As part of the revised Budget 2023, tabled on 24 February, the Malaysian government revealed its plan to allow the issuance of dual-class shares on Bursa Malaysia. This measure is to encourage the listing of local high-growth technology companies in Malaysia. This move is welcomed by the Securities Commission Malaysia (“SC”) as one of the measures to enable the capital market and its supporting ecosystem to serve the needs of the domestic economy and business.
Contrary to the “one share, one vote” principle, the concept of dual-class shares allows companies to issue to shareholders shares which carries disproportionate voting rights, also known as weighted voting rights. Under this structure, there are at least two classes of shares – one with limited voting power and the other with significantly more voting power. This means that certain individuals or group of shareholders, such as founders, will hold superior voting shares while other shares, offered to the public, have inferior voting rights. This is particularly enticing for founders or entrepreneurs of a company who would be permitted to hold shares with superior voting to retain control over the management of the company while allowing sufficient funding to expand the business.
However, this also raises corporate governance concerns that shareholders with superior voting shares may become deeply rooted in the management of the company or seek to extract excessive personal benefit, to the detriment of the minority shareholders. The current approach adopted by regulators in other jurisdictions allowing dual-class shares, such as Hong Kong and Singapore, is to allow listing of companies with dual-class shares structure coupled with some safeguards or restrictions to protect minority shareholders. For example, by imposing a maximum cap of voting differential ratio and by requiring certain shareholders’ resolutions to be decided on a “one share, one vote basis”.
The SC has not yet indicated its approach on the implementation of dual-class shares as details have not been announced at this juncture. We will continue to monitor developments and provide updates.
If you have any questions or require additional information, please contact Joan Ting or the partner you usually deal with at Zaid Ibrahim & Co (in association with KPMG Law).