I. Introduction

The Transport Sector (Critical Firms) Bill (TSCFB), which was passed in Parliament on 8 May 2024, aims to enhance the resilience of essential transport services in Singapore by subjecting designated essential companies in the transport sectors to greater regulatory controls. When in force, the TSCFB will amend the following statutes:

1. the Bus Services Industry Act 2015 (BSI Act);
2. the Civil Aviation Authority of Singapore Act 2009 (CAAS Act);
3. the Maritime and Port Authority of Singapore Act 1996; and
4. the Rapid Transit Systems Act 1995 (RTS Act).

The TSCFB does not, however, cover the Point-to-Point Passenger Transport Industry Act 2019, which regulates the operators of taxis and private hire cars, and ride-hailing companies. This article will highlight and go through some of the key features of the TSCFB.

II. Establishment of the “designated entities” regime

Under the TSCFB, statutory boards such as the Civil Aviation Authority of Singapore (CAAS), the Land Transport Authority (LTA) and the Maritime & Port Authority of Singapore (MPA) will designate entities in their respective sectors that are involved in providing essential and/or strategically important transport services, such as:

1. public bus and rail operations;
2. port and passenger ferry services and facilities; and
3. airport and ground handling and aircraft maintenance.

Such entities will either be designated as a “designated operating entity”, if they directly provide essential transport services in Singapore, or a “designated equity interest holder”, if they hold an equity interest in a designated operating entity. Designated operating entities and designated equity interest holders are collectively referred to as “designated entities” under the TSCFB.

Designated entities will be subject to a targeted set of controls over ownership, management appointments, and will also be required to notify the respective sectoral statutory boards of changes in key operational and resourcing arrangements. While such controls may already be present under existing licensing schemes, the TSCFB consolidates these controls under one (1) framework and extends these controls to designated entities which are non-licensees. The designated entities will not, however, be concurrently designated under the Significant Investments Review Act 2024.

III. Key control features of the TSCFB

The TSCFB will enable the relevant authorities (such as the CAAS, LTA and MPA) (each, a Relevant Authority) to exercise supervisory controls over the designated entities in their respective transport sectors, in the following ways:

A. Ownership controls

For specified changes in ownership or control of designated entities, the TSCFB will introduce notification and approval obligations on the buyers, the sellers and the designated entities. If prior approval was not sought or if conditions of approval were not complied with, the Relevant Authority may issue remedial directions to direct the transfer or disposal of equity interest in designated entities.

For a start, designated entities will need to notify the Relevant Authority of any changes in its ownership and control within seven (7) days after becoming aware of the events. Buyers who obtain a stake in designated entities are required to notify the Relevant Authority after becoming a 5% controller, and are also required to obtain the Relevant Authority’s approval before becoming a 25%, 50% or 75% controller, or an indirect controller. Any person acquiring, as a going concern, any part of a designated operating entity’s business relating to the provision of essential transport services in Singapore, as well as the designated operating entity, will also need to obtain the Relevant Authority’s approval. Sellers selling a stake in designated entities are also required to seek the Relevant Authority’s approval before ceasing to be a 25%, 50% or 75% controller (as the case may be).

B. Controls over management appointments

As part of ensuring that persons who are principally responsible for the management of designated entities are assessed to be fit and proper, and not inimical to Singapore’s national interests, the TSCFB also introduces approval requirements for designated entities to appoint its chief executive officer and the chairperson of its board of directors. For a designated operating entity which is also a licensee under a Relevant Authority, the Relevant Authority’s approval would be required for the appointment of its directors (in addition to its chief executive officer and the chairperson of its board of directors). If prior approval was not sought or if the conditions of approval were not complied with, remedial directions may be issued by the Relevant Authority for the removal of key appointment holders.

C. Operations and resourcing controls and notification requirements

As part of making sure that the designated entities have the adequate resources and capabilities to provide essential transport services, designated entities will be required to notify the Relevant Authority of events that could materially impede or impair the provision of essential transport services in Singapore, such as a lawsuit or an insolvency. Advisory guidelines on such notification requirements will be provided by the Relevant Authorities in due course.

Additionally, designated operating entities cannot be wound up or dissolved without the consent of the Relevant Authority, and the Relevant Authority must be made a party to any related liquidation proceedings. Where the designated operating entity becomes unable to provide essential transport services safely and reliably, they may be issued with a special administration order by the Minister, to ensure service continuity for Singapore and Singaporeans.

IV. Going forward

The introduction of regulatory controls over essential companies in the transport industry under the TSCFB is a move towards ensuring the long-term resilience of Singapore’s essential transport services, in an increasingly complex operating landscape.

The proposed amendments under the TSCFB are slated to come into effect in the second half of 2024, and any breach of the proposed requirements under the TSCFB will be an offence, with differing penalties based on the sector involved as illustrated below:

1. In relation to bus services and rapid transit systems, the new section 28R of the BSI Act and the new section 21R of the RTS Act (as introduced by the TSCFB) impose a fine of up to SGD50,000 and/or imprisonment for a term of up to six (6) months for non-compliance with the new obligations imposed on designated entities.
2. For the aviation industry, the new section 67M of the CAAS Act (as introduced by the TSCFB) imposes:
   1. a fine of up to SGD500,000 and/or imprisonment for a term of up to three (3) years if the convicted person is an individual; or
   2. a fine of up to SGD1 million in any other case,

for non-compliance with the new obligations imposed on designated entities.

In light of the substantial amendments brought about by the TSCFB and the penalties for non-compliance, key players in the provision of essential transport services must be fully aware of these amendments and should seek legal advice whenever they are unsure of their obligations.