China: Super Voting Right and Its Reception for Chinese Overseas Listings

Last Updated: 14 October 2012
Article by Weimin Wang

Mark Zuckerberg had his Facebook listing in May 2012. Upon completion, Mr. Zuckerberg held 57% of the listed company’s voting rights, while owning merely 18% of the company’s shares. 1 The tool to achieve this high degree of control surviving five rounds of pre-IPO investment over 1.8 billion U.S. dollars and an IPO worth 16 billion U.S. dollars 2 is Facebook’s dual class share structure. It allowed the visionary founder to avoid possible interference in his management of the company. An outside shareholder will have numerical disadvantage torpedoing his decision or choice of board members through a normal internal procedure of the company.

Under the dual-class share structure, Mark Zuckerberg and certain others were issued certain Class B Common Shares, endowed with 10 votes per share, 10 times the voting power that of Class A Common Shares. The arrangement, commonly known as super voting right, has certainly drawn attention.

Super Voting Right as Commonly Understood

In the U.S., super voting right was largely confined to family-run enterprises or media companies. It became popular among technology companies, especially internet companies since Google’s IPO in 2004, which adopted a dual-class share structure. From then on, during the past years, some big tech IPOs - LinkedIn, Yelp, Groupon, Zynga, Facebook - featured multiple class share structures. 3 Other big names include Ford Motor Company, Berkshire Hathaway Inc., Echostar Communications, and Hollinger International, etc.

Super voting rights are typically conferred on common shares, resulting in the shareholder holding more than one vote per share. Preferred shares, which grant priority over common shares in terms of dividend payment, liquidation or bankruptcy returns, generally carry subordinate or less (sometimes even no) voting right. When the two classes of shareholders vote together, which they generally do with some exceptions, the common share holders will enjoy a numerical share-to-share voting advantage, hence greater power to steer shareholder resolutions.

Super Voting Right Beneficiaries

Founders find super voting right appealing. Inserted at the right timing, it allows them to raise capital without substantially diluting their control over the companies they found.

From shareholder control and stability comes a higher probability of board and management stability, which arguably contributes to the long term strategizing of the company.

As an anti-dilution tool, dual class shareholding structure is effective against hostile takeovers or forced mergers. If a bidder is successful in acquiring all outside equity, the disproportionately high votes held by the founder may well outnumber the bidder. Its effectiveness is ranked as severe as poison pill. 4

Investor Concerns

Investors see this arrangement in a different light. Some cry unfair advantage. Some worry that it may result in the founder imposing on resolutions that may not take into full account interests of the investors. The founder, together with his family and friends are enticed to institutionalize their positions regardless of performance. Last resort measures by outside shareholders to remove them from management positions are stonewalled. 5

Where investors accept dual class shareholding and super voting right, they must have done so with a tradeoff.

For extra votes yielded to the founder, investors can argue for gains in other terms, such as longer than average protective provisions, more matters requiring super majority votes of the board or of shareholder meetings and more matters requiring separate majority or super majority votes of preferred share holders, etc.

By adjusting the balance of power in terms otherwise standard in transactions without super voting right, the deal an investor can strike may not look as a turnoff as it does when it is first proposed.

Timing and Terms

Timing of the introduction of dual class share ownership is in itself an art.

For the founder, an early and established dual class share structure will help set a good foundation for his future dealings with rounds of investors. It will also leave less room for further vote dilution and change of terms and conditions. On the other hand, for a start-up business with neither apparent growth potential nor a competitive business model, it may not have the power to set the rules. Financing may be off the limits should its insistence on super voting right be questionable. Some investors may even ask that it be dismantled before any investment can happen.

Somewhere down the road, when the founder’s business takes shape and commands a respectable market recognition and share, the balance of power may change so that there may be room for discussions with the investors. The drawback, on the other hand, is that the investors, old and new, are going to ask for some in return for revisions of the terms. While the founder cannot reasonably expect a landslide addition of voting powers, it may acquire some more votes to give himself the comfort of added counterweight.

The matter is different in each case, and a lot depend on the interaction and trust between the founder and investor.

Super Voting Right for Chinese Overseas Listings

Super voting right is not expressly allowed under the China’s legal context. For limited liability companies, Art. 43 of the Company Law, 1994 as amended appears to allow the articles of a limited liability company to provide for voting rights not in strict adherence to the underlying percentage of equity 6 while the allowance is removed for joint stock companies 7 . Whether allowed or not, a company duly registered with class B common shares is not foreseeable, not to mention floating of such share on the Chinese stock exchanges.

Overseas incorporations and listings, on the other hand, do provide a platform for dual class shareholdings. For example, Section 36 of the BVI Business Companies Act 2004 expressly provides “…shares in a company may … (c) confer special, limited or conditional rights, including voting rights; …”. Companies Law (2010 Revision) of the Cayman Islands has similar provisions to that effect. 8

To the extent super voting rights are permitted in offshore jurisdictions where SPVs are frequently incorporated for overseas financing, Chinese entrepreneurs are certainly not hesitant in adopting such arrangements. They did so well before the Facebook IPO. Examples of such incorporations with super voting rights include Baidu (Cayman), Shanda Games (Cayman), Soufun (Cayman), NetQin (Cayman), Youku (Cayman), Renren (Cayman), Qihoo 360 (Cayman).

All of the above found home for their IPOs either on NYSE or NASDAQ. Both U.S. stock exchanges allow listings by companies having super voting shares, but prohibit the listed ones with dual share structure to reduce or eliminate such arrangement or issue a new class of super voting shares. 9

For the Hong Kong Stock Exchange, unless it grants a waiver, dual share listing is barred. 10 It is certainly resolute in denying such waivers. 11

Singapore Exchange, on the other hand, clarified its position on September 20, 2011. After some public discussions, it issued a regulatory guidance 12 declaring that companies are not allowed to list dual-class voting shares in Singapore. 13


Should the U.S. continue to offer high earnings on its market, overseas listings by Chinese enterprises incorporated in the BVI or Cayman Islands may well offer a chance to their founders for super voting right. How that right is to be configured so that it is acceptable to future investors remains a balancing act that will play out pursuant to the comparative powers of the players involved.

At this moment, if the intention is to list in Hong Kong or Singapore, class B common shares, if existing, will have to be converted to all other common shares to qualify.


1 James Surowiecki, “Unequal Shares, Facebook’s IPO and Dual Class Share Structures”, The New Yorker, May 28. 2012, online:

2 JING, Hui, “Rounds of Investors Chewing Their Shares of the Facebook IPO Banquet”, Gesafe Wealth, May 25, 2012, online:

3 James Surowiecki, supra, note 1.

4 Richard S. Ruback, “An Overview of Takeover Defenses”, in Alan J. Auerback (ed.), Mergers and Acquisitions (University of Chicago Press, 1987), 49, at 55, online:

5 Ben McClure, “The Two Sides of Dual Class Shares”, Investopedia, Jan. 08, 2012, online:

6 Art. 43 of the Chinese Companies Law provides: “[s]hareholders shall exercise their voting rights at a meeting of the shareholders assembly in proportion to their respective capital contributions, except where otherwise provided for by the company's articles of association.”

7 Art. 104 of the Chinese Companies Law provides: “[s]hareholders attending a meeting of the shareholders general assembly shall have the right to one vote for each share held, …”.

8 Regulation 2, Regulations for the Management of a Company Limited by Shares, Table A, First Schedule, Companies Law (2010 Revision) of the Cayman Islands provides: “… any share may be issued with such preferred, deferred or other special rights, or such restrictions, whether in regard to dividend, voting, return of share capital or otherwise as the company may, from time to time, by special resolution determine, and any preference share may, with the sanction of a special resolution, be issued on the terms that it is, or at the option of the company is liable, to be redeemed.”

9 New York Stock Exchange Listed Company Manual §313 (A) Voting Rights Policy provides: “[v]oting rights of existing shareholders of publicly traded common stock registered under Section 12 of the Exchange Act cannot be disparately reduced or restricted through any corporate action or issuance. Examples of such corporate action or issuance include, but are not limited to, the adoption of time phased voting plans, the adoption of capped voting rights plans, the issuance of super voting stock, or the issuance of stock with voting rights less than the per share voting rights of the existing common stock through an exchange offer.” §313.10 further provides: “[t]he restriction against the issuance of super voting stock is primarily intended to apply to the issuance of a new class of stock, and companies with existing dual class capital structures would generally be permitted to issue additional shares of the existing super voting stock without conflict with this Policy.” NASDAQ under its Listing Rule 5640 has similar provisions.

10 Hong Kong Stock Exchange Main Board Listing Rule 8.11 provides: “[t]he share capital of a new applicant must not include shares of which the proposed voting power does not bear a reasonable relationship to the equity interest of such shares when fully paid (“B Shares”). The Exchange will not be prepared to list any new B Shares issued by a listed issuer nor to allow any new B Sharesto be issued by a listed issuer (whether or not listing for such shares is to be sought on the Exchange or any otherstock exchange) …”. Hong Kong Stock Exchange GEM Listing Rule 11.25 has similar provisions.

11 Nisha Gopalan, “Structure Key to Man U Listing, Soccer Club Chooses Singapore IPO For Dual-Share Option, Upsetting Favored Hong Kong”, the Wall Street Journal, Aug. 30 2011, online:

12 Singapore Stock Exchange, Regulation, Regulator’s Column, “The Capital Structure of Listed Companies in Singapore”, Singapore, Sept. 20, 2011, online: ompanies+in+Singapore.

13 Mint Kang, “Dual Class Share Not Allowed in Singapore, Says SGX”, Inside Investor Relations, Sept. 21, 2011, online: apore-says-sgx/.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions