Hong Kong Stock Exchange loosens the “one share one vote” principle and rejects the sunset clause

To attract IPOs, especially tech companies, the Hong Kong Stock Exchange gave up the “one share one vote” principle. The fact takes place after years of discussions. In 2014, Alibaba’s IPO sparked off the long-running debate. The e-commerce giant listed its stock in the New York Stock Exchange (the IPO surpassed US$ 20 billion) because the Hong Kong Stock Exchange did not allow the listing of companies with dual-class shares – structure that violates the balance ensured by the one-single class structure, but grants the corporate executive control of the company with a small portion of its capital.
Last month, the Hong Kong Stock Exchange published the “Consultation conclusions – A listing regime for companies from emerging and innovate sectors.” The compilation with more than 120 pages brings together almost 300 comments sent by market’s participants and justifies the changes made. The material also shows that, contrary to the claims of several investors, the stock exchange rejected the idea of combining the loosening of the “one share one vote” principle and the adoption of the sunset clause. The measure proposed that issuers could have dual-class shares for a fixed term; after that, they would be converted into one-class shares and kept separate, subject to the approval in the shareholders’ meeting.
The Hong Kong Stock Exchange rejected the sunset clause because it considered it would create a feeling of insecurity in the capital market. According to the stock exchange, the solution could bring about an arbitrary change to the company’s control, which could also affect the interests of both the company and its shareholders.
Click here to read the full document – “Consultation conclusions – A listing regime for companies from emerging and innovate sectors”