Dual-class share structures on the SGX-ST

Fortis Law’s lawyers’ article on “Dual-class share structures on the SGX-ST” has been published and featured in the Asian Legal Business.

Author: Vanessa Ng

Following the amendments to the Singapore Companies Act (Cap. 50) in 2014 that allow, inter alia, Singapore companies to have dual-class share structures, the Singapore Exchange Securities Trading Limited (“SGX-ST”) is now deliberating loosening its restrictions to allow such a structure for listed companies on the SGX-ST. 


SGX-ST’s Listings Advisory Committee is likely to recommend the implementation of dual-class share structures on the SGX-ST, and will provide details relating to, inter alia, the requirements for issuers and the circumstances under which issuers may adopt a dual-class share structure in due course. 


This implementation of dual-class share structures is intended to attract companies, including Singapore companies, to consider seeking a listing on the SGX-ST knowing that its founding shareholders will be able to sell their shares while at the same time maintain control of their business under the dual-class share structure.


This move will also engender a more complete and dynamic market for Singapore, and allow the SGX-ST to draw more companies, including technology companies, to Singapore. Such a move will foster the technology start-up sector in Singapore, as the products and strategies of technology companies are generally closely tied to the founding shareholders whom are likely to favour the use of dual-class share structures. 


However, dual-class share structures have attracted a fair share of controversy, with critics highlighting the fundamentally inequitable nature of the arrangement and the potential for governance abuses.


Retail investors, who have lower risk appetites, will also need to understand that they could be buying ‘B Class’ shares which come with no voting rights. This essentially means that they will not be entitled to participate in major decisions that can affect the company. It is therefore important to ensure that investors are well aware and fully understand the features and risks relating to dual-class share structures.


Institutional investors are likely to be against dual-class share structures as this group of investors usually expects to be involved in the decision-making process of the company.


In conclusion, there is little certainty at this stage on the implementation of dual-class share structures for listed companies on the SGX-ST. However, if implemented, a dual-class share structure would position the SGX-ST as a preferred listing platform over the Hong Kong Stock Exchange (“HKEX”) given that the HKEX has rejected implementing such a structure. 

Written by: Vanessa Ng