Managing the pros and cons of dual-class listings a balancing act

THE investment and business community has lately been abuzz with reactions to the recent move by Singapore Exchange (SGX) to consider the listing of dual-class shares. In its 2016 annual report, SGX revealed that "an overwhelming majority" of the members of its Listing Advisory Committee (LAC) voted in favour of permitting the listing of dual-class shares although this was qualified by the need to implement the relevant corporate governance safeguards to mitigate the inherent risks associated with a dual-class share structure.

This is a timely update from SGX, following the amendment to the Singapore Companies Act which took effect in March this year, that enables a public company to issue different classes of shares if the company's constitution allows for such issue and if it sets out, in respect of each class of shares, the rights attached to that class of shares.

The following briefly sets out the pros and cons of the listing of a dual-class share structure and considers some of the safeguards that may mitigate the risks.