• ISSN: 2301-3567 (Print), 2972-3981 (Online)
    • Abbreviated Title: J. Econ. Bus. Manag.
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    • DOI: 10.18178/JOEBM
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HOME > Archive > 2022 > Volume 10 Number 2 (Apr. 2022) >
JOEBM 2022 Vol.10(2): 91-96 ISSN: 2301-3567
DOI: 10.18178/joebm.2022.10.2.679

Sunset Clause in the Dual Class Share Structure

Zhi Li

Abstract—In a dual class share structure, the founders of a public company own special voting shares, so they can control a large company with a small number of shares. Although the dual class share structure has the outstanding advantage of helping entrepreneurs to achieve idiosyncratic vision, there is no good mechanism to address the infringement of interests caused by the loss of voice of other shareholders in the dual class share structure itself. The sunset clause as a governance tool has proven to be useful in curbing the negative effects of dual class share structure. China, as a country that has only recently liberalized the listing of dual class share companies, has taken a conservative approach towards formulating its listing rules and has not imposed a time-based sunset. Given the increasing number of publicly listed DCS companies, the Chinese financial regulators should consider adopting the time-based sunset clause to curb permanent DCS. However, when there is a choice to be made between statutory and liberal options concerning the timing of sunset, China could creatively introduce the UK "comply or explain" principle for the application of time-based sunset clauses.

Index Terms—Dual class share, sunset clause, Chinese listing rules, comply or explain.

Zhi Li is with the Law Department, Beijing University of Technology, Beijing, China (e-mail: klaus1125@163.com).

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Cite:Zhi Li, "Sunset Clause in the Dual Class Share Structure," Journal of Economics, Business and Management vol. 10, no. 2, pp. 91-96, 2022.

Copyright © 2022 by the authors. This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

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