THE CURRENT DEBATE AND FUTURE DEVELOPMENT OF DUAL-CLASS SHARE STRUCTURES IN CHINA

Although mainland China has now allowed listings with dual class share structures (DCSS) in the wake of reforms made in Hong Kong and Singapore to accommodate differentiated voting rights arrangements, the debate over DCSS is far from over in China, much like in other jurisdictions that have recently permitted DCSS or are considering the permission of such share structures. Many Chinese domestic scholars call for more stringent regulatory safeguards as well as time -based sunset clauses to tackle the potentially increased governance risks associated with DCSS. This article aims to serve as a bridge between Chinese and English literature by shedding light on mainstream perspectives within China while also examining the latest developments in the field from a global perspective. It first challenges the questions on the legitimacy and reasonableness of DCSS based on the historical evolution of voting rights as well as empirical studies. It then critically analyses the impact of stringent regulatory measures and defines them as a double-edged sword. All current screening and safeguarding measures in China can be categorised as ex ante constraints, the essence of which is to constrain the exercise of superior voting power in to order to mitigate the effect of decoupling voting rights from cash flow rights under DCSS. Based on lessons from overseas DCSS development, this article argues that, for more flexible and competitive capital markets, China needs to relax rather than intensifying stringent ex ante mechanisms and rely more on enhanced ex post mechanisms to further promote DCSS listings.