A Study On The Restriction Mechanism Of A Company‘s Controlling Power Under The Dual-Class Share Structure

With the vigorous development of domestic technology-based emerging companies,more and more technology-based companies are facing financing needs.In recent years,a large number of technology companies have rushed to the United States to IPO with a dual-class share structure.The exchanges of other major financial centers in the world,such as Chinese Hong Kong and Singapore,have also opened up the use of such shareholding structures to prevent high-quality companies from falling into competitors.In the face of international competition,the domestic capital market is also actively participating.In 2019,the "Voting Rights Difference Arrangement" was set up in Chapter 4,Section 5 of the "Listing Rules" officially issued by the Shanghai Stock Exchange.This rule is adapted to actual needs.Under the dual-class structure,shares are divided into high and low shares.The two kinds of voting,that is,the voting rights represented by each share are not consistent.A small number of people can have high voting rights at a low equity ratio,while ordinary shares can only be based on one share,one vote.The reason why the dual equity structure is accepted by the public from abroad to domestic is mainly because of its two main functions: on the one hand,it allows the company’s founders to enter the capital market to raise funds,but does not need to dilute their original shares on the company.Some control rights;second,it plays an effective role in resisting acquisitions for the developing company,so that the team can implement long-term strategic plans for the company’s development according to the plan.The expansion of the company’s financing scale is often accompanied by the dilution of the founding shareholders’ equity.Under the dual-class structure,the company raises funds while the controlling owner does not reduce the control rights,which is different from the "one share,one right",voting rights and economic The state of proportional power,they always hold a high proportion of voting power,and play a vital role in the company’s decision-making.The controlling person of the company is often the founder of the company.They have a strategic plan for the development of the company,and the founders are usually intelligent and talented.A stable way forward will prevent external personnel from interfering in the development plan of the enterprise due to equity dilution caused by financing.However,on the other hand,whether the company’s controller can keep the company’s long-term high-speed development,this is a problem.The company’s development has a life cycle.After reaching a certain level,the development trend may decline,or because the controller does not With the superior ability to control the overall situation,it is no longer suitable to continue to adopt a dual-shareholding structure at this time,which will lead to the abuse of control.A famous case is that after Viacom’s controlling shareholder Redstone lost his ability to act.,But was unable to remove his control in time,which affected the company’s development.This contradiction will focus on the company’s control power mechanism,so how to restrain the abuse of control power under the voting power differential arrangement system is worthy of research and discussion.In this article,researches are made on the advantages and risks and the restraint rules and practices of the differentiated voting rights system under the background of the Science and Technology Innovation Board.Since the implementation of special voting rights,the successfully listed company Ucloud has been studied as the research object,and the basic situation of Ucloud companies,the setting of special voting rights in the prospectus,and the prevention of control by Ucloud have been analyzed.The specific preventive measures taken by the abuse of power found that the special decision arrangement has the following three problems: agency costs increase the risk;limit the role of the supervision mechanism,Under the dual-shareholding structure,the power is out of balance,and the controller is actively biased toward the controlling shareholder.The controlling shareholder can control the decision-making of the holding party meeting,and the board of directors and the board of supervisors are elected by the shareholders meeting.They can completely control the appointment,so that the board of directors Lost independence with the board of supervisors and cannot play its original role;and the risk caused by the greater influence of the founder,because the founder’s reputation and social influence will be directly related to the development of the company.Through the analysis of the rules of the dual-class structure outside the territory,we explored my country’s suggestions for the perfection of the rules governing the control rights under the dual-class structure.The dual-class structure in the United States has developed for a relatively long time,and the system is relatively well-regulated.By analyzing the provisions of differentiated voting rights in the United States,it is found that the use of sunset clauses with time limits is reasonable.Although the establishment of differentiated arrangements for voting rights on the Science and Technology Innovation Board clarifies the arrangement of event-related sunset clauses,it does not specify the specific time limit arrangements.Therefore,practice The voting rights of such enterprises in China can last forever,and it is recommended that the sunset clause with a time limit be introduced into the domestic application of dual equity rules.Through analysis and comparison,the special voting rights binding rules in the mainland are similar to those in Hong Kong.However,the Hong Kong Stock Exchange has certain requirements on the market value of companies listed on a dual-class structure.At the same time,a corporate governance committee composed of independent directors has been established for Supervise daily governance.Based on the above research,this article tries to make the following suggestions for improving the control rights restriction rules under the dual-class structure: On the one hand,establish a control rights restriction mechanism based on the sunset clause with a time limit to avoid affecting the company because the controlling owner is not suitable for continuing to manage the company;on the other hand,improve the information disclosure system,continue to disclose the company’s operating and management status before and after the company’s listing,and reduce the loss of information asymmetry to other shareholders;strengthen the supervision responsibility of independent directors,and consider increasing independent non-executives The number of directors enhances the influence of independent directors on corporate governance issues;the establishment of a class action system,the rules and regulations of class actions are more effective in protecting investors,with the characteristics of low cost and high returns.Other investors are in consideration of litigation costs Will be lazy to exercise their rights,and class actions are of great help in solving this problem.