The Transport Sector (Critical Firms) Act 2024: Impact on M&A in the Singapore transport sector

A. Introduction

On 1 April 2025, the Transport Sector (Critical Firms) Act (the Act) was passed in Parliament after being introduced by the Ministry of Transport in Parliament on 3 April 2024. The Act aims to enhance the resilience of essential transport services in Singapore and to protect against the risk of external parties exerting undue influence over such services, and in doing so expands the list of sectors in Singapore with sectoral legislation which impose ownership and control restrictions.

B. Designated Entities

A central component of the Act is its introduction of a designated entities regime, under which entities across air, land and sea sectors can be designated by relevant authorities (i.e. the Civil Aviation Authority of Singapore, the Land Transport Authority of Singapore and the Maritime and Port Authority of Singapore, each an Authority) under their respective sectoral legislation if they are key entities involved in the provision of essential transport services in Singapore (Designated Entities). Such Designated 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 equity interest in a designated operating entity.

The following entities have presently been designated as Designated Entities:

(i) Designated operating entities

• Air: Changi Airport Group (Singapore) Pte. Ltd., Singapore Airlines Limited, Scoot Pte. Ltd., SATS Ltd, Sats Airport Services Pte Ltd, Sats Asia-Pacific Star Pte. Ltd., Sats Catering Ptd Ltd, SIA Engineering Company Limited and Changi Airport Fuel Hydrant Installation Pte. Ltd.;
• Land: SBS Transit Ltd, SMRT Buses Ltd., SBS Transit Rail Pte. Ltd., SMRT TEL Pte. Ltd. and SMRT Trains Ltd.; and
• Sea: PSA Corporation Limited, PSA Marine (Pte) Ltd, and Jurong Port Pte Ltd.

(ii) Designated equity interest holders

• SMRT Corporation Ltd, in respect of its equity interests in SMRT TEL Pte. Ltd. and SMRT Trains Ltd; and
• PSA International Pte Ltd, in respect of its equity interest in PSA Corporation Limited.

The new designated entities regime under the Act supplements the list of sectors subject to legislative restrictions on ownership and control – the current regulated sectors include the telecommunications, banking and utilities industries, where investors are required to seek specific approvals and/or licences from the relevant sector regulators.

C. Key ownership control measures

The Act establishes a framework for monitoring and regulating ownership changes in Designated Entities through amendments to the statutes administered by the Authorities, namely the Bus Services Industry Act 2015, the Civil Aviation Authority of Singapore Act 2009, the Maritime and Port Authority of Singapore Act 1996 and the Rapid Transit Systems Act 1995. Pursuant to the Act (and its corresponding amendments to the foregoing statutes):

(i) prospective investors into Designated Entities are required to:

1. notify the relevant Authority within seven (7) days after becoming a 5% controller¹  of a Designated Entity;
2. obtain the relevant Authority’s approval before becoming, or ceasing to become, a 25%, 50% or 75% controller of a Designated Entity;
3. obtain the relevant Authority’s approval before becoming an indirect controller of a Designated Entity, i.e. a person who, whether alone or together with any other person, has the power to exert control over the directors, officers or trustee managers of the Designated Entity; and
4. in respect of a Designated Entity which is a designated operating entity, obtain the relevant Authority’s approval before acquiring (as a going concern) any part of the business of such Designated Entity relating to the provision of essential transport services; and

(ii) Designated Entities must notify the relevant Authority within seven (7) days upon becoming aware of any of the above changes.

Where a transaction is effected without the necessary approval, the transacting parties may be directed by the relevant Authority to remedy the non-compliance, such as disposing of a stake in the Designated Entity.

D. Other control measures

Designated Entities will also be subject to other controls, including that:

1. approval from the relevant Authority must be obtained for the appointment of key officers such as the chief executive officer, directors and the chairperson of the board;
2. the relevant Authority will need to be notified of events that could materially impair the provision by the Designated Entities of essential transport services, such as a lawsuit or an insolvency;
3. in extreme cases when essential transport services cannot continue safely and reliably, the relevant Authority may appoint a person under a special administration order to manage the affairs, business and property of the Designated Entity; and
4. approval from the relevant Authority must be obtained for the voluntary winding up or dissolution of a Designated Entity.

E. Implications for businesses and investors

The Act introduces a regulatory framework designed to ensure that significant changes in ownership of Designated Entities are subject to government scrutiny and approval. While the Act aims to protect critical infrastructure, businesses and investors should be aware of the following:

1. Increased regulatory scrutiny: ownership changes in Designated Entities of 25% or greater will be subject to government approval, potentially affecting investment strategies and timelines;
2. Compliance obligations: failure to comply with notification and approval requirements can result in penalties, including fines and imprisonment, depending on the sector; and
3. Strategic planning considerations: entities involved in mergers, acquisitions or restructuring within the transport sector should account for the Act’s provisions in their strategic planning to ensure compliance and mitigate potential delays.

The Act follows closely on the heels of the introduction of the Significant Investments Review Act 2024 (more information on the Significant Investments Review Act 2024 has been covered in our article: Proposed Statutory Developments in Singapore’s Foreign Direct Investment Regime – Significant Investments Review Bill), potentially signalling a trend toward greater regulatory scrutiny of M&A deals. Businesses and investors operating within or engaging with Designated Entities in the transport sector should familiarise themselves with the Act to navigate its requirements effectively and ensure compliance.

Additionally, where deals involving Designated Entities are concerned, we expect a potential uptick in deal structures where Designated Entities enter into unincorporated arrangements, such as partnerships and contractual joint ventures. To the extent that such arrangements do not fall within the scope of the Act, this approach allows Designated Entities to preserve their equity structures and maintain control over their operations, while collaborating with third parties and sharing both economic risks and profits.