Singapore Details Rules For Listing Of Dual-class Shares

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SINGAPORE: Singapore Exchange (SGX) on Tuesday (Jun 26) introduced rules that make possible the listing of companies with dual-class shares (DCS) structures, putting it in a position to help support high-growth companies and battle for blockbuster listings.

The rules, which take effect immediately, fits with Singapore's moves to reinvent itself as a fintech and new technology hub.

SGX lost out on the initial public offering (IPO) of Manchester United to New York in 2012 because it could not obtain approval for a dual-class share structure.

It also comes two months after Hong Kong Exchanges and Clearing (HKEx) added dual-class shares to its IPO rules.

HKEx launched from April 30 new rules designed to attract companies with a market cap of not less than HK$10 billion (US$1.27 billion) while Singapore will allow firms valued at S$300 million to list with dual-class shares.

Dual-class share listings (DCS), which are allowed on the New York Stock Exchange and Nasdaq, give extra voting power to protect executives from shareholders obsessed with short-term gains. The structure has been embraced by companies such as Facebook, LinkedIn, and high-valued tech startups known as unicorns.

But they have also come in for criticism from corporate governance advocates, who have warned of its potential abuse by company insiders. 

The changes, which follow two rounds of public consultation, will help SGX join the global league in terms of offerings, the bourse operator said.

“SGX today joins global exchanges in Canada, Europe and the US where companies led by founder-entrepreneurs who require funding for a rapid ramp-up of the business while retaining the ability to execute on a long-term strategy, are able to list. Investors who understand and agree with the business model and management of DCS companies will also have more choice,” said Mr Loh Boon Chye, CEO of SGX.

Safeguards have been in place to address specific risks, including capping each multiple voting share at 10 votes and limiting the holders of multiple voting shares to named individuals, or permitted holder groups whose scope must be specified at IPO.

SGX also requires “sunset clauses”, including requiring that MV shares be converted to ordinary voting (OV) shares under circumstances the company must stipulate at the time of the IPO.

SGX has also specified a range of instances that require shareholders to vote via an enhanced voting process where all shares including multiple voting shares carry one vote each. 

These instances include the appointment and removal of independent non-executive directors, a reverse takeover and the winding-up or delisting of the issuer. 

“SGX’s framework for dual-class share (DCS) structures strikes a balance between supporting high-growth companies, and having in place safeguards to mitigate governance risks associated with such structures. DCS listings will broaden the range of investment options for investors and add vibrancy to Singapore’s capital markets,” a spokesperson for the Monetary Authority of Singapore said.