AGMs could become mandatory for Reits

REAL estate investment trusts (Reits) may soon be required by law to hold annual general meetings (AGMs) in a move aimed at boosting corporate governance.

The proposal comes in a consultation paper released by the Monetary Authority of Singapore (MAS) yesterday to amend the Property Fund Guidelines.

It recommends that Reits hold an AGM once every calendar year and no more than 15 months after the preceding one. It could come into effect from Jan 1 next year, so all Reits would have to hold an AGM by Dec 31 of that year.

Reits would also have to hold an AGM within four months of their financial year-end. This is in line with the Singapore Exchange's (SGX's) listing rules.

The MAS explained yesterday that the move will 'enhance corporate governance...by providing an important channel for communication' between Reits managers and unit-holders.

It will also make managers more accountable and 'provide a regular opportunity for (them) to seek general mandates from unit-holders for issuance of new units and thus accord greater flexibility for equity raising', it added.

Market observers have welcomed this move, which was flagged in February when the SGX said that the MAS was looking into making AGMs compulsory for Reits.

In its consultation paper released yesterday, the MAS noted that the AGM requirement is already in place in countries such as the United States.

And while mandating AGMs is not common in other jurisdictions, they are recommended in Hong Kong and Australia. 'It would also be consistent with international best practice, which suggests that AGMs are an important component of good corporate governance,' said the MAS.

A similar exercise was carried out in 2005 but respondents in the consultation process felt that AGMs were not costeffective.

This was because Reits were already seeking approval for their acquisitions through extraordinary general meetings (EGMs), which gave unit-holders a chance to be heard.

'However, this assumption has not held true in current economic circumstances for two reasons,' said the MAS yesterday.

As Reits are making fewer or no acquisitions, EGMs held for approving acquisitions are few and far between.

And industry feedback showed that in volatile market conditions, convening EGMs to approve certain matters 'may cause speculation and result in negative impact on the unit price'.

Investor David Lim, 49, who has invested in Reits for several years, said the move was a good one in current market conditions.

'It gives investors a line of communication to the managers, and an annual meeting also gives us a venue to air whatever concerns we might have,' he said.

The public can submit feedback on the proposal via mail or e-mail by June26. For details, go to the MAS website, www.mas.gov.sg.