White Collar | Class actions need to be allowed before dual classes of shares
Hong Kong should first consider allowing class-action lawsuits before the exchange revises listing rule
Hong Kong Exchanges and Clearing is seeking views on whether to list firms with the controversial dual-class share structure, but any such change would be unlikely as long as the city's legal system does not allow class-action lawsuits.
Ten months after its refusal to budge from the rule forbidding such structures cost the bourse the mega listing of e-commerce giant Alibaba Group Holding, which will soon list in the United States instead, HKEx issued a "concept paper" on Friday.
In the paper, the exchange sought opinions from the public as to whether it should change the rule to accommodate the requests from firms that want to give one class of shareholders more rights than the other.
[The exchange] wishes to refrain from adopting a position on either side of the issue
HKEx called it a "concept paper" instead of the usual "consultation paper" because it wishes to refrain from adopting a position on either side of the issue. Instead, the paper only furnishes for public debate the facts on what other markets are doing. If the public says no, then HKEx will do nothing. If the public says yes, then it will hold further consultation.
The exchange is adopting this non-committal approach because it knows well that this is a hot potato.
In October last year, the Securities and Futures Commission and some institutional investors expressed opposition to granting Alibaba an exemption from the listing rule so that its founder and key executives could nominate a majority of the board even though they hold only a minority stake. Such a structure, the commission said, would violate the "one-share, one-vote" principle.
In the event, HKEx said nay, and Alibaba may now raise up to US$20 billion in New York. The initial public offering could surpass Visa's US$19.65 billion flotation in 2008 as the biggest listing in US history.
