Study On Construction Of Legal System Of Dual-share Structure

Alibaba’s “partner system” in 2013 made dual-share structure known to Chinese.Domestic enterprises listing abroad for the protection of dual-share structure also emerged from the water.This triggered domestic fear for the capital flow.Scholars also began to introspect that traditional ownership structure would miss internet enterprises.Under such background,it would be a practical choice to introduce dual-share structure to counter capital flow.But domestic discussion on dual-share structure has been mostly centralized in theoretical field.Dual-share structure turned from theory to practice until the event of “Baowan Battle” shocking domestic capital market in 2015.Faced with “risk capital” entering and hosting the stock market to viciously acquire and disturb the corporate operation,many people in the practice field proposed to try dual-share structure,hoping to protect the benefit for enterprise founders.The attitude by Liu Shiyu,Chairman of China Securities Regulatory Commission,further indicated the acceptance for the protection of founders’ benefit by the practice field.Although China has not executed dual-share structure yet,the structure has experienced the transition from theory to practice and from the macro perspective of protecting domestic capital to the micro perspective of protecting founders’ benefit.Accordingly,this essay makes international and domestic investigation on the dual-share structure and proposes measures for the detailed construction of the system,providing suggestions on the introduction and setting of dual-share structure.Except “Introduction” and “Conclusion”,it is mainly divided into six parts:The first part: The proposition of dual-share structure.Alibaba’s “partner system” attracted the domestic attention to dual-share structure,but it still remained centralized in theory field with the research aim of preventing from resources flow or accelerating long-term development for enterprises.Until the occurrence of the event of “Baowan Battle”,the practice field urged to establish dual-share structure to protect the benefit for founders,which helped transfer the theoretical research on dual-share structure to practical attention.The protection for founders’ benefit also began to become the key point for the research on dual-share structure.The second part: International and domestic investigation on dual-share structure.This part firstly analyzes the application scope of dual-share structure in some countries and the reasons why it is repelled by some other countries;then it analyzes the system barrier,necessity and feasibility for China to adopt dual-share structure.The conflict between dual-share structure and one share-one vote principle is the main barrier to introduce dual-share structure,but one-share-one-vote principle is not the most correct and irreplaceable.Moreover,the protection for founders’ benefit under the background of the international demand of securities and the entrance of “risk capital”,the demand of realizing human-oriented incentives and the feasibility of legislation and practice all provide support for China to adopt dual-share structure.The third part: Basic construction of dual-share system.This part presupposes the basic construction of dual-share structure.Firstly,by reference of the proportion of the voting rights for dual-share structured companies listed abroad,it suggests set the multiple of B share voting rights to be 3-15 times of that for A shares;then,it restricts the limits of authority for B shares: restricting the scope for B shares limited to enterprise founders and recognized professional managers,referring to founder group;decision-making matters about B shares are limited to voting directors,those matters passed by over two thirds of the voting rights regulated in corporation law and matters greatly influencing the corporate survival like company acquisition,merger and recombination and so on;B shares will become common A shares in transferring.Founder’s B shares still remain B shares in inheritance,while B shares of other members in the founder group revert to A shares in inheritance.The fourth part: Application condition for dual-share structure.This part sets the dual-share structure from three aspects.For the entity,during the primary stage after the introduction of dual-share structure,since Chinese systems are not mature enough,it shall be targeted at those enterprises with high demand for control right like family enterprises,state-owned enterprises for public welfare,culture media enterprises and innovative enterprises;for the time,the time to issue dual-share structure shall be only limited to IPO and issuing new shares on the premise that the company must have issued dual voting rights before listing;for the issue premise,listed companies must strictly reveal relevant information.Except revealing the information specified by Chinese laws,it also needs to reveal the reason,risk and detailed ownership arrangement for issuing the dual-share structure.The fifth part:Implementation guarantee for the dual-share structure.The reason why there are many disputes about dual-share structure lies in its risks,like low corporate governance efficiency resulted from the shortage of external supervision and increasing the agency cost between dominant shareholders and minority shareholders and so on.To avoid the above problems and guarantee smooth implementation of the dual share system,it needs to implement internal and external comprehensive monitoring and guarantee for listed companies.External guarantee mainly refers to the means of strengthening the faith obligation of dominant shareholders and improving the independent director system;internal guarantee forces enterprises to make self-controlled promise,for example,enterprises can make such promise of recovering one share-one vote system under special condition or such promise of damage compensation.The sixth part: Relief mechanism in dual-share structure.Targeted at the behavior of B share shareholders damaging A share shareholders,this part proposes establishing relief means beforehand and afterward,mainly including three means: firstly,endow A share shareholders with the right of ceasing the infringing act.When dominant shareholders are or are going to implement infringing act,A share shareholders can propose the right of claim to cease the infringing act to avoid the occurrence or expansion of damage;secondly,establish security public interest litigation system.As the accuser,the protection organization for investors can institute legal proceedings to widely covered securities torts;thirdly,improve the responsibility basis and forms for B share shareholders and improve the calculation basis for relevant torts.Adopt responsibility forms like punitive damages,limiting shareholder’s right to strengthen the restriction of dominant shareholders.