25th January 2023 |
The Department of Enterprise, Trade and Employment is seeking views from stakeholders in response to the European Commission Proposal for a Directive of the European Parliament and of the Council on multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market.
On 7 December 2022, the European Commission put forward measures to further develop the EU’s Capital Markets Union (CMU) which is designed to further financial and economic integration across the EU, through making EU financial clearing services more attractive and resilient, supporting the EU's strategic autonomy and preserving financial stability and alleviating, through a new Listing Act, the administrative burden for companies, in particular SMEs, to better access public funding by listing on stock exchanges.
This proposal for a directive on multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market is part of the Commission’s Listing Act package, a set of measures designed to simplify and improve listing rules, in particular for SMEs, without jeopardising investor protection and market integrity. The Commission has found that many EU companies find it too complicated and burdensome to get listed on a stock exchange. This proposal is designed to allow companies use multiple-vote shares when listing for the first time on SME Growth Markets (a type of multilateral trading facility) allowing owners keep control of their vision for their company while it transitions into publicly listed status.
The Commission has found that listed companies often outpace privately owned companies in terms of annual revenue growth and job creation. By listing on a public market, companies can diversify their investor base, reduce their dependency on bank financing and gain easier access to additional equity capital and debt financing – through secondary offers, raise their public profile and increase brand recognition.
Despite other recent reforms in this sphere, stakeholders have continued to argue that further regulatory action is needed to streamline the listing process and make it more flexible for issuers. In response to this and the Capital Markets Union action plan adopted in 2020, the Commission set up a Technical Expert Stakeholder Group on SMEs which confirmed the stakeholders’ concerns that further legislative action was needed to support listing of companies, especially SMEs.
Multiple-vote share structures are an effective mechanism to allow companies’ owners retain decision-making powers in a company while raising funds on public markets. These share structures permit a shareholder (or a group of shareholders) to hold a controlling stake in a company without having to make the proportionate economical investment required for the size of the stake, should all shares have to have the same voting power. Multiple-vote share structures typically include at least two distinct and separate classes of shares with different number of voting rights attached to the shares belonging to each class.
Some member states have allowed multiple-vote share structures since almost the beginning of their capital markets. In contrast, other member states have banned multiple-vote share structures. The Commission states that these existing differences in national regimes on multiple-vote share structures create an uneven playing field for companies in different member states and that action at EU level is required to substantially reduce the fragmentation of national law regarding multiple-vote share structures and reduce the risk of distortions to cross-border investment decisions caused by these differences.
The proposal provides for:
- a minimum set of harmonised national laws on multiple-vote share structures of companies listing on SME growth markets
- adoption of multiple-vote share structures while leaving flexibility to member states for its implementation
- safeguards for fair and non-discriminatory treatment of shareholders of a company
- requirements on companies who avail of multiple-vote share structures to make public certain information relating to their share structure
Call for views
The Department of Enterprise, Trade and Employment is providing an opportunity in timely fashion for stakeholders to provide their views on the proposal for a directive. Where possible, these views should be accompanied by an explanation or evidence of the expected impact of the proposal.
Submissions should be marked 'Multi Vote Share Structure Directive' and should be emailed to the Department of Enterprise, Trade and Employment at email@example.com.
The deadline for submissions is close of business on 24 February 2023.
Publication of submissions and relevant provision of the Freedom of Information Act 2014
The department may publish all submissions received under this consultation on its website. However, should you submit information that you consider commercially sensitive, please identify that information in your submission and give reasons for considering it commercially sensitive. The department will consult with you regarding such information before making any decision to publish.
Attention is drawn to the fact that information provided to the department may be disclosed in response to a request under the Freedom of Information Act 2014. Therefore, should it be considered that any information provided by a respondent is commercially sensitive, please identify same, and specify the reason for its sensitivity. The department will consult with interested parties regarding information identified by them as sensitive before making a decision on any Freedom of Information request.