According to the OECD Corporate Governance Factbook 2025, in high-stakes global capital markets, more jurisdictions have moved away from the ‘One Share, One Vote’ (OSOV) principle and allowed multiple voting rights under pressure from regulatory competition. Motivations such as promoting initial public offerings (IPOs) and containing short-termism are driving this transformation. However, in the Asia-Pacific region, the competition to attract high-tech ‘unicorns’ and ‘China Concept Stock’ (CCS) companies has become much more complex. Our recent research explored the regulatory trajectories of four key jurisdictions—Singapore, Hong Kong, Mainland China, and Taiwan—as they navigate the deregulation of Dual-Class Share (DCS) structures. This ‘four-way tango’ illustrates a fascinating struggle between the pressure to compete in a global ‘law market’ and the gravitational pull of local path dependence. Notably, it takes ‘four to tango’ (not just two) in the regulatory race for global listings via DCS products, creating a shifting environment where jurisdictions adjust their rules to attract big tech companies. While Hong Kong, Singapore, and Mainland China have converged toward a more permissive, US-style model with stronger protections, Taiwan has remained more cautious. Overall, this convergence toward the US model, with unique local modifications, highlights a dynamic regulatory ‘dance’ where these jurisdictions supply ‘DCS regulatory products’, with China recently entering after Hong Kong and Singapore, and Taiwan remaining resistant to DCS.
The Concept and Debate of Dual-Class Share
Historically, most stock exchanges followed the OSOV principle. A DCS structure challenges this by issuing multiple share classes with unequal voting rights. Typically, ‘Class A’ shares are publicly owned and have one vote per share, while ‘Class B’ shares, owned by founders or key insiders, have multiple votes (eg ten votes per share). This setup allows founders to retain complete voting control over the company’s strategic direction even as their economic ownership decreases through public offerings. The DCS structure mainly aims to protect a founder’s long-term vision from the pressures of public capital markets focused on short-term results. For innovative companies in the biotech or tech sectors, this protection supports ongoing research and development without constant pressure from quarterly earnings targets. However, critics, including many institutional investors, argue that DCS structures raise agency costs and management’s position. When founders are shielded from shareholder accountability, there is a greater risk of ‘corporate royalty’, where insiders may seek private gains at the expense of ordinary shareholders.
A Comparative Study of Jurisdictional Players: Offense, Defense, and the Outlier
Our research explores how the US-China trade war and Alibaba’s 2014 IPO loss catalyzed changes throughout Asia. We categorize the jurisdictions as ‘offensive’ or ‘defensive’ competitors based on their regulatory stances:
- The Offensive Leaders (Hong Kong and Singapore): Hong Kong made the ‘first leap’ in 2018 by amending its Main Board Listing Rules to allow DCS companies to list. This was a direct response to the loss of tech giants to the US. Singapore quickly followed Hong Kong’s lead, amending its rules in June 2018 to remain competitive. Both jurisdictions actively ‘supplied’ DCS legal products to attract high-quality unicorns with DCS structures, adopting similar frameworks that combine permissive listing rules with strict shareholder protections and sunset clauses.
- The Defensive Player (Mainland China): China initially enforced strict controls but later took a defensive stance to prevent a mass exodus of its domestic unicorns. By launching the STAR Market in 2019 and later the Beijing Stock Exchange (BSE), China established a tiered system that allows DCS structures for innovative ‘red-chip’ companies, but it is more restrictive—a ‘stringent permit system’—than Hong Kong’s, with limited adoption as of 2023.
- The Outlier (Taiwan): Taiwan remains the ‘stubborn’ laggard, ranking fourth in this ‘tango’ for not fully adopting other countries’ liberalized, competitive frameworks. While it amended its Company Act in 2015 and 2018 to allow non-public ‘close companies’ to use DCS, it continues to prohibit publicly listed companies from adopting DCS, contrasting with the convergence seen elsewhere. As we argue, Taiwan is a classic case of path dependence, where a tradition of rigid social control and a ‘rule-based, positive-list’ regulatory regime have hindered convergence with its neighbors.
Original Thinking: Formal Convergence vs. Functional Divergence
Our research’s theoretical contribution is to examine further the concepts of ‘Faux Convergence’ and ‘Divergence within Convergence.’ Under convergence theory, competition for listings is driving a shift toward a more permissive (US-style) model, with local adaptations. On the surface, it seems that Hong Kong, Singapore, and China are transplanting the US permissive model. This is what we call formal convergence—the laws appear similar. However, our analysis reveals functional divergence. Unlike the ‘light-touch’ approach in the US, Asian jurisdictions have added significant layers of shareholder protection that the US lacks, such as mandatory event-based sunset clauses and high market capitalization thresholds. This indicates that while these jurisdictions are ‘tangoing’ toward the US model, they are doing so with their own distinctive ‘local steps’ shaped by their unique socioeconomic and institutional histories.
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