SGX launches public consultation on allowing dual-class shares

People pass an SGX Singapore Exchange logo outside its premises in Singapore's central business district
People pass an SGX Singapore Exchange logo outside its premises in Singapore's central business districtPHOTO: REUTERS

The Singapore Exchange has launched a public consultation on whether a dual-class share (DCS) structure where certain shares have higher voting rights than others, should be introduced, and if so, what safeguards may be appropriate.

Starting Thursday, the public consultation will be open for a period of two months, until April 17, for key stakeholder groups to submit their feedback and suggestions.

DCS structures may be used by entrepreneurs and companies to increase flexibility in capital management and to give investors greater choice.

This dovetails with the Committee on the Future Economy's recommendations to explore the merits of DCS structures as such listings are increasingly being considered by companies in high-technology industries.

"The CFE has recommended that DCS listings be permitted with appropriate safeguards to support Singapore's ambitions to become a leading tech and biomedical hub," said Mr Loh Boon Chye, chief executive of SGX.

Hong Kong last month also announced it may change its listing rules and introduce a dual-class share structure after the country's stock exchange operator said it plans to consult the market on the launch of a third board in an effort to attract more listings by technology and new-economy firms.

The consultation seeks feedback on possible safeguards to mitigate key risks of such structures, including the risk of entrenchment where owner managers become entrenched in the management of the company to the detriment of the non-controlling shareholders.

Another key risk is that of expropriation, where controlling shareholders can further their own interest at the expense of other shareholders.

To that end, possible safeguards include: prohibiting the issuance of multiple vote (MV) shares by a company that is already listed; introducing sunset clauses where MV shares are converted to one-vote (OV) shares either after a certain time, or subject to a vote by OV shareholders.

Other possible safeguards include whether there should be admission criteria over and above mainboard prerequisites such as the minimum market capitalization of S$500 million.

"A DCS structure could help entrepreneurs to swiftly accelerate business expansion while continuing to lead the strategies and growth of their company," Mr Loh said.

If DCS companies are listed, their securities will be clearly identified for investors, and investor education activities will be organized.

DCS companies will be required to prominently disclose risks of their structures in their IPO prospectuses, and must make known to all holders of MV shares at the point of listing and in every annual report.