The Singapore Exchange (SGX) has proposed amendments to the SGX-ST Mainboard Listing Rules to implement a framework for the listing of companies with a dual class share structure. Feedback received from the earlier concept consultation paper has been incorporated, where accepted, into the proposed amendments.
Criteria for the listing of companies with dual class shares
After considering feedback, the SGX has decided that no additional admission criteria will be specified for the listing of a company with a dual class share structure. As with all listings, however, a company must be suitable for listing. In the case of a company with a dual class structure, the SGX will take that into account in its assessment. In considering the issue of suitability, the SGX proposes to take into account the following factors (and guidance on this will be issued later):
- The business model of the company;
- Its operating track record;
- The role and contribution of the intended holders of the multi-vote shares to the success of the company;
- How actively involved the intended holders of multi-vote shares are in the company; and
- The level of participation by sophisticated investors.
Safeguards against entrenchment and expropriation risks
The safeguards that are proposed to be included in the Listing Rules are as follows:
- The maximum permitted voting differential for multi-vote shares as against single vote shares is 10:1.
- The number of multiple votes that each multi-vote share carries is fixed at the listing and cannot subsequently be altered.
- After the initial public offering, no additional multi-vote shares may be issued except in a rights issue with the issuance of ordinary voting shares. The rights issue must not increase the proportion of voting rights referable to the multi-vote shares as against single vote shares.
- A corporate action (eg, sub-division of shares, share buy-back) must not increase the proportion of voting rights referable to the multi-vote shares as against the single vote shares.
- A holder of multi-vote shares must be a director and must, subject to the exception set out below, remain a director for so long as he holds multi-vote shares. He need not, however, be an executive director and may be a non-executive director.
- A multi-vote share must automatically convert to a single-vote share if it is sold or transferred to any other person, including another holder of multi-vote shares. It must also convert to a single-vote share if its holder ceases to be a director for any reason. Shareholders may, however, approve the multi-vote shares remaining as multi-vote shares through a voting process where the multi-vote shares carry only one vote per share.
- Shareholders holding ordinary single vote shares must hold at least 10% of the total voting rights. The SGX is consulting on whether the total voting rights should be calculated on the basis that the multi-vote shares hold only one vote per share or their full number of multiple votes.
- Shareholders holding ordinary single vote shares may requisition a general meeting if they collectively hold at least 10% of the total voting rights.
- When shareholders’ approval for the following matters is sought, the multi-vote shares will carry only one vote per share:
- Changes to the issuer’s Articles of Association or other constituent documents;
- Variation of rights attached to any class of shares;
- Appointment and removal of independent directors;
- Appointment and removal of auditors;
- Winding up of the issuer; and
- Delisting of the issuer.
The audit committee, nominating committee and remuneration committee must comprise a majority of independent directors.
The SGX has noted that the advice of the Listings Advisory Committee will be sought for initial cases in respect of the applicant’s proposed safeguards for the dual class share structure.