Equal Treatment of Shareholders under the Dual Class Share Structure: Recent Development of Takeover Rules in Singapore

Abstract

On 24 January 2019, a revised Singapore Code on Take-overs and Mergers (the Take-overs Code) was promulgated by the Monetary Authority of Singapore (MAS) on the advice of the Securities Industry Council (the SIC).

The revisions are to ensure that takeover practices targeting at companies with the dual class share (DCS) structures are conducted in compliance with the principle of equal treatment of all shareholders. The key amendments are two-fold: (a) expanding the application of mandatory offer and its dispensation to target companies with the DCS structures. (b) clarifying the fair pricing norms for multiple classes of equity share capital of target companies with the DCS structures.

The revisions feature several new Notes implementing the mandatory offer rule in the complex context of listed companies of DCS structures. These additional Notes provide greater certainty to market participants and potential business transactions. They reaffirm the fundamental principle that all shareholders, controlling or minority, multiple votes or one vote, shall be given the equal and fair opportunity to access the extra premium paid for the private benefits of control.

This regulatory development manifests the policy preference towards a strong shareholder protection in Singapore. It has been positively accepted by the market for corporate control, as evidenced by respondents’ endorsement to the consultation paper. Such a regulatory update also projects transnational implications to other jurisdictions which have recently incorporated the DCS structure. For example, on 30 April 2018, the Hong Kong Exchanges and Clearing Limited (HKEX) added a new chapter to the Main Board Listing Rules for weighted voting rights listings. The Codes on Takeovers and Mergers and Share Buy-backs have yet to been amended in the HK. Given the affinity of takeover rules between Hong Kong and Singapore, the recent revisions of Singaporean Take-over Code will be a valuable reference for the future amendments to the HK Take-over Codes.

Keywords: Takeover regulation, Dual class share structures, Mandatory offer rule, Fair pricing norms, Monetary Authority of Singapore

JEL Classification: G15, G18, G34, G38, K22, O16