A Study On Dual-class Share Structure Of Internet Corporations

In contrast to the principle of “one share one vote” and “equal share rights” held by single-class share structure, the dual-class share structure divides the shares into different types that have different voting rights. By this way, those shareholders who hold the shares of super voting rights will dominate a company even if their shares are diluted.For internet corporations’ development, there are two critical factors: brainpower and capital.Belonging to high-tech industry, the internet corporations have a special demand for brainpower,which differs from any corporations in traditional industry. The importance of brainpower is over that of capital. The dual-class share structure ensures those who have brainpower could always dominate these internet corporations even if their shares are diluted by the other capital.As a centralized system which would centralize voting rights, the dual-class share structure violates the principle of “equal share rights”, which harms the interests of the other shareholders and the internet corporation itself. But through the analysis of disadvantages of the dual-class share structure, we find that the application of dual-class share structure by internet corporations could bring more benefits than loss. On the other hand, the dual-class share structure also gets a development itself, such as Alibaba partnership solves the problem about how to achieve the changeover of leadership when voting rights are centralized.In recent years, a lot of excellent Chinese internet corporations have gone public abroad, not in China. This is a huge loss for China. To conform to the trend of new times and new economic situation, China has built a basic system of dual-class share structure which fits the demand of internet corporations for brainpower, aiming at drawing Chinese internet corporations go public in China. But relevant securities laws have not been reformed and internet corporations always are unprofitable in a short time, the aim of Chinese dual-class share structure would not be achieved,though it has special advantages. If China do want to conform to the trend of internet economy, the reform about relevant securities laws is necessary.