Regulating Squeeze-Out Techniques by Controlling Shareholders: The Divergence between Hong Kong and Singapore

Forthcoming in Journal of Corporate Law Studies

45 Pages Posted: 1 Apr 2017 Last revised: 12 Feb 2019

See all articles by Christopher C. Chen

Christopher C. Chen

Singapore Management University School of Law

Wei Zhang

Singapore Management University

Wai Yee Wan

Singapore Management University - School of Law; City University of Hong Kong

Date Written: March 28, 2017

Abstract

Squeeze-out transactions are controversial as the controlling shareholders may expropriate the minorities’ shareholdings at unattractive prices. Existing scholarship has focused on the optimal approach towards regulating such transactions in the US and the UK, which have widely dispersed public shareholdings, but little attention is placed on jurisdictions with concentrated shareholdings, which may necessitate a different approach given that the prospects of expropriation are very high. This article fills the gap by examining Hong Kong and Singapore, which have concentrated shareholdings. Notwithstanding the fact that they have adapted their corporate and securities laws from the UK, Hong Kong ultimately provides greater minority shareholder protection than Singapore.

We present empirical evidence that the differences in regulation have led to a smaller number of squeeze-outs but higher premium payable to minority shareholders in Hong Kong, as compared to Singapore. However, Hong Kong firms experience higher levels of related party transactions prior to the squeeze-outs, which represent another form of tunnelling. We explain that the differences in regulation and discuss the normative implications of our findings. Our study contributes to the broader literature that “law matters” and provides case studies of how interest group politics shape the evolvement of laws and regulation.

Keywords: Squeeze-Outs, Delistings, Going Private Transactions, Controlling Shareholders, Takeovers, Hong Kong, Singapore

Suggested Citation

Chen, Christopher C. and Zhang, Wei and Wan, Wai Yee, Regulating Squeeze-Out Techniques by Controlling Shareholders: The Divergence between Hong Kong and Singapore (March 28, 2017). Forthcoming in Journal of Corporate Law Studies. Available at SSRN: https://ssrn.com/abstract=2943201

Christopher C. Chen

Singapore Management University School of Law ( email )

55 Armenian Street
Singapore, 179943
Singapore

Wei Zhang

Singapore Management University ( email )

School of Law
55 Armenian Street
Singapore, 179943
Singapore

Wai Yee Wan (Contact Author)

Singapore Management University - School of Law ( email )

55 Armenian Street
Singapore, 179943
Singapore

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

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