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Singapore Exchange (SGX) is organising a roundtable with the National University of Singapore (NUS) Faculty of Law to discuss the feasibility of introducing the dual-class shares structure in the local market.
The “Roundtable on Dual-Class Shares Structure and the Singapore Context” taking place today, 14 November 2016, is part of SGX’s process of gathering feedback and engaging with stakeholders on an issue that has generated debate from stakeholders across the spectrum.
Featuring six speakers and moderated by Professor Hans Tjio of NUS Law who is Co-Director of the Centre for Banking & Finance Law, the round-table discussion will be followed by a half-hour question-and- answer session with members of the audience.
Loh Boon Chye, CEO at SGX, and Professor Tan Cheng Han, Chairman at Centre for Law & Business, NUS Law, will issue opening remarks, while Mr Tan Boon Gin, Chief Regulatory Officer at SGX will conclude the roundtable with closing remarks.
Following are quotes from the speakers ahead of the round-table:
Ang Hao Yao, private investor and member of the Corporate Governance Committee of the Securities Investors Association (Singapore), said: “The introduction of the dual-class shares structure provides more options for the investors and generally that is beneficial to the market. There remains though genuine corporate governance issues such as entrenchment and expropriation risks which I believe can be mitigated through safeguards. I am confident that SGX will address these issues and introduce appropriate conditions to protect minority investors before dual class shares are listed.”
Goh Eng Yeow, Senior Correspondent, The Straits Times, said: “Dual class shares raise issues over entrenchment of control and these shares are not available to the public. So far, the discussion is over the safeguards which should be put in place if they are introduced here. But we should also ask if the investing public understands the issues involved and whether they are ready for these substantially different voting rights in a listed company.”
Associate Professor Lawrence Loh, Director, Centre for Governance, Institutions and Organisations, NUS Business School, said, “There are merits for the one man, one vote system although outcomes in the Brexit referendum and the US presidential election may indicate a need for a fundamental rethink. In the corporate arena, dual-class shares sustain the original ethos of the company. While such dual-class structure’s impact on stock performance has been mixed, fresh evidence points to a positive impact on performance when the firms are transparent. In other words, when the company’s corporate governance foundation is strong, dual-class shares can be viewed positively by investors.”
Patrick Grove, Co-Founder & Group CEO, Catcha Group, said, “As a business owner who is also a tech entrepreneur, the possibility of SGX introducing the dual class shares structure is greatly exciting. This doesn't just represent a credible alternative; I'd go as far as to say it's a potential game changer. When I think about the defining characteristics of our investing climate today, I'm looking at VUCA (volatility, uncertainty, complexity and ambiguity). The introduction of this structure represents an opportunity for me to plan for the longer- term growth of my company. It means stability and security which allows me to maintain a future-oriented approach to my business decisions. This, needless to say, stands to benefit investors who've placed their trust in us as well.”
Stefanie Yuen Thio, Joint Managing Director, TSMP Law Corporation, said, “Dual-class shares could put Singapore on the radar screen of technology companies planning an IPO. The structure may carry certain special rights which could entrench voting rights, giving control to certain shareholders who are usually the founders. These rights could be reduced over time and should not be entrenched forever. Other safeguards we should consider include making certain matters contingent on approval by the audit committee or by a higher percentage of independent directors.”
Associate Professor Wan Wai Yee, School of Law, Singapore Management University, said, “The dual class shares structure has been touted as a potential solution to our placid stock market. While this might increase investor offering in the short term, it is as necessary to consider the longer term corporate governance consequences of this introduction. Issuers may come up with dual class structures that are structurally defensible at the initial public offering stage but because benefits of control versus agency costs of disproportionate control can change over time, these structures will cease to be defensible if the agency costs start outweighing the benefits of control. These are concerns that SGX has yet to address adequately, and which I hope are discussed during the roundtable.”
