Dual-Class Shares

Overview

Dual-class share issuance is on the rise in a number of markets around the world. Such a development threatens to disenfranchise investors.

Regulation

Many jurisdictions allow dual-class share structures, including the United States, Canada, Brazil, France, and Italy. Other economies such as Singapore and Hong Kong are reconsidering whether to allow dual-class share structures to attract more IPO business.

CFA Institute Viewpoint

Company rules should ensure that each share has one vote. A structure that permits one group of shareowners to have disproportionate votes per share creates the potential for a minority shareowner to override the wishes of the majority of owners for personal interest. In cases in which such dual structures are legal, companies should disclose such arrangements and the situations, the manner, and the extent to which those arrangements may affect other shareowners.

 

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