Legal Research On Dual-class Share Structure

Hong Kong Stock Exchange(HKEX)and Singapore Stock Exchange(SGX)can be described as a pair of "fellow sufferers",because they stick to the single-class(one share-one vote)share tradition,failing to pair their system with capital needs,and thus they are difficult to compete with exchanges in the United States,respectively,they miss the high-quality listed resources of Alibaba and Manchester United,and after painful reform they both finally embrace the dual-class share structure.The fact that there is fierce competition among international exchanges is becoming more apparent.In recent years,a large number of Internet companies have gone abroad for various reasons,one of which is the dual-class share structure.It is a kind of corporate governance arrangement which deviates from the traditional theory of "one share,one right" in company law which allows the separation of voting rights and residual claim rights.Under that circumstance,A and B share are issued.A share equals multiple times of B share's voting rights.This arrangement can firmly control the company while financing,and it is friendly to the founders.The report of the Nineteenth National Congress puts forward the strategic objectives of "deepening supply-side structural reform" and "speeding up the construction of an innovative country",which includes the meaning of "stimulatingand protecting entrepreneurship,encouraging more social subjects to engage in innovation and entrepreneurship",“establishing enterprises as the main body,market-oriented,and strengthening support for innovation of small and medium-sized enterprises”.Considering the help and feedback to the real economy,in this context,supporting the financing of innovative enterprises and encouraging the return of overseas listed innovative companies have become the keynote of new policies and law amendments.Several Opinions on Launching the Pilot Program of Issuing Stocks or Depositary Receipts within China by Innovative Enterprises(Hereinafter refer to as“CDR new rules”)issued by China Securities Regulatory Commission(CSRC)allows China's overseas listed companies to issue CDR with “different classes of shares in terms of the voting rights”.On August 31,2018,the CSRC responded to the CPPCC's Proposal that China's security market should be strengthened in support of the listing of innovative enterprises.CSRC said that after careful study,it would "connect the revision of the Securities Law,promote the relevant revision of the Company Law,and propose the revision of the legal arrangement that a company can issue common shares with different voting rights on the basis of continuing to set the principle of the“one vote per share and equal shareholders' right" as default rules.Suggestions are made to meet the requirement of founders of start-ups to control the companies after financing.After the Hong Kong Stock Exchange embraced the dual-class share structure,mainland China was once again put it on the agenda.At the beginning of 2019,the capital market was shocked.The relevant rules related to the establishment of the science and technology innovation board were publicly consulted on January 31,and the "dual-class share structure" was mentioned again.From the above iteration process,the introduction of dual-class share structure into China can be said to be an arrow in the string,but the relevant perfect supporting measures are still to be perfect.Because of the separation of voting right and residual right,and deviation from the basic theory of "shareholder equality" and "shareholder democracy" in the traditional theory,and it aggravated the agency problem of the company,which has also been controversial for many years in the theoretical circles.On this occasion,it is of theoretical and practical significance to study the legal basisand optimization approach of the dual-class share structure from the perspective of interest balance between protection of shareholder's right and enterprise Innovation Incentive.From the perspective of interest balance of shareholder protection and company innovation,this paper mainly discusses the application and optimization of dual-class share structure in China.This Paper can be divided into four parts.The first part mainly analyses the legal basis of dual-class share structure(concept and origin);the second part mainly analyses the advantages and disadvantages of dual-class share structure.The third part focuses on the laws,regulations and norms related to the dual-class share structure in China at the present stage,as well as the potential practical aspects.The fourth part mainly analyses the protection of shareholders under the dual-class share structure,which is nothing more than pre-restriction,in-process restriction and post-relief to ensure the application of the dual-class share structure.