Dual-class Share Structure And Its Application In China

Dual-Class Share Structure has been the concern and controversy of economic and legal scholars Because of breaking through the traditional principle of the company law: one share one vote.With the successful listing of Xiao mi and Mei tuan on the Hong Kong Stock Exchange in July2008 and September 2018,the issue has once again come into focus.Dual-Class Share Structure is adopted in many foreign countries and regions,China currently advocates “mass entrepreneurship and innovation”,and the reform of the mixed system of state-owned enterprises has also been carried out comprehensively.In this process the founder and State shareholders will loss control after the equity is diluted.Whether the dual ownership structure needs to be introduced into China,what aspects should be paid attention to after the introduction of the system,and what system should be matched to ensure its effective implementation.In order to achieve the fairness and justice of the company law,there must be restrictions,including the restrictions on the application of dual-share structure companies,restrictions on the shareholder and information disclosure.Fundamentally the legislation should regulate it and the practice of dual ownership structure should be done in accordance with the law.The research in this thesis chiefly comprises 5 parts as follow:Chapter 1 summarizes the characteristics of dual-class share structure on the basis of the content of the first chapter and the second chapter.The main features are: the same share have different rights,The number of shares(the right to claim profits)and the separation of control,the voting rights shall be centralized and owned by specific persons.Through this analysis,we can find that Dual-Class Share Structure is essentially that the shares held by a certain class of shareholders enjoy many times the voting rights of other shareholders,so as to control the company without an absolute advantage in the number of shares.The second chapter introduce the historical of dual-class share structure in the USA and Hong Kong capital markets.The reason why I choose the USA and Hong Kong capital markets for research is that they are relatively mature and representative.Through research on these two capital markets we found that the dual-class share structure was cautiously accepted at the initial stage,and was restricted after being opposed.With the development of economy,market competition and the breakthrough of ideas it was gradually accepted.The evolution of foreign capital market can give us enlightenment,and its legislation can also serve as a reference for China to establish The evolution of foreign capital market can give us enlightenment,and its legislation can also serve as a reference for China to establish dual ownership structure.The third chapter analyse the domestic and foreign companies adopting dual ownership structure,including Xiaomi,JD,Alibaba and Face Book.Through a detailed analysis of these companies,we find that there are some differences in the implementation of the Through a detailed analysis of the dual ownership structure of each company,we find that there are some differences in the implementation of the dual ownership structure.For example,the partner system of Alibaba is different from the commona-share and b-share models in the way of controlling the company and it's not a standard dual-class structure.Liu qiangdong,founder of JD,owns20 times the voting rights of other common shareholders,and other companies generally agree 10 times.In addition to control,some companies,such as JD and Face Book,are also using proxy voting agreements to strengthen their control except through dual-class share structures.Chapter four analyzes the theory and practice of dual-class share structure in China,so as to prove the feasibility of its application in China.Now China encourages individual entrepreneurship,and the reform of the mixed system of state-owned enterprises is proceeding.After the introduction of new capital,the problem of the weakening of control is highlighted due to the dilution of the equity of the founders or state-owned shareholders.The heterogeneity tendency of shareholders is also obvious.In the case that foreign capital market admit dual ownership structure,how to choose our capital market? A single “one share one vote”system is obviously difficult to adapt to the needs of diversified markets.According to China's current company law,companies can negotiation on voting rights in their articles of association,which lays a foundation for the introduction of dual-class share structures in China.At the same time,because dual-class share structures brake the principle of the one share one vote,there are also defects such as the increase of agency costs,easy to lead to the founder to infringe the rights of other shareholders.The fifth chapter is the author's suggestion on the legislation of introducing dual-class share structures in China,including expanding the application scope of preferred stock,the establishment of a system of super-voting shares,a company may issue other types of shares except for the super-voting shares and non-voting shares,and how the dual-class share structures is applied in the reform of state – owned.At the same time,in view of the disadvantages of the dual-class share structures,it is necessary to strictly limit the issuance time and objects,and strengthen information disclosure and protection of minority shareholders.