SGX starts final consultation stage for dual class share listings

SGX unveils detailed safeguards in final consultation stage

Singapore Exchange (SGX) started the final consultation stage for dual class share (DCS) listings yesterday with the unveiling of detailed rules and safeguards that most experts praise as comprehensive.

The SGX said companies must meet its entry criteria for the mainboard, meaning that Catalist-listed firms are exempt.

Mr Tan Boon Gin, chief executive officer of SGX Regulation (SGX Regco), told a briefing: "What these companies need is the ability to raise substantial funds in order to grow quickly. We agree with the committee's recommendations to allow certain companies to list using dual class share structure."

It plans to allow firms with an expected market capitalisation of $300 million to list with the dual-class structure, a change from an earlier proposal of $500 million. This could give Singapore an edge over Hong Kong, which is mulling a market cap of at least HK$10 billion.

Mr Michael Tang, SGX's head of listing policy and product admission, said: "The minimum $300 million market capitalisation is just one of the three criteria. There are three alternative admission criteria...and the company need only meet one of the three."

Companies seeking to list under DCS structure must convince the SGX that they need the set-up to succeed.

"The one-share-one-vote structure will continue to be the default structure. The DCS structure will be the exception," said Mr Tan.

There are also proposed safeguards against the two main risks presented by dual class shares: expropriation, where owners seek to extract excessive personal benefits, and entrenchment risks.

The SGX will give non-controlling shareholders the power to vote in their own independent directors who will chair and form the majority of key governance committees such as audit, nominating and remuneration committees.

To prevent founders from entrenching themselves, the SGX has proposed allowing each multiple vote share to carry a maximum of 10 votes, and limiting initial holders of these shares to directors.

Ms Stefanie Yuen Thio, joint managing partner at TSMP Law Corporation, said the proposed safeguards are more comprehensive than she had expected.

"What I particularly appreciate about the proposed rules is that they have been structured with an eye on mitigating risk, rather than on rule observance."

Ms Choo Oi Yee, managing director, head of Singapore investment banking at UBS, agreed that the SGX has provided a good framework: "Investors are also likely to take these into consideration, amongst others, when they make their investment decisions."

The consultation is open until April 27. The SGX plans to adopt the DCS structure shortly after June. - THE STRAITS TIMES