Studies On The Construction Of Dual-class Share Structure In China

The dual-class share structure along with the development of modern enterprise system, is the innovation way of the corporate governance structure for good governance mode. The dual-class share structure allows companies to issue different voting right stock, and sets up the corresponding rights and obligations on all kinds of stock in equity structure. The dual-class share structure, because of its unique voting mechanism, is a good way to solve the contradiction between equity financing and management control system over the company, and disperse the founding shareholders’ investment risk. With the family business and innovative enterprise demanding for the innovation of the corporate governance, is commonly used by a growing number of companies. In recent years, Alibaba Corporation, JD Corporation and other domestic well-known electricity enterprises going public with dual class stock, sparked the debate of dual-class share structure of Chinese scholars.Compared with the traditional single-share structure,the dual-class structure deviate from a one share-one vote regime, separate cash flow rights and voting rights, and stable on control and so on. The dual-class share structure of the unique advantages, makes it easier to practice gradually widely used in the company. First of all, it protects the originator or the substantial shareholders with stable control power, which is also the original purpose of the dual-class share. In family businesses, management in order to promote the further development of the enterprise, need more equity financing, but several rounds of equity financing may result in loss of management control, which makes the management into a dilemma, but the dual-class share structure is to solve the plight of the management. Secondly, the dual-class share structure to avoid the outside shareholders "management myopia", and management can make the long-term development strategy according to company development needs, which can promote the long-term development of the enterprise. In addition, the dual-class stock structure can effectively resist the hostile takeover. Everything has pros and cons, and opportunities are often accompanied by challenges.The dual-class share structure also has negative effects that we can not be ignored. It deviates from a one share-one vote regime, to distinguish the stock of cash flow rights and voting rights, and increases the risk of agency cost. At the same time, long-term and stable control may lead to market failure, increasing the difficulty of the external mergers and acquisitions, damaged the company’s external supervision mechanism. In practice, the management control using encroach upon the rights and interests of minority shareholders is also often appear, caused the shareholders’ rights inequality.Although the dual-class share structure is debated by the international scholars, it is also widely used in practice. At present, most countries in the world have permission or the existence of the dual share structure by default. In the development of overseas dual-class share structure, American mode is the most mature and development of the system in overseas. The dual-class share structure in the United States produced more than one hundred years, it has formed a relatively mature theoretical basis and practical experience,which has been the model of other countries to build the dual-class share structure learning and using for reference. The dual-class share structure effective operation without the perfect legal system:perfect supervision mechanism and the mechanism of protecting minority investors.With the development of Chinese capital market, the company ownership structure design is more and more flexible. So transplant the dual-class share structure in our country, can make the capital market vital. At present, the company law and practice, Shareholding structure complies with the one share one vote regime, and relevant laws and regulations did not specify a dual-class share structure. Therefore, in China, to build the dual-class share structure need to enhance the company law, securities law and other relevant regulations, which need to clarify the legal status of the dual-class share structure, and establish applicable rules, ensuring effective operation of the dual-class shareholding. In addition, our country at present can’t use dual share structure, another reason is that our country capital market supervision mechanism is not sound and the imperfect legal system of small and medium-sized investors protection. Also building the dual-class share structure in China, therefore, our country should strengthen the protection of small and medium-sized investment, enhancing the information disclosure, check-and-balance ownership structure and shareholder litigation system.