Dual-Class Share Structure: A Challenge for Contemporary Corporate Law
DOI:
https://doi.org/10.48614/jlaw.1.2022.4944Keywords:
Classes of shares, single-class share structure, dual-class share structure, “one share, one vote”, corporate governance, “Sunset Provision”, stock exchanges.Abstract
A share is a security of a joint-stock company. It confirms the contribution of a partner (shareholder) in the capital of a joint-stock company and legally establishes its holder’s positions and rights. There are different classes of shares that differ from each other in terms of legal status. One of them entitles a shareholder to managerial control (i.e. common share) and the other does not and is limited to provide property rights only (i.e. preferred share).
According to the existing trend in the present world, large corporations are distinguished by a diverse capital structure i.e. they issue two (or more) classes of shares simultaneously: both common and preferred, as well as several classes of common shares with different voting rights. This is especially true for high-tech companies like Google, Facebook, Snap Inc., etc. They are called Dual-Class Companies. When a company issues shares of two or more classes, it is accompanied by great risks and difficulties. It causes differences of opinion among scholars and investors whether the issuance of different classes of shares is harmful or beneficial for a company. In general, why do corporations resort to this path? What positive or negative impact can classes of shares have on corporate governance? Also, what is the role of a shareholder in the management of a company? In the present paper, the named issues will be discussed; What approaches exist in countries with developed economies and what methods do they use to improve corporate governance.
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