Dual class shares: safeguards or minefields?

THE Singapore Exchange (SGX) has now moved one step closer to allowing companies to list with dual class shares (DCS), with the Listings Advisory Committee (LAC) endorsing it with certain "safeguards". The SGX has given assurance that there will be a public consultation before it makes its decision. I would urge all investors and other stakeholders who feel strongly against DCS to make their voices heard in this consultation - even if they feel that this may be to no avail.

It is good that the LAC understands that there are entrenchment and expropriation risks that come with DCS. However, even though the LAC is stacked with "practitioner experience", I wonder whether they fully understand how these risks may actually play out in a DCS company and the usefulness and practicality of the safeguards they are proposing.

According to the LAC, the SGX has proposed certain measures to mitigate against the risks of poor quality companies with a DCS structure. These measures are admission of companies based on a holistic assessment and the SGX referring potential listings with a DCS structure to the LAC for advice for an initial period, until the SGX becomes more familiar with such listings (which may be about the time that we have the sequel to the "S-chip" listing frenzy). The "holistic assessment" would include consideration of factors such as industry, size, operating track record and raising of funds from sophisticated investors.