The Optimization Path Of The Weighted Voting Right System For Public Companies

The pilot scheme of weighted voting right system conducted in Shanghai Stock Exchange in 2019 triggered discussion on special shareholding structure in practice and academic circles.The laws and regulations in China have established the basic frame of weighted voting right,but space for optimization in regulations still exist.The distinguishing features of Chinese stock market are the reform under the supervision of Securities Regulatory Commission,the higher rate of individual investors,and the innovation-oriented developing tendency in the pilot platform of The Science and Technology Innovation Board.The optimization of weighted voting right system shall base on the developing feature of stock market in China,rather than introduce foreign system aimlessly.The weighted voting right system in China has five optimizable aspects.The first is the system of class shares is yet not developed.The weighted voting right shares has not yet been defined as class shares under present legislation,which causes regulations are not unified.The second is under present rules,the legal entity is permitted to hold the special voting shares,as long as it is actual controlled by the very person who is permitted to hold such shares.Such rules will impact the original purpose of weighted voting right system by complicate the governance structure of issuers.The third is the oversight function of independent directors is ambiguous,which may cause conflict between controlling shareholders and independent directors.The fourth is present jurisdiction has no precedent of weighted voting right,and the jurisdiction guiding opinions has not yet been unified with present regulations.The fifth is current disclosure rules are not specified,which causes difficulties in supervision and maintaining fair trading environment.The optimization path of weighted voting right system shall be based on the feature of the stock market,and be adjusted with pertinence.The first is to establish a class shares system with the core of the Company Law,in which the nature of weighted voting right is determined.And supporting systems can be designed accordingly.The second is to prohibit legal person to hold special voting shares,to prevent the risk of corporate governance procedure weakening the weighted voting right.The third is to confirm the defensive nature of independent directors,and their function shall be limited within preventing controlling shareholders damaging corporate interest by non-business activities.The fourth is to introduce business judgment standard,assuring the decisionmaking rights of controlling shareholders in daily business.The fifth is to further complete the qualitative disclosure,and to regulate disclosure issues related to weighted voting rights.