On 14 February 2024, the Council and the European Parliament have reached a preliminary agreement on the directive on multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market (the “Proposed Directive”). The Proposed Directive is part of the Listing Act package, a set of measures to make public capital markets more attractive to EU companies and to facilitate access to capital for small and medium-sized enterprises (“SMEs”).
The Proposed Directive is specifically aimed at encouraging company owners, particularly those of SMEs, to initiate the listing of their company's shares on an SME growth market as well as other multilateral trading facilities (“MTFs”) by utilising multiple vote share structures, thereby enabling them to maintain adequate control of their company post-listing.
Scope of Proposed Directive
The Proposed Directive lays down rules on multiple-vote share structures in companies that seek the admission to trading of their shares on MTFs (which include SME growth markets); the Proposed Directive excludes from its scope companies that have shares already admitted to trading on a regulated market or (except for Article 6(2) of the Proposed Directive) an MTF. Pursuant to the Proposed Directive Member States must ensure that a company that does not have shares admitted to trading on a regulated market or MTF has the right to adopt a multiple-vote share structure for the admission of its shares on an MTF.
Covered by the definition of “multiple vote shares” are those shares belonging to a distinct class that carry more votes per share than another class of shares with voting rights on matters to be decided at a general meeting.
Safeguards
The Proposed Directive requires Members States to ensure that companies that have a multiple-vote share structure (as envisaged by the Proposed Directive), have appropriate safeguards to protect the shareholders holding shares with lower voting rights. In that regard, Member States:
- shall require that a company’s decision to modify a multiple-vote share structure in a way that affects the voting rights of shares is taken by the general meeting by at least a qualified majority (and such majority shall apply to each class in case of multiple classes of shares);
- limit the impact of the multiple-vote shares on the decision-making process at the general meeting by introducing at least one of the following
- a maximum ratio of the number of votes attached to multiple-vote shares to the votes attached to shares with the least voting rights.
- a restriction for decisions by the general meeting subject to qualified majority of the votes cast, excluding appointment and dismissal of members of the administrative, management and supervisory bodies of the company as well as operational decisions to be taken by such bodies and that are submitted to the general meeting for approval, by requiring that the majority is calculated on the basis of the total number of votes cast and on either the share capital represented at the general meeting or the number of shares represented at the general meeting, or on the basis of the total number of votes cast and on votes cast in each class of shares affected by the decision.
The Proposed Directive allows Member States to provide for further safeguards within their national legislation to ensure adequate protection of the interest of shareholders who do not hold multiple-vote shares.
Next Steps
The provisional agreement on the Proposed Directive needs to be endorsed and formally adopted by the Council and the European Parliament.
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