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Dual-class share structures

S.Korean govt pushes dual-class share structure amid Coupang US listing

By Feb 19, 2021 (Gmt+09:00)

Coupang is set to become the first Korean company to list directly on the New York Stock Exchange.
Coupang is set to become the first Korean company to list directly on the New York Stock Exchange.

South Korea's ruling Democratic Party is set to pass a bill that will allow a dual-class share structure for unlisted companies next month amid growing debate over domestic e-commerce giant Coupang Inc. opting for a US listing to issue dual-class shares.

“We plan to propose the amendment to the National Assembly’s Trade, Industry, Energy, SMEs and Startups Committee on Feb. 23 with a goal to pass it in March," said Song Gap-seok, the secretary of the ruling party, in a call with The Korea Economic Daily on Feb. 18.

A dual-class share structure allows issuing multiple voting rights for a single share held by the company’s founder or executive. It recently came into the spotlight when it was noted that Kim Bom-suk, the founder of Coupang, will receive 29 votes per share after the US listing.

The amendment to the existing Venture Businesses Act includes allowing up to 10 votes per share for unlisted venture companies. Also, if the founder’s shareholding is below 30% due to large-scale investment, then the company will be allowed to issue dual-class shares for up to 10 years but will be required to convert these to common shares after the three-year grace period.

Most local startups, including grocery delivery service Market Kurly and Viva Republica Inc., the operator of South Korea's popular digital wallet Toss, will qualify to exercise the dual-class share system if the amendment goes through. 

There is criticism that the ruling party is a bit late with the revision considering that it has been promoting the adoption of a dual-class structure as a key policy for innovative growth since last year; touting it as a move to appease financial circles in an uproar due to toughened business regulations.

However, there was no progress until recently when Coupang announced its US listing plans, fueling debate over the ruling party's belated approach.

The revision is also criticized for imposing more restrictions than the US version.

In the US, dual-class shares can be freely issued under corporate bylaws instead of government regulations and can be maintained even after the company is listed. Also, there are no limits on the number of voting rights for the shares.

“The restrictions imposed on the dual-class shares is basically another regulation of its own,” said a venture business official.

Write to Mi-hyun Jo and Geong-jin Min at mwise@hankyung.com

Danbee Lee edited this article.

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