On The Construction Of Dual-class Share Structure In China

Dual-class share structure originated in the United States, which is widely adopted by high-tech companies. Companies which adopt this share structure, will issue two class share, class A and class B. The two class share have the same economic interests, while have great difference in voting. With this structure, the founding shareholders can maintain control of the company.Firstly, in the foreword, the author introduces the basic concept of Dual-class share structure, and the current research of dual-class share structure in our country.In the first part of the article, through the introduction with Google, Facebook and other high-tech enterprise’s ownership structure in the United States, author introduced dual-class share structure in overseas capital markets. In addition, by introducing the ownership structure of Baidu and SINA weibo, shows that although China’s capital markets are not allowed to establish dual-class share structure, but many domestic companies by setting up complex structures, in fact, has adopted the sys ownership structure, but constrained by the statutory limits, the only option listed in overseas capital markets.In the second part of the article, the author firstly analyses the basic features of dual-class share structure, these basic features mainly includes the equality of economic interests, and the Inequality of voting right and so on. Secondly, author compares the dual-class share structure with other similar systems. Through the comparison, the author describe the special effect of dual-class share structure in company governance. At the last, author analyses the efficiency value, fair value and security value of this system. Author thinks that this system can increase the stability of company and expands the financing scale, it can also protect shareholder’s rights and interests.In the third part of this article, the author focuses on the rationality establishing dual-class share structure ownership structure. For a long time, how to strike a balance between financing and maintain the control is a major difficulty faced by the company’s founder. Dual-class share structure is a solution to solve the problem. Besides, it can attach high quality enterprises to list on the domestic capital market. In addition, it plays an important and positive role against hostile takeovers.In the fourth part of this article, the author analyses the feasibility of establishing dual-class share structure. On the application of the structure, the author believe that it should mainly apply to company limited. In addition, in the context of current operating range limits are more lenient, restricting certain industry companies adopt the two-tier share system is unreasonable. In view of the characteristics of voting rights, holders of B class share should be limited to have a significant role in the development of the company’s founder shareholders. Of course, the external transfers of B class share shall also adopt strict limits in order to ensure the stability of corporation.In order to protect the interests of companies and other investors, the author also focuses on analysis of regulation, Under the modern institutional economics perspective, the company is seen as the combination of a series of contracts, privacy rights as the cornerstone, through the establishment of the contract in the form of two-tier stock system, and bound by the holders of class b common stock should be the most important regulations in the market economy. Of course, generally makes the public authority intervention of market failure is also essential. When regulation of private rights and the public authority has failed to prevent the impairment of a right, investors shall have the right to sue the founding shareholders.