Asian Spotlight: Investors urged to oppose Hong Kong dual class share structure plans

The International Corporate Governance Network (ICGN) and the Asian Corporate Governance Association (ACGA) are urging institutional investors to respond to the latest consultation from the Hong Kong stock exchange which proposed allowing certain companies with dual-class share structures to list. The proposals form part of the stock exchanges aspiration to be a more attractive place to list for growth companies.

Hong Kong

Investors urged to oppose dual-class share structure plans

The ICGN and the ACGA, however, have already voiced their opposition to such changes in previous consultations and in articles and will do so again and have urged investors to add their voice.  The ICGN said ownership structures that allow disproportionate control via voting rights over publicly listed companies relative to economic interests and investment risk were a backward step for good governance, as they can lead to entrenchment of control and an erosion of accountability to minority shareholders. The group added that it advocated the importance of equal voting rights for all shareholders and called for disclosure and explanation of any divergences as well as commensurate extra protections for minority shareholders.

In this latest consultation, following its plans published last December, the Hong Kong stock exchange set out proposals to expand the existing listing regime to facilitate the listing of companies from emerging and innovative sectors, in particular, biotech companies. The exchange said it  believed that the “one-share, one vote” principle continued to be the optimum method of empowering shareholders and aligning their interests in a company.”

However, the exchange added that its main objective to expand the listing regime to allow weighted voted rights (WVR) structures was to attract good quality and high growth companies from innovative sectors to list in Hong Kong. Consequently, the exchange said it would consider all circumstances in exercising its discretion to find an applicant suitable to list with a WVR structure and “would do so only in appropriate cases where the applicant fits the profile of companies targeted by the proposed regime.”

The deadline for responses to the consultation is 23rd March 2018.

Financial Services Agency’s Council of Experts develops guidance to facilitate engagement between issuers and investors

The Financial Services Agency’s Council of Experts, appointed to advise on Japan’s corporate governance and stewardship codes, has developed guidelines for engagement between companies and investors. These are still under discussion by the council but provide a framework for investors to ask questions relating to the rules of the code.

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