“Any consideration of multiple-vote share structures should prioritise and safeguard investor interests,” the European Fund and Asset Management Association (Efama) has stated in response to the European Commission’s proposal for a Multiple Voting Shares Directive.
The EU’s Listing Act seeks to make EU public markets more attractive and help small and medium businesses (SMEs) access capital. The European Commission has proposed a directive in the Listing Act package that deals with how companies can use multiple-vote share structures when they want to trade their shares on an SME growth market.
According to Efama, the “one share, one vote” principle links voting rights to economic exposure in a company, emphasising that shareholders are motivated to maximise company value. This principle further aligns with the Shareholders Rights Directive II, especially when shareholders are expected to be “proactive stewards of a company’s sustainability transitions”.
“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 added.
Safeguards recommended by Efama include setting limits on multipliers, favouring a maximum weighted voting rights ratio of 5:1, incorporating expiration clauses for rights and restricting the scope of decisions where supplementary voting rights can be used during general meetings.
Additionally, it suggested requiring shareholder approval for transactions that could lead to conflicts of interest or fairness concerns and prohibiting the transfer of enhanced voting rights to third parties, with a reversion 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. Any new rules governing multiple voting share structures must balance issuers’ and investors’ interests. We therefore urge the introduction of clear and harmonized safeguards to govern their use to protect minority shareholders and promote the overall integrity of EU capital markets.”
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