Publication Type

Journal Article

Version

submittedVersion

Publication Date

12-2018

Abstract

This article seeks to understand the rationale for and potential implications of the introduction of dual class shares (DCS) in Singapore. It does so by first considering the theoretical as well as evidential arguments for and against the use of DCS, followed by a survey on the reception (or otherwise) of such structures in four common law jurisdictions with vibrant capital markets, viz., Canada, the United States, United Kingdom and Hong Kong. It observes that the chief argument cited by business founders to justify the use of DCS structures is the desire to enhance a firm’s long-term profitability by shielding the (talented) founder from short-term market pressures. Though the use of DCS structures remains controversial, the phenomenal success of technology unicorns such as Alphabet Inc. and Alibaba appears (for now) to have sealed the place of DCS in the American securities markets. This exerts considerable pressure on competing markets to follow suit. Singapore’s response to this aggressive competition is pragmatic but measured. The indications so far are that the regulators would chart a middle path between the conflicting goals of incentivizing entrepreneurial fundraising and investor protection by permitting DCS structures in exceptional cases circumscribed by stringent safeguards. This, it is submitted, is an appropriate response given the theoretical and evidential underpinnings of DCS structures as well as economic and regulatory conditions peculiar to Singapore. Should it succeed, this development would serve as an interesting and notable example of a regulatory innovation that avoids the proverbial race to the bottom in the face of intense competition.

Keywords

Dual-class shares, Singapore, corporate governance, Hong kong, Listing rules

Discipline

Asian Studies | Banking and Finance Law | Corporate Finance

Research Areas

Corporate, Finance and Securities Law

Publication

Berkeley Business Law Journal

Volume

15

Issue

2

First Page

440

Last Page

467

ISSN

1548-7067

Publisher

University of California, Berkeley School of Law

Additional URL

https://lawcat.berkeley.edu/record/1128873?ln=en

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