The Jurisprudence Analysis And Application Approach Of Dual Class Structure Shares In Companies

In the traditional company law and corporate governance theories,shareholders' right is a bundle of voting right and the usufruct.Every shareholder exercise his or her voting rights and participate into the decision making process according to their shares in the company.This proportionality maintains the efficiency of the corporate governance.The diversity of the financial products available in the market and of the demand of shareholders pushes the companies to seek for an appropriate management method and ownership structure suitable to them.In this particular process,the bond that previously tied the voting rights and usufruct to shareholder's right become loose.The so called category shares start to appear in the market to meet the specific demands of shareholders.This diversity and flexibility provides the companies enormous advantages when raising fund,because on one hand the dual class shares structure could help the company to attract the widest range of shareholders with different investment tendency;on the other hand,the founders of the company could maintain its management power on the company so that the efficiency of corporate governance of the consistency of the company's strategy could be maintained.However we cannot deny that the dual class structure has the potential to destroy shareholder's interest even though this innovative structure has gained international recognition.This recognition can also reflect the needs of flexibility in the practice.With the gradual opening up of Chinese capital market to foreign investment,the boundary in the global capital market blurred up.Our security authority and security exchange should immediately recognize the urgent need the dual class structure and its rationality.More directly speaking,our capital market needs dual-class structure.If authority concerned keep ignoring this urgency,some companies with great potential that want to adopt dual-class structure to go public will have to go abroad.We should also realize that the great challenge connected with the possible adaptation of dual-class structure that corporate governance should face.This self-created contractual inequality will engender moral hazard and harm small and medium shareholders.On the theoretical level,we still do not have research dedicated to the dual-class structure,the main topic that many available thesis share is to talk about the practical needs of such regime.This article aims to analyze the relevant theory behind thedual-class structure,the nature of this structure and the reason why it could arouse controversy.We have to admit that Chinese research related to company law starts quite late,we do not have sufficient research results to support innovation and the traditional “one share one vote” principle still dominates.This article comprises four chapters.The first chapter mainly talks about the dual-class structure itself and its features.Fundamentally speaking dual-class structure is a categorized voting right.Because of its specific features such as the separation of voting rights and usufruct and the concentration of power with the hands of several people,it is now widely used.The second chapter take the historical application of dual-class structure in the U.S.as the example.The U.S.as the country that has the most complete legal system and the most advanced corporate governance has always been the first choice for Chinese companies with dual-class structure to go public.During the past several decades,U.S.opinion towards dual-class structure has also reversed.This reversal is the result of different powers checks and balances.The third chapter attaches great emphasis on the jurisprudence analysis of dual-class structure.Dual-class has is rationality of application.One-share-one-vote principle becomes doubtful.Firstly,the equality of shareholder's rights should not stay merely on the formality.If we naively follow the equality of capital,we will ignore the needs of diversity.Secondly,the information asymmetry theory justifies the existence of one-share-one-vote only when there is great deficiency of relevant regulations.The related legislative process will effectively reduce the information asymmetry,one-share-one-vote principle will lose its foothold.Thirdly,the efficient market hypothesis points out a normal marked to market mechanism and cost of agency theory,one-share-one-vote principle is not necessary.The fourth chapter illustrates the policy construction within China.The main problem resides on the question of how to reconcile the interest conflict when companies raising fund.On the practical level,this chapters briefly introduces the information disclosure system and judicial relief.