Research On The Protection Of Public Investors' Rights And Interests Under The Dual-class Share Structure

As an effective way to resolve the contradiction between control rights and equity financing,the dual-class share structure has been maturely applied in countries with very developed capital markets.However,in China,the legislation has been in a blank state for a long time,resulting many emerging industrial enterprises in China that have an urgent need for this special shareholding structure have gone overseas to seek listing opportunities in recent years.The issue of shareholding structure has become one of the important factors hindering the listing of some companies in China.The single shareholding structure can no longer meet the financing needs of some companies in China.Although the dual-class share structure increases the risk of infringing the rights of public investors,this should not be the reason for completely banned this structure.In recent years,the practice of dual-class share structure in Chinese companies has continuously promoted the process of legislation.At present,the loosening of legislation provides a certain space for the application of the dual-class share structure in China.The series of documents set up by the Shanghai Stock Exchange to establish the Science and Technology Board has also incorporated the dual-class share structure into the system design.Of course,the dual-class share structure can certainly play its positive function,but its drawbacks cannot be ignored.What we should consider is how to properly exercise the positive function of this structure,while constrain the behavior of shareholders holding higher voting power,and protect the interests of other shareholders holding lower voting power,especially how to protect the rights of public investors from being infringed after the company's listing.From the perspective of public investor protection,under the dual-class share structure,there are rights that are not allocated to public investors,those that have been allocated to public investors but lack effective protection measures,and the right to lack effective remedies.Specifically,the rights of public investors to participate in major decisions of the company and the rights to select and supervise managers are not allocated,the shareholders' right to know need to be strengthened,and the shareholders' right to distribution and the right to propose also require more sound remedies when they are violated.Therefore,China needs to carry out related system construction and improvement when introducing the dual-class share structure.The use of dual-class share structure in many countries and regions currently gives us successful examples and experiences.In the process of localization of the dual-class share structure,the main line of protecting the rights and interests of public investors should be consistently carried out in combination with the actual situation in China.Based on the improvement of the existing system,targeted measures should be established.For example,in order to compensate for the right of public investors to participate in major decisions of the company,we can limit the implementation of the dual-class share structure in legislation,restrict the voting rights and the number of issuance of the shares with higher voting power,improves the classification voting system,regulate the conversion of voting rights and strict adherence to the principle of one share and one power in special case.For the lack of public investors to choose and supervise the manager's rights,it can be compensated by adopting a compulsory cumulative voting system,establishing a reward and punishment mechanism for shareholders holding higher voting power shares,improving the independent director system and limiting the identity of shareholders holding higher voting power shares.In terms of the protection of shareholders' right to know,first of all,it is necessary to further clarify the relevant provisions on the preservation and provision of company documents;secondly,it should improve the mandatory information disclosure system,it should disclose in detail the necessity of using a dual-class share structure,the application details,the safeguard mechanism for preventing infringement and the company's development and governance information in the prior disclosure,and it should continue to disclose relevant information in subsequent periodic reports,the implementation and changes of information during the reporting period;finally,expand the scope and methods of access rights of public investors,establish channels for effective communication with public investors.For the relief of the shareholder's surplus distribution rights,it may be considered to improve the litigation system of compulsory surplus distribution,and effectively protect the abstract surplus distribution rights of public investors.For the relief of shareholder's proposal rights,priority is given to the administrative relief of the dispute settlement body of the CSRC as a shareholder's proposal power dispute,supplemented by the judicial remedy measures of the shareholder's proposal rights litigation system.Through reasonable system design,reduce or even avoid the negative impact of the dual-class share structure and protect the rights and interests of public investors.