Legal Risks And Prevention Of Listed Companies’ Differential Voting Rights Arrangement

With the rapid development of the global capital market and the heterogeneity of shareholders,the corporate governance structure shows a trend of equity differentiation.Based on the consideration of both equity financing and control rights and the needs of the company’s founders to implement long-term strategies,a differentiated voting right system has emerged.After 2017,in order to attract new economy companies to go public,Hong Kong,Singapore and other places have gradually improved the laws and exchange rules related to the conditions for securities issuance and listing,allowing companies with differentiated equity structures to go public.In 2019,China also allows technological innovation companies to issue shares with "special voting rights".The science and technology board accepts the difference in voting rights under the premise of formulating preventive measures.It is a decision made after careful consideration,a lot of market research and international experience,on the one hand,it respects the scientific and technological innovation of corporate governance,and the aspect also fully considered the current stage of development of China’s capital market.This article will take the special voting right system in the rules of the Science and Technology Innovation Board as a research entry point,and based on the issues that may arise the dynamic development of China’s capital market,draw on the practical experience of foreign capital markets,and analyze the benefits generated by the voting right differentiation system.Rebalancing and other issues,and put forward system recommendations to further deal with legal risks arising from the differentiated voting rights of listed companiesThe first chapter of this article starts from the form and historical approach of the voting right differentiation arrangement,and discusses the main disputes and responses of the voting right differentiation system.Based on the consideration of both equity financing and control rights and the needs of the company’s founders to implement a long-term strategy,the arrangement of voting rights is the first issue in restructuring the rules of the system.By making special arrangements for shareholders’ participation rights and economic rights different from ordinary shares,in order to achieve the goal of both equity financing and control of the company,the voting rights and income rights in equity need to be arranged differently from the same shares and the same rights.However,the differentiated voting right system has caused controversy on a global scale,mainly including the increased agency costs caused by the separation of revenue rights and voting rights,and disputes over permanent control of the company’s insiders.In response,countries (regions) have responded positively by analyzing the practices and rules of overseas differentiated voting rights in the United States,Hong Kong,and Singapore,and summarizing the countermeasures of the voting rights differentiation system,including structural setting requirements,operational requirements,exit mechanisms,and punishment enforcement mechanismsFor a long time,there have been many calls for allowing joint stock companies to adopt a differentiated voting right structure for listing.However,based on the possible problems caused by the above differentiated voting right structure,China’s basic laws,the Company Law and the Securities Law,have not been liberalized.limit.The introduction of a differentiated voting right system is a great attempt to reform China’s capital market rules.The second chapter introduces the obstacles and processes of the introduction of China’s differentiated voting rights system,and reviews the latest practice and rules of the voting rights differentiation system in China.In order to balance the relationship between shareholders holding special voting rights and ordinary shareholders,reasonably set up differentiated voting rights arrangements,regulate necessary measures on how to protect the interests of other shareholders,and also make institutional arrangements on the qualifications of the company to be listed,the shares with limited special voting rights,the governance structure of the company with different arrangements for voting rights,and internal and external monitoring mechanisms.This section also prejudges legal risks such as the risk of excessive separation of the two powers leading to abuse of control,the risk of the supervisory board’s oversight mechanism ineffectiveness,the risk of inadequate information disclosure,and the lack of effective post-event relief measures.The third chapter of this article is "Consolidation of China’s Voting Rights Differential System:Renewal of Ideas and Institutional Responses".Aiming at the possible legal risks of China’s voting rights differential system,this paper proposes to build a multi-layered legislative system to protect the system;to prevent differential ownership structure The abuse of control rights,including clarifying the meaning of"shareholding subject" and related disclosure requirements,enriching the "sunset clause",that is,the exit mechanism of special voting rights,improving the rules of faithful obligations of holders of special voting rights;improving the difference in voting rights Arrange the company’s internal supervision system,the special requirements for the arrangement of the company’s information disclosure requirements,and the judicial remedy protection system under the arrangement of the company’s differentiated voting rights.