for business trusts with the Companies Act and strengthen governance for business trusts.

Business trusts are a common structure for tapping on capital on the SGX. The proposed amendments to strengthen governance of business trusts are welcomed. I have clarifications on two areas.

Let me start by thanking MAS for conducting a public consultation before bringing this Bill to Parliament. Public consultations not only show that the Government is keen to listen but they also help our Government agencies guard against blind spots they may have during the policy-making process.

I also thank MAS for publishing a response paper to this public consultation. This gives respondents the assurance that their feedback is heard loud and clear.

My first set of clarifications has to do with loans to directors for defending against proceedings.

Firstly, can the Minister of State clarify why loans to directors for defending against regulatory actions are treated differently from loans for defending civil or criminal proceedings? Conditions outlined in the new section 27B of the Business Trusts Act and in section 163A of the Companies Act appear to apply when the loans are for defending civil or criminal proceedings but not when the loans are for defending against regulatory actions. The reason for this distinction is unclear.

Secondly, can the Minister of State clarify whether loans for defending criminal or civil proceedings need to be repaid if charges are withdrawn and the director is issued a stern warning or for a discharge not amounting to an acquittal? The Bill makes clear that repayment must be made in certain other situations such as when the director is convicted in the proceedings but it does not state as much for this situation.

Thirdly, it is common for a defendant in criminal proceedings to be convicted on some charges and acquitted on others. Similarly, in civil proceedings, a defendant may succeed on certain heads of claim but not others. Can the Minister of State clarify how repayment should be treated in such cases? Will the director be required to repay only part of the loan? Alternatively, will the need for repayment be determined by whether the director has succeeded overall in the criminal or civil proceedings? If this is the case, how will overall success be determined? Is this determined by the number of charges or claims, or the severity of the charges or claims that the director succeeds on?

My second set of clarifications has to do with a trustee-managers' duties to maintain information.

The new section 52K requires the trustee-manager of a BT to take "reasonable steps" to identify registrable controllers of a BT. The scope of such duties is potentially very large. Can the Minister of State provide illustrations to guide these trustee-managers on what would constitute reasonable steps in the discharge of their duties?

Also, can the Minister of State clarify whether the new section 52N applies to someone who knows or ought to know that someone else may be a registrable controller? If not, can the Minister of State explain why the new section 52K, which enforces a similar requirement to disclose information, does not apply to such a person? It would be helpful to understand why the two sections, similar in their scope, do not apply the burden to the same groups of people.

Sir, notwithstanding these clarifications, I stand in support of the Bill.

Mr Speaker: Assoc Prof Jamus Lim.

3.16 pm

Assoc Prof Jamus Jerome Lim (Sengkang): Mr Speaker, the proposed amendments to the Business Trust Act are predominantly of a technical nature, with the goal of streamlining existing stipulations or to better align the Act with other Acts, in particular, the Companies Act and the Securities and Futures Act, or international standards, such as the International Financial Reporting Standards. To the extent that these amendments further strengthen the Government's provisions in BTs, many of these which have already been incorporated into other Acts, they are welcome.

For my speech, I wish to speak about three issues. I will begin by touching on a number of concerns directly related to the various amendments proposed by the Bill. Next, I will move on to discuss the implications that the Bill may have by further encouraging the BT structure for the economy at large. Finally, I will speak more generally about how trusts, along with foundations, may be repurposed as instruments that would enable the Government to better meet its fiscal objectives.

Before I proceed, I wish to declare that I am the Chief Economist (Emeritus) of Thirdrock, a homegrown boutique wealth management and consultancy business.

The Bill offers a host of amendments, some 124 pages worth, for an original Act that was just 14 pages longer. Some of these strike me as unambiguously good; others just a little bad and yet others just a tad ugly.

First, the Bill makes provision, captured in the revised section 20 of the Bill, that only a 50% majority, rather than the current supermajority of 75% of unit holders' approval is required to remove the trustee manager. This amendment corrects a longstanding, yet glaring discord between BTs and other related trust structures, notably real estate investments trusts (REITs), where only a simple majority was required for removing the manager. Given the enormous power vested into a trustee manager within the BT structure, this change will re-enfranchise the average unit holder. For this reason, the change is good and very much welcome.

Second, I would question the porting of certain amendments just because they have been stipulated in the Companies Act. As this House is likely aware, BTs are distinct from either corporations or trusts. For that reason, certain advantages offered to either pure business enterprises or trusts may not be as applicable to a BT. Let me offer two concrete examples.

The new sections 27B and 27C of the Act allows the trustee manager to extend trust monies via a loan on specified terms to trust directors, akin to sections of the Companies Act. One could credibly make an argument that directors of a firm are integral to its viability as a going concern and hence deserving of such support from the business entity. But the case is much harder to make for a trust. After all, the very design of a trust is already one step removed from the principles to allow business decisions to be rendered sufficiently independently of the directors.

As another example, the new section 52C vests on the MAS the ability to liquidate and deregister BTs. To be fair, this strikes me as a fairly pedestrian change that is likely to be invaluable for operational purposes. Still, I wish to seek the assurance of the Minister, that the MAS will only exercise this power to wind up BTs judiciously. In particular, it should already be clear with exercising this clause, that the trust is already clear defunct, rather than an exercise of this power as a means of regulation. By the same token, I wish to ask the Ministry to clarify the channels of appeal available to a BT in the event that it receives a request to wind up from the MAS, if it were to.

In my view, these appropriations from the Companies Act while undeniably better at aligning the two, do not sufficiently respect the distinctions between the two business structures and therefore, I find them at risk of being a little bombastic, admittedly, just a little ugly.

Third, there is a potential bad that I wish to highlight from promoting the BT structure, especially over and above a REIT structure. Sir, a casual examination of the current list of registered BTs reveals that eight of the 18 are essentially dealing in real estate, while another three had also, arguably have their fortunes tied to real estate assets.

Why should this matter? As industry observers are well aware, a BT is not constrained, in terms of the amount of leverage they are able to take on. In contrast, REITs are only able to be geared up to 50%. This introduces a potential concern, where essentially REITs are registering as a BT to avoid the prudential stipulations related in part to excess leverage. Indeed, while some BTs, do explicitly state that their practices more closely imitate REIT guidelines, such as restraining the amount of leverage that they take on, these are merely self-regulating assurances which are not limited by the force of law.

Sir, I fully grasp the motivation to expand the scope and accessibility of BTs. This vehicle offers greater flexibility in extracting value from cashflow generating assets over how distributions may be made and in structuring of assets under development. Undoubtedly, there are major reasons for their comparative popularity.

I also recognise that the benefits of BT from the perspective of our position as an international financial centre. Making as many possible asset management instruments available strengthens our relative attractiveness as an international financial and wealth management centre. It also allows our financial sector professionals and population at large to germinate keener interest and understanding of the role that increasingly more complex financial instruments play in our domestic and financial and economic landscape.

Even so, there are potential risks to the expanding role of BTs insofar as our economy is concerned. I had already alluded to on, pointing out that BTs are legally unconstrained by loan-to-value requirements and hence may engender greater financial stability concerns as a result.

Allow me to touch on another, one that may carry more profound implications for the average worker in the economy. As Members of this House are undoubtedly aware, business entities, whether taking the form of companies or a trust, typically adhere to the rigours of maximising profits and shareholder value. In a world unencumbered by non-monetary considerations, it would be difficult to fault either entity for being more brutal in imposing market discipline.

But we know that companies, large and small, deviate from this so-called neoclassical ideal all the time. Enterprises in China and Japan often strive to preserve employment, either for reasons of social stability or corporate loyalty. German businesses consider not just shareholder interests, but also stakeholder ones, with labour unions, routinely engage in workplace bargaining with management to deliver extra employment protections or social benefits. Even here at home, this Government has frequently trumpeted the importance of tripartite negotiations to promote aggregate welfare within our corporate context.

This begs the question of how BTs fit into this overall picture of stakeholder capitalism. If BTs increasingly become a favourite structure for managing large business asset holdings, would the additional distance between unit-holders and management afforded by the BT and by design, inadvertently undermine the ability of workers to engage in negotiations with management? Would we see greater willingness by BT-managed businesses to fire employees at the first whiff of a downturn? What are the implications of more REITS and real estate-focused BTs for escalating rent and sales prices, if such structures were to proliferate?

After all, the BT structure, as opposed to other forms of trusts, permit greater, proactive involvement of the trustee manager in the everyday firm operations. If this enhanced interventionism is paired with more flagrant disregard for non-pecuniary objectives – perhaps, because of differences in the investment horizon – then I fear that directed action by the trustee managers or their proxies on corporate decisions may induce more cut-throat behaviour by these firms in favour of capital, to the detriment of labour.

Finally, I would note that BTs do not have a distribution requirement whereas other trust frameworks, such as REITs, must respect a distribution of at least 90% of distributable income under the Income Tax Act. While this allows the trustee manager to exercise greater discretion in how they would translate cashflow into returns and is, in fact, one of the attractive aspects of a BT, one is left to wonder if this distinction ends up promoting excess accumulation and in turn, exacerbating wealth inequality.

This, of course, is a non-trivial matter, as this House is well aware. Social inequality has been rated by Singaporeans as their third most pressing concern, just behind bread-and-butter issues like employment and healthcare. This concern is especially acute among young Singaporeans who, perhaps predictably, feel like they have the greatest state in the yawning wealth gap. It has also been exacerbated by the influx of wealthy individuals from abroad.

What I am suggesting here is that we can go one step further and further refine our existing system. I previously alluded to how we could do this in the context of my Adjournment Motion on wealth taxation. I will now elaborate on this idea in greater detail.

While trusts may seem esoteric and limited to high net worth individuals, most of us would, in fact, be familiar with some form of trust. Most of us would have nominated beneficiaries to our insurance policies or CPF monies. Last year, this House also debated amendments to the Mental Capacity Act, which included extensive discussion of the Lasting Power of Attorney, which is a trust arrangement. Those of us lucky enough to have savings set aside in a unit trust will have some familiarity with such investment trusts. And of course, most of us have contributed to charities at some point in our lives and such philanthropic foundations are the cornerstone of trust institutions.

Thus, even without more involved estate planning, the average Singaporean would have some exposure to the notion of trust. Of course, those with more means will often rely on yet more sophisticated instruments to manage their estate. Private family trusts, as well as family offices are increasingly widespread here, allowing us to harness our global advantages as a wealth management centre. Investment oriented trust, including unit trusts or REITs and BTs – the focus of our debate today – enable such assets to grow in a manner unencumbered by tax considerations prior to vesting.

At the national level, this has promoted a landscape where trust institutions have become ever more important. The REIT asset class has grown to $130 billion in 2020. As Minister Tharman shared in response to my Sengkang colleague, Louis Chua's Parliamentary Question, the number of family offices has also almost doubled between 2020 and last year from 400 to 700. Our listed BTs now boasts a market capitalisation of close to $20.6 billion.

Yet, in spite of this rapid growth in investment-oriented trusts, there are only little more than 400 philanthropic organisations and trusts in Singapore.

The amount of tax-deductible donations received by charities has even receded slightly, from a peak of $1.07 billion in 2018, to $1.01 billion in 2020.

I venture that we can go further in how we manage our trust institutions, to not only accentuate their supply side, the growing of assets within a trust, but also to foster their demand side and evolve them into grant-making institutions and thereby, build a stronger culture of philanthropy among the wealthier in our nation.

Mr Speaker, we have come far as a nation. Since Independence, our per capita income, adjusted for inflation, have increased almost 16-fold, from around 5,800 to around 91,000 last year. We are, undeniably, no longer a developing country. Yet, our philanthropic culture still retains the vestiges of economies that are far less advanced. Our fiscal financing, while diversified, essentially relies on a regime of low income taxes, with charges and fees, which are regressive in nature, still playing a prominent role.

What I am suggesting is that we could put these two together, we could allow private and non-profit sectors to assume greater importance in financing various public expenditures. This goes beyond approaches currently favoured by this Government, such as public-private finance partnerships for infrastructure or the granting of the right to issue tax exempt receipts for Institutions of Public Character.

In many advanced economies, wealthy individuals fund a wide range of socially beneficial activities, from naming rights to hospitals and university buildings and even park benches, to setting up non-profit organisations dedicated to various causes, to establishing foundations that provide grants to groups aligned with the foundation's declared mandate.

One wonders if our tax structure could be further refined to provide additional incentives for business trusts to also be involved in philanthropic activities as well. In other jurisdictions, such activities are all often wholly unconstrained.

As a result, it could give rise to perverse situations where a billionaire's favourite pastimes, such as art galleries or classical music concerts are financed through tax exemptions, while causes that benefit the poor remain relatively underfunded, or foundations could become indirect wealth accumulation vehicles.

To prevent such outcomes, we should insist that our foundations consistently deplete their endowments by funding approved fiscal expenditures until a stipulated closure date. Foundations may retain some independence over their target expenditures, but these areas would be pre-selected by the Government.

This will result in an indirect wealth tax that carries significant social capital, appealing to high net worth individuals' sense of agency, civic responsibility and earnestness. This could also encourage the development of fundraising and grant writing expertise in our domestic workforce.

Besides potentially expanding a small cottage industry in the social sector, it could also increase the awareness of, and affinity towards important causes that are valuable to our society.

In my conversations with those in industry, I have been impressed by the complementarities that exists between the supply and demand sides of the story. Indeed, many donor trusts and foundations, private banking clients and non-profits are served by the self-same assets and wealth management professionals.

As we position ourselves to mature even more as a global wealth management hub, enhancing such intermediary functions is a logical next step. My hopes, Sir, is that trusts and foundations will eventually become a part of our nation's social fabric, that we will not just privilege certain trust structures, such as investments or business trusts, to the detriment of others that will enrich the life of our citizens as well as our economy.

Mr Speaker: Minister of State Alvin Tan.

3.35 pm

Mr Alvin Tan: Mr Speaker, Sir, I thank Mr Louis Ng and Assoc Prof Jamus Lim for their views on the Bill. I will first address specific questions raised in the Bill before tackling the broader questions on the relevance of BTs' structure and the trust foundations in the philanthropy landscape. But I also wanted to say that, for the purposes of this amendment Bill that we focus very much on the core of what we are trying to do, which is to enhance the transparency and strengthen governance of Business Trusts(BTs). And for many other topics, we can leave that on another day.

On the Bill, both Mr Louis Ng and Assoc Prof Jamus Lim raised questions on provisions that will seek to align the BTA with a regulatory regime for companies. Assoc Prof Jamus Lim asked about the appropriateness of replicating the Companies Act's provisions in the BTA, as well as whether we need to strengthen the regulatory regime for business trusts relative to the regulatory regime for REITs.

BTs, as the Member had noted, is also meant to be an alternative business structure to companies. Hence, the regulatory regime for BTs is modelled after that of companies. Similar to the Companies Act, the intention of the BTA is to set out requirements to protect, indeed, the fundamental rights of unit-holders of these registered business trusts and to set out the duties and accountability of the trustee-managers and their directors. That is at the fundamental level.

And then on top of requirements that we have adapted from the Companies Act, MAS has also included relevant governance requirements from the REIT regime. BTs and REITs, of course, share a lot of structural similarity. For example, both are externally managed, as I had mentioned in my speech. MAS has also taken reference from applicable REIT rules when reviewing the BTA, especially in areas where the risks are similar.

For instance, MAS has, in this Bill, proposed that the removal threshold for trustee-managers be aligned with that for REIT managers. If you reference the requirements for REIT managers, MAS is also considering amending subsidiary legislation of the BTA to enhance independence requirements for directors of trustee-managers. MAS will be consulting on its suite of proposed amendments to subsidiary legislation of the BTA in the coming months.

Just a few points about the fiduciary role of the directors of the trustee-manager. The directors of a trustee-manager essentially perform the same fiduciary role as the directors of a company. Hence, we are trying to align the BTA with the Companies Act. The provisions allowing loans to be given to directors of companies are also relevant to the directors of trustee-managers within the BTA.

On whether vehicles are trying to get away with easier regulations as regard to the BT versus REIT – companies, BTs and REITs are, in fact, all subject to corporate governance requirements.

Assets that do not fall neatly under a REIT structure can be included in a company structure. It is important that we have these proper rules and consistent rules for both companies and BTs. And that is why, again, going back to the fundamentals, that is why we are aligning the BTA to the Companies Act.

On section 52, it is an existing provision that MAS may apply to a Court, to appoint a liquidator to wind up, and thereafter, deregister a defunct BT. The new section 52B provides for any persons with reasonable cause, that the BT should not be deregistered to object when MAS issues a notice of its intention to apply to Court for liquidation.

The context of section 52 is actually for a defunct BT, but it is actually not for still functioning BTs – just to clarify that point, which is quite important.

The Member, Assoc Prof Jamus Lim also mentioned about the distance between trustee-managers in a BT, and unit-holders or stakeholders. The trustee-manager, in this regard, has to manage businesses and operations, just in the same way as the board or the management of companies and has to similarly consider the interest of key stakeholders, in order for the business to be successful. Again, going back to it, is really aligning both.

On the distribution of REITs, I just want to clarify that REITs must distribute 90% of the income in order for them to enjoy tax transparency. In fact, REITs are required to distribute least 90% of their distributable income to enjoy this tax transparency, where BTs do not enjoy any tax transparency and, hence, are not subject to similar requirements. There are differences between REITs, as well as BTs and that is why although they are structurally similar, some of the provisions, we have to regard them as separate as well.

I will address other points with regards to trust and REITs. REITs are investment funds which are obviously subjected to investment guidelines and are intended to specifically hold income-producing properties. The business trusts are not investment funds. They are business structures which can hold the wide range of assets. Assoc Prof Jamus Lim mentioned many of the 18 that he raised earlier on. So, they do hold a wide range of assets but they are not limited to real estate, although many that Assoc Prof Jamus Lim raised appear to be linked to real estate, but they can also operate active businesses.

The two regulatory regimes cannot, therefore, be equalised.

What MAS has done is to draw the most appropriate provisions from both the Companies Act and also the REIT regime to design a regulatory framework that addresses the needs of stakeholders in a BT. MAS will also regularly review the regulatory regime for BTs and will make appropriate refinements to ensure that the regime remains robust and also meet the market needs, as and when it is required.

Mr Louis Ng raised a few questions relating to loans by trustee-managers to their directors for defending against proceedings or regulatory actions. Mr Ng also asked about the difference in treatment between loans made to directors for defending against civil and criminal proceedings, compared to loans to directors for defending against regulatory actions.

In the case of loans for defending against civil and criminal proceedings, the Bill requires specific terms to be placed on the loans, namely that the loan is to be repaid no later than 14 days of certain events occurring, such as if the director is convicted. However, similar loan repayment terms are not required to be included for defending against regulatory actions, consistent with the comparatively less severe nature of regulatory actions versus Court proceedings. The difference in treatment also follows from equivalent provisions in the Companies Act and it can also be found in the UK Companies Act as well.

Mr Louis Ng also asked for clarification, whether repayment will be required in situations not specified in the Bill, such as if charges are withdrawn. Loans, by their very nature, are expected to be repaid according to the terms of the loan agreement unless otherwise agreed with the lender. While the Bill will not require trustee-managers to include terms in their loan agreement for repayment of loans under circumstances other than those specified in the Bill, trustee-managers can still choose to include such terms as they deem appropriate.

For repayment terms that are required by the Bill, Mr Louis Ng further asked how these should apply where a loan was granted to a director to defend criminal or civil proceedings and a conviction or judgment against the director was only obtained for some, but not all, of the charges or heads of claims. The provision does not provide for apportionment. The general position is that the loan will need to be repaid according to the required terms, as long as the director is convicted or judgment is made against the director and that the conviction or judgment is final.

The next set of questions Mr Louis Ng raised relates to the transparency requirements for unlisted business trusts regarding their registrable controllers, or controllers in short. He asked what would constitute "reasonable steps" for the purpose of a trustee-managers' discharge of their obligations to identify controllers of a BT. MAS intends to issue guidelines on this, similar to the guidelines issued by ACRA, under the Companies Act. Under ACRA's guidance, a company is regarded as having taken "reasonable steps" if it sends out a notice at least annually to each member and each director of the company, unless the person has already provided it with the requisite information.

Mr Louis Ng further asked about the differing burdens placed on a controller versus a person who knows or ought to know the identity of a controller. For brevity, I will refer to the latter as third parties.

The Bill requires both controllers and third parties to provide information to the trustee-manager when served with a notice to do so. In addition, controllers are required to notify trustee-managers of their particulars, such as the dates they became controllers of the BTs. However, third parties are not under similar obligations to furnish information on a controller unless they have been asked to do so by the trustee-managers.

The differing requirements are intended to balance between requiring trustee-managers to maintain a complete register of its controllers and the burden to third parties. The duty to notify the trustee-manager of a controller's beneficial ownership of the BT falls naturally on the controller himself, as he is the primary source of information about his own interests in the BT.

The same cannot be said for third parties, who are one step removed. Requiring a third party to provide the trustee-manager with information on another person, the controller, without being asked to do so would impose an excessive burden on the third party.

Nevertheless, where a third party is served a notice by the trustee-manager to provide information on a controller, he would be clearly informed that the information is required of him. He would therefore be obligated to provide the information in this situation.

Mr Speaker, Sir, I will now address the broader questions raised by Assoc Prof Jamus Lim on the role played by business trusts and on the development of the trust and foundation landscape and if there are ways in which the Government can foster a culture of philanthropy.

Business trusts are by design suitable for businesses, as I have mentioned in my earlier speech, that have high cash flows and also stable growth. They add to the array of many alternative structures for businesses to organise themselves in a manner that meets their operating and fundraising needs.

As for Assoc Prof Jamus Lim's suggestions to support a culture of philanthropy, they extend quite beyond the scope of the BTA, as I have mentioned earlier, but we will be happy to take those questions as matters for further study where relevant.

I will also just mention that one of the strategies under MAS' Financial Services Industry Transformation Map (ITM) 2025, is to help to develop Singapore into Asia's centre for philanthropy and MAS will provide support in line with this ITM. In fact, last week, Deputy Prime Minister Lawrence Wong announced a number of measures that we are studying, including reviewing our tax incentive structures and schemes to see how we can encourage family offices to do more philanthropic giving and to support the local philanthropic ecosystem, by structuring their giving through local charities and also non-profit entities.

Just on another point by Assoc Prof Jamus Lim on taking a more interventionist approach to direct high net worth wealth to fund specific causes that are aligned with Singapore's interest, the approach thus far has been to enhance just the overall ecosystem to encourage high net worth individuals to conduct their giving activities in Singapore, effectively just to build the culture of philanthropy until so when these offices and these structures come to Singapore encourage them to give locally as well.

It is also to help them to find ways in which to give to local causes as they gain familiarity over time with what is required in the landscape. We have, so far, stayed away from dictating the causes that high net worth individuals should give to an industry. We just do not want to be that prescriptive in that regard as we start to build up this ecosystem.

Mr Speaker, let me conclude by reiterating the benefits that we seek to bring with this set of amendments. These amendments will bring the BTA in alignment with the regulatory regime for companies, upon which the regulatory regime for BTs is based. It will also strengthen the corporate governance safeguards of BTs.

I also want to just share as a final point that this is not very unique to Singapore. In fact, apart from Singapore, there are few other jurisdictions where BTs are also used as corporate vehicles. Australia, Hong Kong, Canada have business vehicles quite similar to our BTs. But, of course, our own BT regime has its own legal framework with very clear rules that are specifically tailored to the features of our Bts. In fact, it was developed to be as close to a company as possible, as they are intended to be an alternative structure to companies so that they have that flexibility. For example, Malaysia's BT regime is also quite similar to that in Singapore. There are also other jurisdictions – Australia, Hong Kong and Canada, for example – that have different structures, but they have their own regulatory regimes suited to their own ecosystem.

In short, by amending this Bill, the Bill will contribute towards a strong, a robust and transparent regulatory framework for businesses and investors, and also support Singapore's business competitiveness. With that, Mr Speaker, I beg to move.

Mr Speaker: Are there any clarifications? None.

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. – [Mr Alvin Tan].

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

Mr Speaker: Order. I propose to take a break now. I suspend the Sitting and will take the Chair at 4.15 pm.

Sitting accordingly suspended

at 3.52 pm until 4.15 pm.

Sitting resumed at 4.15 pm.

[Deputy Speaker (Mr Christopher de Souza) in the Chair]