“Companies with a dual-class share structure that are primary-listed in developed markets can seek a secondary listing on Singapore Exchange.” This was the comment from the Singapore bourse operator on July 28 in response to queries raised during a public consultation process.
The approval of dual class shares in the lion city puts peer pressure on another Asian financial hub Hong Kong, where the Hong Kong Exchanges and Clearing (HKEx) is lobbying to a new market called the New Board to host companies with dual class shares.
The Asian Corporate Governance Association (ACGA), whose members are mainly international institutional investors, called SGX’s new policy “leading a possible race to the bottom” in corporate governance.
Jamie Allen, secretary general of the , earlier told FinanceAsia if Singapore went ahead with dual-class shares, it would be a lot harder for Hong Kong’s Securities and Futures Commission – which struck down HKEx’s previous attempt of introducing dual class shares to the Main Board two years – to veto a third board that allows them.
Under the dual class shareholdings, one set of shares – typically held by the founding partners – have more voting rights than publicly held shares.
"We question whether Singapore-based investors would be able to effectively access the investor protection mechanisms in the primary markets of [dual class share] firms,” the ACGA said.
SGX said it would not have any post-listing conditions for companies that are already listed on any of the 22 markets the international index-providers FTSE and MSCI classify as developed markets. However, they will need to make disclosures via SGXNet, the exchange’s information disclosure portal, of all the announcements made to the home exchange.
Such a rule is in line with HKEx's proposal. Under the HKEx’s design, the pro unit of the proposed board, open to professional investors only, will not place any requirements for companies to demonstrate shareholder protection. The other unit, which is open to retail investors, doesn’t require a company to demonstrate shareholder protection if it’s listed in the US already, opening the door for secondary listings by US-listed mainland Chinese companies.
The ultimate result? In the words of Loh Boon Chye, CEO of SGX, “should a [dual class share] company secondary-list on SGX, it could enhance overall market knowledge and familiarity with the risks and benefits of [dual class share] companies.”
Basically it will open a door for Singapore to allow dual class shares in primary listings in the future, according to the ACGA, and in Hong Kong’s case, allowing a new board DCS brings pressure to allow the non-common corporate governance structure on the main board one day.
“While the decision is restricted to secondary listings from developed markets at this stage, this ‘backdoor’ approach arguably opens the door to allowing [dual class shares] in primary listings in Singapore in future,” according to an email from the ACGA to its members.
“It also gives significant encouragement to a plan by Hong Kong Exchanges and Clearing to introduce [dual class shares] through a new third board,” it added.
But Tan Boon Gin, CEO of Singapore Exchange Regulation, an independent regulatory subsidiary of the SGX, argues otherwise. “While the existing secondary listing framework accommodates [dual class shares] companies, this does not presume that we will adopt a primary DCS listing framework. We are still evaluating the feedback received and target to update the market before the year-end.”
