Dual-Class Shares in Overseas IPOs of Vietnamese Companies

Dual-class shares let founders keep control of a company while selling most of its economics to public investors. For Vietnamese companies preparing an overseas IPO, dual-class shares are often one of the first points raised by founders and underwriters, yet Vietnamese corporate law starts from a very different default: one share, one vote.

This article explains how weighted voting rights are built and listed on NYSE, Nasdaq, HKEX and SGX, what listing rules, sunset clauses and investor protections require, how index providers and proxy advisers react, and what the Vietnamese position means for any later onshore listing.

Table of Contents

Table of Contents

Why Dual-Class Shares Matter for Vietnamese Issuers

Vietnamese founders who raise growth capital abroad face a familiar tension. Each round of equity dilutes control, yet an IPO on a major exchange requires selling a meaningful free float. Dual-class shares resolve that tension by separating economic ownership from voting power: public investors buy a class with one vote per share, while founders keep a class carrying several votes per share.

The rationale is easy to state. Founders argue that long-term strategy in technology, consumer and platform businesses is better served when decision makers are insulated from short-term market pressure. Investors counter that dual-class shares weaken accountability, because control can persist even after the founder’s economic stake has fallen sharply. Every modern regime therefore pairs dual-class shares with disclosure, governance and, increasingly, time limits.

For Vietnamese companies, dual-class shares are a practical question rather than a theoretical one. Technology, fintech, e-commerce, clean energy and consumer groups have all considered overseas listing routes, and the structure of the share capital must be settled early, because it is almost impossible to introduce weighted voting after the IPO.

How Weighted Voting Rights Work

Class A and Class B in practice

The market convention for dual-class shares is a two-class structure. Class A shares are sold to the public with one vote each. Class B shares are held by founders and carry a multiple, most often ten votes per share, although some issuers use a lower ratio or a fixed percentage of total votes.

Class B shares are usually unlisted, non-transferable except to approved affiliates, and convertible into Class A shares on a one-for-one basis at the holder’s option or automatically on certain events. These weighted voting rights are written into the memorandum and articles of association, so the details live in the constitutional documents rather than in the listing rules.

Economic rights versus voting rights

Dual-class shares normally rank equally on dividends, liquidation and other economic entitlements; only voting differs. The result is a “wedge” between the founder’s economic interest and voting power. A founder holding 15% of the equity through Class B shares at ten votes each can control a majority of votes, which is why regulators focus on the size of that wedge and the conditions under which it must narrow.

What the weighting actually controls

Weighted voting rights usually apply to the election of directors, ordinary resolutions and most special resolutions. Better-drafted articles carve out a short list of reserved matters on which every share has one vote, such as changes to class rights, removal of independent directors or auditors, and voluntary winding up. Investors scrutinise this list closely.

Dual-Class Shares on NYSE and Nasdaq

Listing rules in the United States

The United States is the most permissive major venue. Both NYSE and Nasdaq allow dual-class shares at IPO. The Listed Company Manual of NYSE (Section 313.00, voting rights policy) and Nasdaq Rule 5640 do not prohibit unequal voting at the outset; they restrict later actions that disparately reduce or restrict the voting rights of existing shareholders.

The consequence is the same as elsewhere: dual-class shares must be in place before listing, and weighting cannot be imposed on public holders afterwards. There is no mandatory sunset clause, no cap on the vote ratio and no minimum economic stake for the founder, so the market, through pricing and investor demand, disciplines the terms.

The controlled-company exemption

A company in which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is a “controlled company” (NYSE Section 303A.00; Nasdaq Rule 5615(c)). Dual-class shares often create that status automatically. The controlled-company exemption relieves the issuer from the requirements for a majority-independent board and for independent compensation and nominating committees, but not from the audit committee rules.

Most Vietnamese issuers would list as foreign private issuers, who may follow home-country practice on many governance items instead, so the controlled-company exemption is useful mainly where the company loses foreign private issuer status or elects to comply with domestic rules. Proxy advisers and investors still read the exemption as a governance signal.

Dual-Class Shares on HKEX and SGX

HKEX Chapter 8A

Hong Kong reopened to dual-class shares in April 2018 under Chapter 8A of the Main Board Listing Rules, and Xiaomi became the first listing under the regime. Chapter 8A is deliberately conditional. Applicants must be innovative companies and meet a high market-capitalisation test, either a large valuation on its own or a lower valuation combined with substantial revenue.

The people holding weighted votes must be directors who have contributed materially to growth, must hold a minimum economic interest, and the weighting is capped at ten votes against one. Ordinary shareholders must retain a minimum share of total votes, and dual-class shares may be created only at IPO.

Weighted votes lapse automatically on events such as death, incapacity, the holder ceasing to be a director or transferring the shares. One vote per share applies to reserved matters, enhanced governance requirements apply (including a corporate governance committee), and listed names carry a “W” marker. The exact thresholds have been refined since 2018, so current rule text should be confirmed.

SGX Mainboard

Singapore permitted dual-class shares from June 2018 for Mainboard applicants. The SGX framework allows enhanced voting shares but pairs them with a required sunset clause, which may be time-based or event-based, a cap on the vote ratio, coattail-style protections that give all holders equal treatment on a takeover, and tighter board and committee independence.

The Singapore regime shows a middle path between the open United States approach and the highly conditional Hong Kong test, and the specific conditions should be verified at the time of an application.

Comparison at a Glance

Feature	NYSE / Nasdaq	HKEX (Chapter 8A)	SGX Mainboard	HOSE (Vietnam)
Dual-class at IPO	Permitted	Permitted, innovative companies only	Permitted, subject to conditions	Not in a durable form; voting preference shares limited by law
Vote ratio	No cap in rules (10:1 is market norm)	Maximum 10:1	Capped (commonly 10:1)	Set by charter, but only for founders and State-authorised bodies
Sunset clause	Not required; market driven	Event-based lapse mandatory	Required (time or event)	Statutory: founder preference ends 3 years after registration
Added after IPO	Restricted for existing holders	No	Restricted	Not applicable
Controlled-company relief	Yes (domestic issuers)	No equivalent	No equivalent	No equivalent

The table is a simplified summary. Each venue also has disclosure, independent-director and amendment rules that matter in a real offering.

Sunset Clauses and Investor Protections

Time-based and event-based sunsets

A sunset clause converts the high-vote class of dual-class shares into ordinary shares after a defined period or event. Time-based sunsets typically run for five to ten years from IPO, with some allowing renewal by a vote of independent shareholders.

Event-based sunsets trigger on death or incapacity of the founder, the founder ceasing to be an executive or director, a transfer of the shares to a non-permitted holder, or the founder’s economic stake falling below an agreed percentage. Institutional investors and governance bodies have for years promoted a sunset clause of roughly seven years as best practice, and many recent issuers include one even where the rules do not require it.

A Vietnamese issuer should expect the question in the first round of investor feedback.

Coattails, reserved matters and independent oversight

Beyond sunsets, investors look for equal treatment on a takeover (coattail provisions), one-vote-per-share on reserved matters, a majority-independent board or strong independent committees, related-party transaction approval by disinterested directors, and clear limits on transfer of Class B shares. These protections do not remove the founder-control premise but reduce the risk that voting power is used for private benefit. For a Vietnamese group with related-party flows among onshore affiliates, the quality of these safeguards is often what separates a well-received deal from a discounted one.

Index Providers and Proxy Advisers

Dual-class shares affect who can buy the stock. Index treatment has shifted over time, and the following points must be verified against current methodologies before they are given to a client.

S&P Dow Jones Indices: excluded multi-class companies from the S&P Composite 1500 from 2017, then reversed that policy in April 2023. Eligibility questions now turn on other criteria.
FTSE Russell: requires a minimum percentage of voting rights to be in the hands of unrestricted shareholders; companies with very low public voting rights have been excluded. The threshold should be confirmed.
MSCI: has consulted on and adjusted its treatment of non-voting and low-voting shares, so inclusion factors and eligibility need checking for each structure.
Proxy advisers: ISS and Glass Lewis generally recommend scrutiny of unequal voting structures at newly public companies, and commonly favour a sunset clause, with seven years often cited as the benchmark. Their policies vary by market and issuer type and should be read for the relevant jurisdiction.

Practical lesson: model the index and proxy consequences of dual-class shares at the structuring stage. A ten-to-one ratio that is acceptable to a founder may reduce passive demand, and a sunset that is generous on paper may still draw negative voting recommendations.

Implementing Through a Cayman Holdco

Why issuers choose a Cayman holdco

Overseas IPOs of Vietnamese businesses are almost always carried out through an offshore parent. Vietnamese joint stock companies cannot freely issue weighted shares to the public, and Vietnam has no mechanism for listing its operating companies on NYSE, Nasdaq, HKEX or SGX directly.

A Cayman holdco is the standard solution because the Cayman Islands Companies Act permits flexible share classes, tailored voting rights, conversion and redemption mechanics, and the structure is familiar to underwriters and exchanges. The usual chain runs from the Cayman parent through intermediate entities in Hong Kong or Singapore to the Vietnamese operating subsidiaries.

Our capital markets practice typically begins with this architecture: where the holdco sits, what the intermediate layers are for, and how the Class A and Class B terms will be drafted.

Vietnamese issues in the reorganisation

The offshore structure does not remove Vietnamese law. Founders who exchange onshore shares for Cayman shares must consider foreign investment registration and share transfer procedures, market access conditions that apply once the Vietnamese company becomes foreign owned, merger control, tax on the reorganisation and on future transfers, and foreign exchange rules for outward investment by Vietnamese residents.

Weighted voting at the holdco does not change the fact that the Vietnamese subsidiary is owned by a foreign investor, so sector ownership caps apply regardless of who controls the votes. For dual-class shares in sectors with foreign ownership limits or conditional licences, the structure may fail or require a different route.

Vietnamese Law and the HOSE Listing Question

Law on Enterprises 2020: voting preference shares

Vietnamese company law follows one share, one vote for ordinary shares. The Law on Enterprises 2020 does allow joint stock companies to issue voting preference shares, but narrowly. Only organisations authorised by the Government and founding shareholders may hold them, the number of votes per share is set in the charter, and the founders’ voting preference is effective for three years from the date the enterprise registration certificate is issued.

After that period the shares convert to ordinary shares, and voting preference shares cannot be transferred to other persons. This is a transitional founder device, not a lasting dual-class shares system. The article numbers and details should be confirmed against the current text.

Law on Securities 2019: public companies

The Law on Securities 2019 and Decree 155/2020/ND-CP regulate public companies and listing. They set thresholds for public status and listing, including minimum capital, profitability, and free-float and shareholder-number tests, and contain tender offer rules that apply when a person acquires 25% or more of the voting shares of a public company.

Nothing in them creates a durable weighted voting category for listed companies, and the three-year limit in the Law on Enterprises means a founder preference will normally have lapsed by the time a company reaches the listing track. Current figures and amendments (including the 2024 amending law) should be checked before reliance.

sunset clause — Photo: Wikimedia Commons (public domain / CC0)

What this means for a HOSE listing

Three conclusions follow for founders. First, a HOSE listing realistically means one share, one vote at the operating company, so control must be preserved by other means: a controlling parent holding company, voting agreements, charter provisions on board nomination and the dilution plan for new issues.

Second, a Cayman holdco with dual-class shares is a different listing vehicle, not a stepping stone; it is not a Vietnamese joint stock company and cannot simply be admitted to HOSE. The choice between an offshore IPO and a HOSE listing is therefore made at the outset, or involves a later reorganisation. Third, if Vietnamese policymakers consider new listing channels or voting structures, the position will need to be reviewed.

Our corporate and commercial team advises on onshore charters and shareholder arrangements that approximate founder control without relying on weighted shares.

For primary sources, see the HKEX rulebook for Chapter 8A and the NYSE Listed Company Manual for the voting rights policy and controlled-company rules.

Frequently Asked Questions

Can a Vietnamese company list directly overseas with dual-class shares?

Not in practice. Vietnamese joint stock companies have no durable dual-class option, so overseas IPOs normally use an offshore holding company, often a Cayman company, that issues Class A and Class B shares and owns the Vietnamese operating subsidiaries.

Is a sunset clause mandatory?

It depends on the exchange. SGX requires one, and HKEX requires event-based lapse of weighted votes. NYSE and Nasdaq do not mandate sunsets, though investors and proxy advisers often expect one, with seven years commonly cited.

Do dual-class shares prevent index inclusion?

Not automatically. S&P reversed its 2017 exclusion in 2023, but FTSE Russell and MSCI apply voting-rights tests that vary. Eligibility must be checked for each structure and each index before pricing.

Does Vietnamese law recognise dual-class shares?

Only in limited form. The Law on Enterprises 2020 allows voting preference shares for founders and Government-authorised organisations, and the founders’ preference lasts three years from registration before converting to ordinary shares.

Can dual-class shares be used for a HOSE listing?

No. A HOSE issuer is a Vietnamese joint stock company where weighted voting rights are not durably available. Founders usually rely on parent holding companies, voting agreements and charter provisions to preserve control instead.

Whether the right route is an offshore IPO with dual-class shares or an onshore listing, the share structure should be decided before the first investor presentation. The most useful next action is to map your current cap table against the control outcome you want, and test it against the venue rules, index criteria and Vietnamese regulatory conditions described above.

Considering an overseas IPO? IVLF Advisors LLC offers a confidential preliminary consultation on dual-class shares, holding company design and listing venue selection. Contact our team to arrange a discussion with a partner.

This article provides general information only and does not constitute legal, tax or financial advice. Laws, listing rules and index methodologies change; consult a qualified adviser about your specific circumstances before acting.