As companies worldwide seek external funding to fuel their growth and development, preserving founder control becomes a critical concern. From start-ups seeking private equity or venture capital to private limited companies embarking on initial public offerings (IPOs), attracting investors while safeguarding founder influence demands innovative corporate structures.

When investors become shareholders, their voting rights are determined by the class and rights attached to their shares. Consequently, founders may find their control diluted if substantial shares are allotted to investors. To address this challenge, entrepreneurs turn to dual-class shares with weighted voting rights—a mechanism that grants certain shareholders multiple votes per share.

In this article, we explore the strategic implementation of dual-class shares to empower founders with majority control while attracting vital funding for the company’s growth and development. By examining the advantages and regulatory considerations, we equip clients at MahWengKwai & Associates with valuable insights to make informed decisions in navigating the dynamic landscape of corporate governance.

Definition and Mechanics of Dual-Class Shares

Dual-class shares are a distinctive corporate structure that deviates from the conventional single-class share system. While single-class shares offer equal voting rights to all shareholders, dual-class shares introduce a tiered approach, allocating different voting powers to distinct classes of shares.

In essence, multiple classes of shares are issued, with Class A and Class B shares being the most common denominations. Class A shares are typically offered to the public and carry limited or no voting rights, ensuring widespread ownership but limited influence in corporate decision-making. On the other hand, Class B shares are held by company founders, executives, or early investors, endowing them with significantly higher voting power.

The typical structure of dual-class shares often bestows superior voting rights upon Class B shares, granting key stakeholders a more influential say in critical matters compared to Class A shareholders. This arrangement empowers company founders to retain substantial control over strategic decisions, even if they possess less than fifty per cent (50%) of the total issued share capital.

Through the implementation of dual-class shares, founders can safeguard their vision and long-term interests, despite seeking external funding to propel the company’s growth and development. This strategic mechanism not only provides entrepreneurs with stability and autonomy in steering their ventures but also allures investors seeking to align with visionary leadership.

Dual-Class Shares in Malaysia

Traditionally, the concept of “one share, one vote” has been the norm in Malaysia, as prescribed by Section 71(1)(c) and Section 293(1)(a)(iii) of the Companies Act 2016. However, the Companies Act 2016 also allows for special voting rights to be conferred to certain classes of shares under Section 69(d) and Section 90(1).

69. Types of Shares

Subject to the constitution of the company, shares in a company may –

(d) confer special, limited or conditional voting rights…

90. Description of shares of different classes

(1) A company that has different classes of shares shall, in its constitution, state prominently the following:

(a) that the company’s share capital is divided into different classes of shares; and

(b) the voting rights attached to shares in each class.

Dual-Class Shares for Private Limited Companies

Taking advantage of Section 69(d) and Section 90(1), private limited companies in Malaysia can establish a dual-class share structure that grants distinct voting rights to each class of shares. For instance, a company may have two classes of shares: Class A Shares with three (3) votes per share, typically held by the Founder or original shareholders, and Class B Shares with one (1) vote per share, offered to Investors, the public, or third parties.

For private limited companies, implementing a dual-class structure involves clearly describing the classes of shares and their corresponding voting rights in the company’s constitution. This strategic approach enables the Founder to retain significant decision-making control while attracting funding from external investors.

Potential for Dual-Class Shares in Public-Listed Companies

While dual-class shares are currently available for private limited companies, their implementation in public-listed companies is still pending further announcements from Bursa Malaysia and/or the Securities Commission Malaysia. Although the Malaysian government has proposed plans to allow the issuance of dual-class shares as part of the revised Budget 2023, public-listed companies must await regulatory developments for their adoption.

The Rationale Behind Dual-Class Share Structures

Dual-class share structures have gained popularity among companies seeking to strike a delicate balance between raising capital and retaining control. Several reasons drive the implementation of this corporate model:

  1. Preserving Founder Control: For many start-ups and established businesses alike, founders and early investors play a pivotal role in the company’s success. Dual-class shares offer a means for these key stakeholders to maintain significant decision-making power, even as the company expands and attracts external funding. By holding Class B shares with superior voting rights, founders can safeguard their vision and leadership influence.
  2. Long-Term Vision: Dual-class shares align with the long-term strategic vision of founders and management. With a focus on sustainable growth and innovation, these companies can steer clear of short-term pressures and demands from public investors. This approach empowers management to make strategic decisions that may take time to yield substantial returns, without the fear of facing immediate backlash from short-term shareholders.
  3. Protection Against Hostile Takeovers: The differential voting rights inherent in dual-class shares can serve as a defence mechanism against hostile takeovers. By concentrating voting power in the hands of committed insiders, companies can shield themselves from external forces that may seek to gain control for short-term gains, potentially compromising the company’s long-term objectives.

Advantages of Dual-Class Shares

Dual-class shares offer an array of advantages that can positively impact a company’s governance and operations:

  1. Stability and Autonomy: The weighted voting rights provided by dual-class shares offer stability and autonomy to the company’s leadership. This stability can foster an environment conducive to long-term planning and strategic decision-making, as founders and key insiders are not beholden to the immediate demands of external shareholders
  2. Protection for Visionary Leadership: For companies with founders or executives who possess a unique vision for the company’s future, dual-class shares provide a safeguard against challenges to that vision. By retaining control through Class B shares, these leaders can execute their plans without undue interference, cultivating a corporate culture focused on innovation and bold initiatives.
  3. Attracting Long-Term Investors: Dual-class shares may be particularly appealing to long-term investors who share the company’s vision and believe in the capabilities of its leadership. Such investors are often willing to make substantial commitments to support the company’s growth, recognizing the value of a strong and focused leadership team.

Disadvantages and Criticisms

While dual-class shares offer compelling benefits, they have drawn criticisms:

  1. Lack of Accountability: Critics argue that dual-class structures can lead to a lack of accountability, as certain shareholders with superior voting rights may exercise disproportionate control without adequate checks and balances. This concentration of power in the hands of a few can diminish the voice of other shareholders, raising concerns about corporate governance practices.
  2. Potential for Abuse of Power: The differential voting power granted to insiders through dual-class shares may create opportunities for abuse of power, allowing founders or management to prioritise their interests over those of minority shareholders. Such scenarios can stifle dissent and discourage active shareholder engagement.
  3. Entrenched Management: Some corporate governance experts contend that dual-class shares can contribute to the entrenchment of management. With concentrated voting power, management may resist external calls for changes or reforms, potentially hindering the company’s ability to adapt to evolving market conditions.

Investor Considerations

Investors need to assess how the weighted voting rights present in a company’s dual-class shares can influence their investment decisions. Understanding the implications of this unique corporate structure is essential for making informed choices that align with their financial goals and risk tolerance. Here are key considerations for potential investors:

  1. Corporate Governance Practices: Investors need to carefully analyse the company’s corporate governance practices before committing their funds. Scrutinise the board structure, composition, and independence, as well as any measures in place to protect minority shareholders’ interests. Transparent and accountable governance practices are vital for ensuring fair treatment of all shareholders.
  2. Balance of Power: It is crucial to evaluate the balance of power between different classes of shareholders, particularly the significant disparity between Class A and Class B shares. Understand how much control founders or insiders hold and how their decisions may impact the company’s direction. A skewed distribution of voting power may indicate a higher risk of management entrenchment or potential conflicts of interest.
  3. Influence on Decision-Making: Investors should analyse how the weighted voting rights might influence key decisions within the company. Gain insights into the specific matters in which Class B shareholders can exert their superior voting power. Evaluate if this concentration of control aligns with the company’s long-term goals and values, and whether it may lead to a lack of responsiveness to other shareholders’ concerns
  4. Risk Tolerance: Recognize that investing in companies with dual-class shares entails unique risks. With founders or insiders retaining significant control, minority shareholders might have limited avenues to influence the company’s direction. Consider your risk tolerance and whether you are comfortable with potentially reduced voting power and fewer protections compared to traditional single-class share companies.
  5. Long-Term Investment Goals: Dual-class share structures often emphasise long-term strategic vision. Investors need to align their investment goals with the company’s trajectory and growth prospects. Investing in such companies requires a commitment to ride out market fluctuations and support the company’s leadership in achieving its long-term objectives.
  6. Future Dilution: Take into account the potential for future share dilution. As the company continues to grow and attract more investors, additional classes of shares may be introduced, further diluting voting power. Understand the company’s plans for future fundraising and its potential impact on the balance of power.
  7. Regulatory Environment: Be aware of the regulatory environment and voting rights protections in the jurisdiction where the company is incorporated. Regulations may vary across countries and can influence the degree of control granted to certain shareholders.


In the modern corporate world, dual-class shares with weighted voting rights offer a way for companies to get funding while keeping control. We have seen how they empower founders and insiders to plan for the long term without worrying about short-term pressures. They provide stability, protect against takeovers, and attract long-term investors

Investors should be cautious. Dual-class shares come with potential risks like less accountability and entrenched management. Before investing, they should carefully check the company’s governance, power balance, and their own willingness to take risks. Seeking professional advice is vital to make smart choices in dealing with this unique structure.

Understanding dual-class shares is essential for companies and investors alike. By balancing the benefits and risks, they can navigate the corporate landscape successfully and ensure sustainable growth and success.

By Raymond Mah and Tommy Wong


Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.