The Chamber of Hong Kong Listed Companies has called for a revamp of the city’s regulatory mechanism to allow firms with dual-class shareholding structure to list on the local stock exchange.
But the industry body, which has more than 200 listed companies as members, said firms with dual-class shares should only be allowed to list on the Growth Enterprise Market, or the GEM board, the Hong Kong Economic Journal reported on Monday.
The “one share, one vote” principle is a cornerstone of Hong Kong’s financial development, and the main board of the stock exchange should not compromise on this matter, the group’s chairman, Patrick Sun, was quoted as saying.
However, the GEM board could be adaptable and accommodate companies with dual-class shareholdings.
The chamber issued its statement as the Hong Kong Exchanges and Clearing Ltd. (00388.HK), the city’s stock exchange operator, conducted a consultation on proposals to amend its listing rules to better attract technology companies.
Hong Kong has lost the mega deal of Alibaba Holding Group Ltd. after it rejected the e-commerce giant’s dual-class shareholding structure that would allow its founders to control the board despite holding a minority of the stocks.
Alibaba decided to list on the New York Stock Exchange where its initial public offering raised a record-shattering US$25 billion in September.
According to the chamber, regulators should be given the discretion to allow the dual-class shareholding structure based on the history of a company rather than on the industry it is in.
The proposal would need amendments to the code of corporate governance and the code of takeovers and mergers.
A sunset clause, which will restrict the founders’ ability from leaving the company or transacting in its shares, could be added to balance their privilege under a dual-class shareholding structure, Sun said.
Meanwhile, lawmaker Christopher Cheung said regulators should relax the rules of the main board to maintain the city’s status as an international financial center, noting that many fund companies have mandates not to invest in the GEM board.
Corporate governance advocate David Webb, however, said the stock exchange should maintain its “one share, one vote” principle. In this regard, he initiated an online petition that has collected 350 signatures as of Sunday.
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