SGX consults public on dual class share structure 

Singapore Exchange (SGX) is consulting the public 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 might be appropriate.  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) has also recommended exploring the merits of the DCS structures as DCS listings are increasingly being considered by companies in high-technology industries.

The consultation seeks feedback on possible safeguards such as:

1. Whether there should be admission criteria over and above current Mainboard prerequisites such as a minimum market capitalisation of S$500 million.
2. Possible safeguards against the risk of entrenchment of the controlling shareholder and the risk of expropriation where the controlling shareholder can further his own interest at the expense of other shareholders. These safeguards include:

1. Prohibiting the issuance of multiple vote (MV) shares by a company that is already listed.
2. A sunset clause where MV shares are converted to one-vote (OV) shares either after a certain time or subject to a vote by OV shareholders.
3. Subjecting the appointment of Independent Directors to a vote where both MV shares and OV shares are treated equally.

“The Companies Act allows for an MV share structure. The CFE has also recommended that DCS listings be permitted with appropriate safeguards to support Singapore’s ambitions to become a leading tech and biomedical hub,” said Loh Boon Chye, CEO of SGX.

“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,” added Mr Loh.

“This consultation is open for two months so that key stakeholder groups can submit their feedback and suggestions. We welcome views on whether DCS should be implemented as well as possible safeguards for risks many see as specific to DCS,” said Tan Boon Gin, Chief Regulatory Officer of SGX.

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

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