Changes from plenary report to adopted text

RemovedDRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

AddedMultiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market

Removedon the 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

AddedCommittee on Economic and Monetary Affairs

Removed(COM(2022)0761 – C90416/2022 – 2022/0406(COD))

AddedPE749.139

AddedEuropean Parliament legislative resolution of 24 April 2024 on the 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 (COM(2022)0761 – C9-0416/2022 – 2022/0406(COD))

▸6 unchanged paragraphs

(Ordinary legislative procedure: first reading)

The European Parliament,

– having regard to the Commission proposal to Parliament and the Council (COM(2022)0761),

– having regard to Article 294(2) and Article 50(1), Article 50(2), point (g), and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90416/2022),

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

– having regard to the opinion of the European Economic and Social Committee of 23 March 2023,

Added– having regard to the provisional agreement approved by the responsible committee under Rule 74(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 14 February 2024 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

▸6 unchanged paragraphs

– having regard to Rule 59 of its Rules of Procedure,

– having regard to the opinion of the Committee on Legal Affairs,

– having regard to the report of the Committee on Economic and Monetary Affairs (A9-0300/2023),

1. Adopts its position at first reading hereinafter set out;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Change 1

RemovedAMENDMENTS BY THE EUROPEAN PARLIAMENT*

AddedP9_TC1-COD(2022)0406

Removedto the Commission proposal

AddedPosition of the European Parliament adopted at first reading on 24 April 2024 with a view to the adoption of Directive (EU) 2024/… of the European Parliament and of the Council on multiple-vote share structures in companies that seek admission to trading of their shares on a multilateral trading facility

Removed---------------------------------------------------------

Added(As an agreement was reached between Parliament and Council, Parliament's position corresponds to the final legislative act, Directive (EU) 2024/2810.)

Removed2022/0406 (COD)

RemovedProposal for a

RemovedDIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

Removedon multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market

Removed(Text with EEA relevance)

RemovedTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

RemovedHaving regard to the Treaty on the Functioning of the European Union, and in particular Article 50(1) and Article 50(2), point (g) and Article 114 thereof,

RemovedHaving regard to the proposal from the European Commission,

RemovedAfter transmission of the draft legislative act to the national Parliaments,

RemovedHaving regard to the opinion of the European Economic and Social Committee,

RemovedActing in accordance with the ordinary legislative procedure,

RemovedWhereas:

Removed(1) To reinforce the attractiveness of the capital markets union and to reduce inequalities for companies seeking admission to trading in the single market, it is necessary to address obstacles to the access to such markets that stem from regulatory barriers. Companies should be able, subject to safeguards established under Union and national law, to choose governance structures that suit best their development stage, including by enabling controlling shareholders of those companies to retain control of the business after accessing regulated markets, SME growth markets, or any other multilateral trading facilities (MTF), while enjoying the benefits associated to trading on those markets, as long as the rights of minority shareholders are continuously safeguarded.

Removed(2) Fear of losing control over a company constitutes a deterrent for controlling shareholders to trade on public markets. Admission to trading usually entails dilution of ownership for controlling shareholders, thus reducing their influence over important investment, strategic and operating decisions in the company. Maintaining control of the company may in particular be important for start-ups and companies with long-term projects that require significant upfront costs, because they may wish to pursue their vision without becoming too exposed to market fluctuations. Shareholders in SMEs and in family-owned companies might not seek listing due to the fear of losing control over the company.

Removed(3) Multiple-vote share structures are an effective mechanism to enable controlling shareholders to retain decision-making power in a company, while raising funds from the public. Multiple-vote share structures are a form of a control enhancement mechanism involving at least two distinct classes of shares with a different number of voting rights. Under such structures, at least one of the classes of shares has a lower number of votes attached per share than another class (or classes) of shares with voting rights. The share carrying the superior amount of votes is a multiple-vote share.

Removed(4) There are other control enhancing mechanisms that allow leveraging voting power, apart from multiple-vote share structures. Such mechanisms may include non-voting shares, non-voting preference shares and voting right ceilings. However, those alternative control enhancing mechanisms, being more rigid in their set-up, are liable to constrain the amount of capital that a company can raise at the point of admission to trading▌.

Removed(5) Loyalty shares, like multiple-vote shares, confer superior voting rights to a shareholder. A shareholder may obtain additional voting rights attached to loyalty shares, holding the share for the designated time and complying with certain conditions. Loyalty shares are control-enhancing mechanisms that are designed to foster a more stable, long-term oriented ownership among shareholders rather than to increase the attractiveness of raising funds from the public. It is therefore not appropriate to include loyalty shares in the scope of this Directive.

Removed(6) There are substantial differences between national provisions on multiple-vote shares across Member States. Some Member States allow multiple-vote share structures, while others ban them. In some Member States, the ban on multiple-vote shares is limited to public companies, while in others it applies to all companies. The differences in national regimes create barriers to the free movement of capital within the internal market. Moreover, the regulatory fragmentation creates an uneven playing field for companies in different Member States. Companies in a Member State that bans multiple-vote share structures have to move to another Member State or even outside the Union if they seek admission to trading with multiple-vote shares, and hence face higher costs. In some cases, because of those higher costs, companies may decide against raising funds from the public, which may limit their funding opportunities. Such considerations are particularly relevant for SMEs and start-ups that lack financial resources to cover those costs.

Removed(7) Member States should provide companies with the possibility to adopt multiple-vote share structures to allow them to seek admission to trading on a regulated market, an SME growth market, or any other MTF, without their controlling shareholders having to relinquish control. While admission to trading on regulated markets is, overall, more suitable for larger and more mature companies, SME growth markets are generally more appropriate for SMEs. SME growth markets were originally designed as SME dedicated trading venues with a regulatory treatment that takes the particularities of SMEs into account. Not all companies with securities listed on SME growth markets are, however, SMEs. Directive 2014/65/EU of the European Parliament and of the Council requires that SMEs constitute at least 50 % of the issuers of financial instruments admitted to trading on SME growth markets. Companies other than SMEs generally have more liquid securities and hence their admission to SME growth markets enables those markets to generate higher trading fees to maintain profitability of their business model. Nevertheless, to ensure clarity for investors, all issuers on SME growth markets, irrespective of their size, are currently subject to the same rules. ▌

Removed(8) Member States should be able to introduce, or maintain in force, national provisions that allow companies to adopt these structures for purposes other than the first time admission to trading of shares on a regulated market, an SME growth market or any other MTF. This may also include cases whereby companies transfer from an SME growth market to a regulated market, while retaining multiple-vote shares.

Removed(9) ▌Member States should not prevent companies from adopting multiple-vote share structures at a point prior to the moment of the admission of shares to trading. Member States should, however, be allowed to lay down that the exercise of the enhanced voting rights, which represent additional voting rights attached to multiple-vote shares compared to voting rights of shares of other classes, is conditional upon the admission to trading of shares on a regulated market, an SME growth market, or any other MTF, in one or more Member States. In that case and until the admission to trading, multiple-vote shares should have the same voting rights as other classes of shares in the company. That would ensure that multiple vote shares specifically promote a first-time admission to trading on a regulated market, an SME growth market or any other MTF.

Removed(10) Due to a diminished voting power of non-controlling shareholders in the company relative to their investments, multiple-vote share structures may provide controlling shareholders of that company with perpetual control and thereby lead to controlling shareholder entrenchment. That may increase the risk that controlling shareholders extract private benefits from control. To address those risks, the adoption of multiple-vote share structures should be subject to safeguards to protect minority shareholders.

Removed(11) Member States that allow multiple-vote shares provide for safeguards to protect minority shareholders and the interests of the company. However, the existing safeguards vary between Member States due to national specificities and diverging company law systems. Having regard to the objectives of the internal market as set out in particular in Article 50(2), point (g) of the Treaty on the functioning of the European Union, Member States should ensure a coordinated approach in their national laws on multiple-vote share structures with respect to the protection of the interests of minority shareholders and of the company. This includes protection against decisions creating risks for or resulting in adverse human rights, climate change, and environmental consequences. Under that coordinated approach, all Member States should ensure that any decision to adopt a multiple-vote share structure, or to modify that structure where there is an impact on voting rights, is taken by a qualified majority at the general shareholders’ meeting. In companies where there are several classes of shares, that qualified majority should be calculated on the basis of the total number of votes cast and on the basis of the number of votes within each class of shares affected by the decision. Furthermore, Member States should limit the voting weight of multiple-vote shares by introducing restrictions▌ on the design of the multiple-vote share structure and on the exercise of voting rights attached to multiple-vote shares for the adoption of certain decisions. The restriction on the exercise of voting rights may be implemented by requiring that an approval by qualified majority necessitates both a qualified majority of the votes cast at the general meeting of shareholders and of the share capital represented at the general meeting of shareholders.

Removed(11a) Multiple-vote shares may protect a company from focussing too much on short-term interests, by giving a stronger voice to founders and long-term shareholders. With a view to stimulating long-term sustainable growth, companies issuing multiple-vote shares could publish a report detailing how their share structure will help to promote the interests of all stakeholders.

Removed(12) Member States should be given discretion to introduce additional safeguards, where needed, to ensure adequate protection of minority shareholders’ interests and the interest of the company. Member States should assess the appropriateness of additional safeguards in light of their effectiveness in protecting the interests of minority shareholders and of the company, while ensuring that such safeguards do not defeat the purpose of multiple-vote share structures, i.e. the possibility for a company’s controlling shareholders to influence important decisions, including the appointment of directors.

Removed(13) The disclosure of accurate, comprehensive and timely information about issuers strengthens investor confidence and allows for informed investment decision-making. Such informed investment decision-making enhances both investor protection and market efficiency. Member States should therefore require companies with multiple-vote share structures to have a stock name that ends with the marker ‘WVR’ (weighted voting rights) in order to clearly indicate to the public that their shareholder structure and liquidity profile is different from that of traditional companies. Member States should also require companies with multiple-vote share structures to publish detailed information on their share structure and corporate governance system at the moment of the admission to trading, as well as periodically in the annual financial report. Such information should mention whether there are any limitations on the holding of securities, including whether any transfer of securities requires the approval either of the company, or of other holders of securities. It should also mention whether there are any restrictions on voting rights, including limitations of the voting rights of holders of a given percentage or number of votes, deadlines for exercising voting rights, or systems whereby the financial rights attached to securities are separated from the holding of securities. Such information should be updated periodically and whenever a significant change occurs in the ownership or control of shares with special voting rights. Furthermore, those companies should in accordance with existing transparency law, disclose the identity of holders of multiple-vote shares as well as of the natural persons entitled to exercise voting rights on their behalf and of persons exercising special control rights to provide investors, as members of general public, with transparency on ultimate ownership and de facto influence on the company. This would allow investors to make informed decisions and thereby strengthen their confidence in well-functioning capital markets.

Removed(14) Since the objectives of this Directive, namely to increase funding options for businesses as well as to make SME growth markets more attractive, cannot be sufficiently and timely achieved by Member States but can rather, by reason of the scale and effects of the measures, be more effectively and expeditiously achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on the European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives.

Removed(15) To assess the implementation and impact of this Directive, in particular any negative impact on stakeholders, and to take account of market developments and developments in other areas of Union law or Member States’ experiences with the implementation of this Directive, the Commission should review this Directive three years following the date of transposition and every three years thereafter.

Removed(16) In accordance with the Joint Political Declaration of 28 September 2011 of Member States and the Commission on explanatory documents, Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified.

Removed(17) The European Data Protection Supervisor was consulted in accordance with Article 42(1) of Regulation (EU) 2018/1725 of the European Parliament and of the Council and delivered an opinion on [XX XX 2022/2023],

RemovedHAVE ADOPTED THIS DIRECTIVE:

RemovedSubject Matter

RemovedThis Directive lays down common rules on multiple-vote share structures in companies that seek the admission to trading of their shares on a regulated market, an SME growth market, or any other multilateral trading facility, in one or more Member States and that do not have shares already admitted to trading on any trading venue.

RemovedDefinitions