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Singapore Exchange considers dual class share structure

Singapore Exchange (SGX) may introduce a dual class share structure if feedback from a current consultation project is positive.20 Feb 2017

Under a dual class structure (DCS) some shares are given higher voting rights than others. SGX has launched a public consultation asking whether this should be introduced, and what safeguards would be needed.

"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 has also recommended exploring the merits of the DCS structures as DCS listings are increasingly being considered by companies in high-technology industries," SGX said.

In its consultation SGX asks whether extra admissions criteria are needed, such as a minimum market capitalisation of S$500 million (£284 million).

Safeguards may also be needed against the entrenchment of the controlling shareholder, and the risk of that shareholder furthering his own interests at the expense of other shareholders, SGX said. The safeguards could include prohibiting the issuance of multiple vote (MV) shares by a company that is already listed, including a sunset clause whereby MV shares convert to one-vote (OV) shares after a certain time of after a vote by OV shareholders, or giving MV and OV shareholders equal right to vore on the appointment of independent directors.

Loh Boon Chye, chief executive of SGX said: "A DCS structure could enable entrepreneurs to swiftly accelerate business expansion while continuing to lead the strategies and growth of their company. SGX must keep innovating as a fund-raising platform and feedback from our stakeholders will be crucial in helping to construct a DCS offering which is in the interest of investors and attractive."

The consultation will be open for two months, SGX said. 

The Monetary Authority of Singapore said this month that it will assess the effect of introducing DCS structures in SGX.

"DCS structures pose governance risks that need to be carefully assessed and managed. SGX will soon be conducting a public consultation on whether and how to introduce a listing framework for DCS structures in Singapore," it said.

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