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Manchester United and the Dual Class Share Structure

Umakanth Varottil
The financial press is abuzz with Manchester United’s possible listing on Singapore’s stock exchange (SGX) with a dual class share structure. For example, the Financial Times notes:

Manchester United football club’s $1bn initial public offering in Singapore will use a two-tier share structure that will minimise the influence of outside shareholders over the US-based Glazer family.

The ability to use a dual share structure, in which some shares have more voting rights than others, was an important reason for the club’s decision to switch the IPO from Hong Kong to Singapore, according to people with knowledge of the transaction.

…

The disclosure of the proposed dual share structure will trigger fresh debate about the corporate governance standards at the club under the Glazers, since two-tier shareholding structures are often regarded as inequitable.

Curiously enough, Singapore’s Companies Act does not permit dual class share structures, except for newspaper companies. Section 64 provides that “each equity share issued by such a company … shall confer the right at a poll at any general meeting of the company to one vote, and to one vote only, in respect of each equity share …”. However, an ongoing law reform proposal is activity considering the introduction of dual class share structures. As far as Manchester United’s proposal is concerned, the structure will have to pass muster under the company law of its jurisdiction of incorporation. Further, SGX will have to obtain comfort from the governance arrangements that it will not pose an undue threat to minority shareholders.

This also renews the debate on shares with differential rights in the Indian context. While the current law permits such shares subject to strict conditions, the Companies Bill, 2009 contains a clause that proposes to abolish them and revert to the “one share one vote” rule. However, the Standing Committee on Finance that reviewed the Bill recommended that companies be given the flexibility to issue such shares, along with appropriate safeguards. Where this flip-flop process will culminate is far from clear, but it will be useful to keep in mind the debates and developments elsewhere in cases such as Manchester United.