| Alibaba Corporation has adopt partner system that founders can appoint and remove most directors in order to control the operation and management of the company. Company laws and regulations in England and America allow companies to set up dual-class stock, which can set up different proportions of voting shares, namely common shares and special shares. Common shareholders have one voting right per share, special shareholder have multiple voting rights.In dual-class stock companies, founders have the right to control the management of companies that can ensure the long term performance and operation of companies and implement the basic development strategies. Public offering of common stocks, like preferred shares/convertible shares, can appeal potential investors and meet the demand of corporate finance. Preferred shareholders/convertible shareholders get fixed income or preferred dividends and do not participate the management of companies. At the same time,dual-class stock company exist some issues,including high cost of agent/the shortage of mechanism to restrain controller and prevent controller infringing small and medium shareholders. Dual-class stock company have to disclose more internal information and build more effective internal governance mechanism.In this paper, through summarizing the present situation of countries that apply dual-class stock, we have a basic understanding of the dual-class stock and subject stocks. The classification of subject stocks is diversified and flexible, including dual-class stocks in America/subject stocks in England/species stocks in Japan. Analysis differences between dual-class stock and accumulative voting system\limited partnership to define the concept of dual-class stock.Analysis the data of companies that have listed in the New York Stock Exchange and NASDQ Stock Market, including American companies and Chinese companies that listed in the United States. Analysis the industrial distributions of dual-class stock companies to find industries that are suitable for using dual-class stock. The outcome is that innovative internet companies and cultural media companies prefer to adopt dual-class stock in England and America. Whether multiple voting shares violate shareholder’s democracy? Shareholder democracy needs to be interpreted broadly. Shareholder’s democracy does not mean all shareholders must have the same proportion voting rights, but means the equity structure can satisfy different investors’ investment purposes and set up particular content on each subject stock.According to the company law in China and data of industrial distributions, dual-class stock can be introduced to China and operated in innovative internet companies and cultural media companies initially. At the same time, in view of the risks of dual-class stock, it is necessary to take measures to reduce the risks. Multiple voting rights can only apply to the management、decision-making and appointment of directors of companies. It is necessary to control the scope of application of multiple voting rights strictly in case of power rent-seeking. Common shareholders have rights to participate and vote in meetings about profit distribution and the remaining assets allocation.The complexity of the subject stocks needs to establish perfect information disclosure system. Non-listed companies need to register information of subject stocks in industrial and commercial administration and listed companies have to disclose potential risk of subject stocks. Establishing transformation mechanism of subject stocks, controller shall lose multiple voting rights if they lose management ability; small and medium shareholders shall restore full voting rights if they find controller infringe companies’ interests or shareholders’ interests. At the same time, securities’ regulators perform the function of "regulatory state". |
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