HONG KONG • Hong Kong is set to allow controversial dual-class shares under rule changes to be proposed by the city's stock exchange as it raises the stakes in its battle against New York for blockbuster Chinese initial public offerings (IPOs).
Hong Kong Exchanges and Clearing (HKEX) said yesterday it had begun drafting specific rule changes that will be put up for a formal public consultation in the first three months of 2018.
Dual-class shares, which typically give one set of shareholders greater voting rights than others, have been favoured by many owners of new age industries such as technology, with the extra voting power given to top executives seen as protection against pressure for short-term returns.
But they have also come under criticism from corporate governance activists, who have warned of its potential abuse by company insiders.
Hong Kong's proposed changes stem from a discussion paper published in June. The exchange said "a large majority" of the 360 responses it received were supportive of permitting dual-class shares.
"The market has made it clear they want the exchange to take action to broaden Hong Kong's capital markets access and enhance its competitiveness," said HKEX chief executive Charles Li. "By the second half of next year, we hope that we will see a significant number of innovative companies beginning to choose Hong Kong."