On 16 February 2017, the Singapore Exchange Securities
Trading Limited ("SGX") released a
consultation paper seeking responses to a possible admission
criteria for companies with a dual class share
("DCS") structure. Under a DCS
structure, certain shareholders have voting power disproportionate
to their shareholding. Shares in one class carry one vote each
("OV Shares"), while shares in another
class carry multiple votes ("MV
The permissibility of DCS structures is a matter of considerable
public debate. On one hand, there is the risk that shares with
multiple votes can be used to severely undermine minority
interests. On the other hand, it is recognised that DCS structures
may be utilised by entrepreneurs and companies to increase
flexibility in capital management, and to provide greater investor
choice while supporting Singapore's economic transformation.
The Committee on the Future Economy (CFE) recommended exploring the
merits of the DCS structures as DCS listings are increasingly being
considered by companies in high-technology industries. The Listings
Advisory Committee (the "LAC") advised
SGX that it was in favour of permitting a DCS structure, subject to
SGX is therefore seeking feedback on whether a listing framework
for companies with a DCS structure would be beneficial, and
proposes additional admission criteria for a company to list with a
Under SGX's proposed framework, a potential issuer with a
DCS structure must fulfil all the usual admission criteria under
the Listing Manual, and may be required to fulfil the following
1 New Issuers; Holistic Assessment
A DCS structure will only be allowed for new issuers seeking a
listing. SGX will conduct a holistic assessment when determining
the suitability of the listing applicant.
2 Compelling Reason
A DCS structure will only be allowed if there is a compelling
reason to adopt the same.
3 Voting Differential
The maximum voting differential between MV Shares and OV Shares
is 10 to 1. The voting differential must be fixed at the point of
IPO and may not be changed.
4 Post-listing Issuance
MV Shares may not be issued post-IPO except in the event of a
rights issue (where the MV Shareholders may retain their existing
5 Limited to Management Team
The constitutive documents of the issuer may be required to
include provisions that MV Shareholders must be executive directors
or executive officers. Failing which, their shares will be
converted to OV Shares.
6 Sunset Clause
It may be a requirement that the constitutional documents
provide for the automatic conversion of MV Shares into OV Shares at
a future date.
7 Board Composition
Code of Corporate Governance recommendations on board
composition will be mandatory for issuers with a DCS structure
(currently it is on a "comply or explain" basis).
8 Appointment of Independent Directors
Independent directors must be appointed through an enhanced
voting process where one MV Share is limited to one vote.
9 Coat-tail Provision
MV Shareholders may be required to enter into a coat-tail
agreement providing that the MV Shareholders will be treated
similarly to OV Shareholders in a takeover.
Other proposed requirements are set out and elaborated in the
consultation paper, a copy of which can be obtained from SGX's
website: www.sgx.com. The consultation exercise will
close on 17 April 2017.
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.
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