A Tale of Two Cities: Business Trust Listings and Capital Markets in Singapore and Hong Kong

The modern, statutory business trust is an increasingly important business vehicle in both the United States and around the world; it remains, however, woefully understudied. In particular, hardly any comparative legal research on business trusts exists. This Article seeks to fill such a void by providing a comparative analysis of business trusts and business trust listings in Singapore and Hong Kong, two of the world’s most important financial centers and the only two major jurisdictions in the world which have actively opened up their capital markets for business trust listings; this Article is, to my knowledge, the first scholarly investigation of business trusts in Singapore and Hong Kong. The Article argues that the experience in Hong Kong and Singapore and hype there over business trusts shows that business trusts are gaining some popularity in foreign jurisdictions as important capital-raising vehicles, apart from traditional business trust forms in jurisdictions such as the United States (such as mutual funds and pension funds). As seen through the Singaporean and Hong Kong experiences, when listed on public stock exchanges, business trusts arguably offer numerous advantages, namely: greater distributions to the beneficiaries, since distributions can be made out of cash flows rather than accounting profits); more funding opportunities (through listing); increased investor liquidity; and the asset owner’s ability continue to exercise control over the trust’s assets, to name a few. The control advantage is especially important, as Singapore and Hong Kong currently do not permit dual class stock structures – thus, business trusts offer management a suitable alternative to raise capital while maintaining control, and Singapore (and Hong Kong, which, as of June 2012, is still finalizing its business trust listing regulatory regime) can serve as potential models for empowering business trusts as an alternate corporate form. The Article ends with a brief analytical comparison of business trusts and dual class stock structures and argues that the Singaporean and Hong Kong models can serve as points of reference for US business trust law reform