The EU’s Listing Act is a key legislative initiative aimed at enhancing the appeal of EU public markets and facilitating capital access for small-medium enterprises (SMEs). That includes a new proposal by the European Commission for a Multiple Voting Shares Directive (MVSD). EFAMA believes it is of key importance to the European economy to ensure that EU capital markets remain attractive and competitive globally, therefore getting these types of initiatives right is crucial.
Limiting multiple-vote share structures to listings on SME growth markets, as proposed by the European Commission, would ensure that the main goal of the initiative is supported, without broader unintended consequences.
Preserving the 'one-share one-vote' principle for investors
The "one share, one vote" principle is rooted in the belief that voting rights should reflect the economic exposure of an investment in a company. Shareholders, acting as the last resort creditors for a company, have a vested interest in maximizing the company's value. In an era where shareholders are expected to play a more active role as stewards of companies’ sustainable transitions, this principle also aligns with the Shareholders Rights Directive II. Therefore, any consideration of multiple-vote share structures should prioritize and safeguard investors' interests.
Protecting investors and including proportionality
Without proper safeguards, the excessive use of controlling rights by majority shareholders may undermine the fragile balance between holding management responsible while, at the same time, fostering thriving capital markets. EFAMA recommends introducing the following technical safeguards to maintain this essential balance:
- Appropriate boundaries on multipliers, with a preference for a maximum weighted voting rights ratio of 5:1.
- Mandatory inclusion of expiration (sunset) clauses, with rights expiring either after five or seven years.
- Restrictions on the types of decisions where supplementary voting rights can be exercised during general meetings.
- Mandatory shareholder approval for transactions that may present conflicts of interest or raise concerns about fairness (“whitewash” mechanisms).
- Prohibiting the transfer of enhanced voting rights to third parties and reverting enhanced voting shares to ‘one-share, one-vote’ upon transfer.
Chiara Chiodo, Regulatory Policy Advisor at EFAMA, commented: “Ensuring that EU capital markets are a competitive source of finance for SMEs is of key importance. We believe that any new rules governing multiple voting share structures must, however, strike a balance between issuers' and investors' interests. We therefore urge the introduction of clear and harmonized safeguards to govern their use, in order to protect minority shareholders and promote the overall integrity of EU capital markets.”
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