The city’s lawmakers may have made a breakthrough by introducing differential voting rights to different types of shares within a company, according to a draft on science innovation handed to the Standing Committee of Shenzhen Municipal Congress for review Tuesday.
At present, Chinese share-holding companies abide by the “one vote per share” mechanism, while the draft aims to give more protection to founders of technology companies by allowing them to have more votes per share, according to a Shenzhen Special Zone Daily report yesterday.
For most technology start-ups in Shenzhen, the founders, who own proprietary but limited registered capital, face risks of losing control of the company after rounds of fundraising.
In a company’s share structure, if Group B (the founders) has 10 votes per share while Group A has one vote per share, then the shares have the same economic worth, but the controlling rights associated with Group B are 10 times as strong as the ones of Group A.
The structure will protect the voting rights of original stock holders, prevent malicious acquisitions, attract global talent and resources, and encourage entrepreneurship, the Daily report said.
The draft also stresses long-term construction of national-level key infrastructure projects such as Shenzhen-Hong Kong Innovation Cooperation Zone, Guangming Science City, Xili Lake International Science and Education City and Pengcheng Laboratory and promotes deep integration of the infrastructure with cutting-edge interdisciplinary research.
Moreover, the draft encourages enterprises to undertake research projects independently or collaboratively with universities and research institutes.
Meanwhile, in a draft amendment of intellectual property rights (IPR) protection, the city will increase the penalties for violating IPR rules by introducing punitive compensation. The penalty can be up to five times the losses from IPR infringement of the proprietary owners.
The other drafts handed to lawmakers for review include lifting of restrictions on overseas investors in the Qianhai area of the China (Guangdong) Pilot Free Trade Zone in sectors of finance, modern logistics, and information and technology service.
