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Singapore Exchange introduces rules allowing listing of dual-class shares

posted onJuly 1, 2018
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Singapore Exchange (SGX) on Tuesday (June 26) launched new rules that allow companies with controversial dual-class share structures to list, aiming to attract hot tech initial public offerings.

The move also comes two months after Hong Kong Exchanges and Clearing (HKEx) added dual-class shares to its IPO rules allowing companies with a market cap of not less than HK$10 billion (US$1.27 billion) to list.

A DCS structure, favoured by technology stocks and high-valued tech startups known as unicorns, permits the issuing of different classes of shares with differential voting rights and dividend payment arrangements by the same company. Such a structure allows entrepreneurs to maintain control of their companies even after successive rounds of financing. It is often considered by academics as an anti-takeover device. On the other hand, opponents say it breaches the "one share, one vote" principle and leaves minority shareholders (with less voting power) vulnerable. 

“SGX today joins global exchanges in Canada, Europe and the US where companies led by founder-entrepreneurs who require funding for a rapid ramp-up of the business while retaining the ability to execute on a long-term strategy, are able to list. Investors who understand and agree with the business model and management of DCS companies will also have more choice,” said Loh Boon Chye, CEO of SGX.

Singapore's Exchange also set out various rules for dual listings designed to safeguard investors. They include: 

  • Requiring an enhanced voting process where all shares carry one vote each regardless of class, for the appointment and removal of independent directors and/or auditors, variation of rights attached to any class of shares, a reverse takeover, winding-up or delisting.
  • Requiring the majority of the audit committee, the nominating committee and the remuneration committee, and each of their respective chairman, to be independent directors.
  • Capping each multiple voting (MV) share at 10 votes a share and limiting the holders of MV shares to named individuals, or permitted holder groups whose scope must be specified at IPO.
  • Requiring sunset clauses where MV shares will auto-convert to ordinary voting (OV) shares under circumstances the company must stipulate at the time of the IPO.

The rules take effect immediately, the SGX said. Singapore will allow firms valued at S$300 million to list with dual-class shares. 

“SGX’s framework for dual-class share (DCS) structures strikes a balance between supporting high-growth companies, and having in place safeguards to mitigate governance risks associated with such structures. DCS listings will broaden the range of investment options for investors and add vibrancy to Singapore’s capital markets,” a spokesperson for the Monetary Authority of Singapore  (MAS) said. MAS is Singapore's central bank and financial regulatory authority. 

Singapore's Exchange  was formed on 1 December 1999 as a holding company. SGX  is Asia's most international, multi-asset exchange, with about 40% of listed companies and 75% of listed bonds originating outside of Singapore. As of  end-May 2018, SGX had 745 listed companies with a combined market capitalisation of  S$1.02 trillion. 

SGX is a member of the World Federation of Exchanges and the Asian and Oceanian Stock Exchanges Federation.