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Nikkei Markets

SGX modifies rules, allows dual-class share listings

Move aimed at drawing fast-growing firms

 Singapore Exchange's move comes after months of debate about the controversial share structure which has been opposed by corporate governance activists as favoring some shareholders at the expense of others.   © Reuters

SINGAPORE (Nikkei Markets) -- Singapore Exchange announced rule changes on Tuesday that will allow dual-class share companies to list in the city-state, putting it on par with Hong Kong in the race to attract high-growth companies such as start-ups and technology firms.

The move comes after public consultations and months of debate about the controversial share structure which has been opposed by corporate governance activists as favoring some shareholders at the expense of others.

"SGX today joins global exchanges in Canada, Europe and the U.S. where companies led by founder-entrepreneurs who require funding for a rapid ramp-up of the business while retaining the ability to execute on a long-term strategy, are able to list," CEO Loh Boon Chye said in a statement late Tuesday.

In recent years, Asian companies that have opted to list in the U.S. include Chinese internet giant Alibaba Group Holding and Singapore-based online gaming and e-commerce company SEA, which made its debut on the New York Stock Exchange last year.

Alibaba chose to list in New York in 2014 after Hong Kong Exchanges and Clearing rejected requests for concessions that would have allowed a structure where half the board would be nominated by founder Jack Ma and key executives.

Late in April, Hong Kong added dual-class shares to its rules for initial public offerings.

SGX's rule changes included some safeguards to protect shareholders.

For example, holders of multiple-vote shares will only be allowed one vote per share for major decisions such as the appointment and removal of independent directors, variation of shareholder rights, the selection of auditors, a reverse takeover, or winding up and delisting.

The multiple-vote shares would be capped at 10 votes each and their holders must be named in the IPO documentation, SGX said. Additionally, the IPO documentation must also contain a sunset clause for how and when the multiple-voting shares will convert to ordinary shares, it said.

Lawrence Loh, a director at the NUS Business School and the head of the Centre for Governance, Institutions and Organisations, said the traditional shareholder democracy model needed to keep up with the times and that the rules would provide the "best balance" between developing the new economy sector and governance.

But demand for the structure wasn't guaranteed, he said.

"It's just not the case that all the blockbuster mega IPOs will beat a path to your door. It's one hurdle being removed," he said.

--Leslie Shaffer

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