Investors worried by news that listed companies incorporated in the tax haven of Bermuda do not need to follow Singapore's take-over code can relax, according to The Straits Times.

Shareholders' rights remain protected, as all 45 or so of such companies listed on the local bourse still comply via another method.

It turns out that these companies have amended their articles of association to include a section saying they will abide by local take-over rules.

The safeguard was requested by the Singapore Exchange (SGX) each time a company applied for a listing, and so far all Bermuda-incorporated applicants have complied, The Straits Times understands.

`In cases where the place of incorporation does not have a take-over code, such as Bermuda and the British-Virgin Islands (BVI), these companies have been asked to undertake to apply the Singapore take-over code,' said a local lawyer.

`Once there is such an undertaking...there will be a binding contractual agreement between the company and its shareholders,' he said.

Corporate lawyers contacted by The Straits Times yesterday confirmed earlier reports that Bermuda's regulatory framework does not provide a take-over code, and in theory, companies that were incorporated there would not be subject to any rules when it came to mergers and acquisitions.

Shareholders of such companies had feared a situation like this one arising: An outside suitor triggers a compulsory take-over by acquiring a holding of over 30 per cent. Other shareholders end up selling their shares to that party cheaper than what it paid for the initial 30 per cent.

But in reality, safeguards are in place, going by the example of Sesdaq aspirant Axis Systems Holdings, which incorporated its holding company in Bermuda last year.

Axis noted in its preliminary listing prospectus that because it is incorporated in Bermuda, Singapore's take-over and merger laws and regulations will not apply to take-over offers for it.

But the prospectus also pointed to the company's bye-law 168, which requires any member (registered shareholder) who makes a take-over offer in respect of its shares to comply with Singapore's take-over rules.

But what if it is an outside take-over bid? A spokesman for the Securities Industry Council (SIC) explained that in cases where a Bermuda-incorporated company wants to take over a local company, it would have to comply with Singapore's take-over code.

He also said: `If the target company is a non-Singapore-incorporated company, including Bermuda companies, then the take-over rules at the place of incorporation apply.'