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The Non-transferability of Super Voting Power: Analyzing the “Conversion Feature” in Dual-class Technology Firms


Snap Inc.’s IPO in 2017 is one recent example of a U.S. corporation going public in the footsteps of Alphabet and, to a certain extent, Facebook with different classes of common stock, including non-voting as well as super voting stock. Dual-class structures are very controversial, as demonstrated by the recent decision not to list dual-class companies in major stock indexes, such as the S&P 500. On the other hand, competition among stock exchanges around the world has recently led Hong Kong and Singapore to revisit their listing requirements in order to attract more innovative technology firms.

This Article focuses on one special feature of this “new generation” of controlling shareholders, namely the “founder-specific” nature of their shares, which is usually expressed in a conversion feature in the certificate of incorporation. In general, this “conversion feature”—as understood in this Article—stipulates that the super voting power is lost upon certain kinds of transfers. This Article demonstrates that the non-transferability of super voting power has positive as well as negative effects and proposes a corporate governance solution to mitigate these disadvantages. In doing so, the Article takes a broad comparative perspective, looking not only at jurisdictions that have traditionally employed dual-class structures but also at jurisdictions that are currently revisiting their dual-class policy and at jurisdictions with other compelling approaches toward restrictions on the transferability of shares.