March 23, 2018 / 6:28 PM / a month ago

Norway's wealth fund cautions Hong Kong against dual-class shares

March 23 (Reuters) - The Hong Kong stock exchange needs to introduce additional measures to protect minority shareholders rights if it allows the listing of shares with unequal voting rights, including putting a time limit on them, Norway’s sovereign wealth fund said on Friday.

Last December, the Hong Kong exchange proposed to introduce dual-class shares, which typically give one set of shareholders greater voting rights than others.

A number of Chinese tech groups are considering where to list their shares in 2018 and unequal voting structures have been favoured by technology companies as a protection against shareholder pressure for short-term returns.

The influential Norwegian government pension fund, which is the world’s largest with assets of $1-trillion, told the Hong Kong stock exchange in a letter that while it was supportive of measures motivating companies to go public it was concerned about the impact on minority shareholders.

“We regard the protection of minority shareholder rights as a necessary requirement to safeguard and promote the fund’s long-term financial interests,” said the letter which was published on its website on Friday.

“To maintain market standards for investor protection, we see the need for additional measures,” it added.

One of those measures should be to introduce a time-based phase-out of unequal voting rights, and another should be to strengthen standards governing the independence of non-executive directors, the fund said.

Unequal voting structures have been criticised by corporate governance advocates, who have warned of potential abuse by companies.

Certain matters, such as transactions involving entities associated with holders of weighted voting rights, should always be subject to the “one share one vote” principle, the fund said.

Norway’s Government Pension Fund Global, also known as the oil fund, had $26.6 billion invested in shares listed on the Hong Kong stock exchange at the end of 2017, it said in the letter.

The fund is one of the world’s largest investors. (Editing by Elaine Hardcastle)

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