Changes from report parliamentary committee draft to plenary report

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

▸10 unchanged paragraphs

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 – C90416/2022 – 2022/0406(COD))

(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,

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

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

Changed– having regard to the report of the Committee on Economic and Monetary Affairs (A9-0000/2023),(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

RemovedRecital 1: (1) To reinforce the attractiveness of listing and 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, within certain limits, 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 a regulated market or SME growth markets, while enjoying the benefits associated to trading on those markets, as long as the rights of minority shareholders continue to be safeguarded.

AddedAMENDMENTS BY THE EUROPEAN PARLIAMENT*

RemovedRecital 2: (2) Fear of losing control over a company constitutes one of the main deterrents for controlling shareholders to trade in the single market. Admission to trading usually entails dilution of ownership for controlling shareholders, thus reducing their influence over important investment 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 family-owned companies might be strongly deterred from seeking listing and tapping into public markets due to a fear of losing control over the company.

Addedto the Commission proposal

RemovedRecital 4: (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.

Added---------------------------------------------------------

RemovedRecital 7: (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 or an SME growth market without their controlling shareholders having to relinquish control. While admission to trading on regulated markets is generally 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 Council39 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.

Added2022/0406 (COD)

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

AddedProposal for a

RemovedRecital 9: (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 or an SME growth market 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 regulated markets or SME growth markets.

AddedDIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

RemovedRecital 13: (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 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. Furthermore, those companies should 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 the…

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

RemovedRecital 14: (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.

Added(Text with EEA relevance)

RemovedRecital 15: (15) 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.

AddedTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

RemovedArticle 1 – paragraph 1: This 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 or an SME growth market in one or more Member States and that do not have shares already admitted to trading on any trading venue.

AddedHaving 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,

RemovedArticle 2 – paragraph 1 – point f: deleted

AddedHaving regard to the proposal from the European Commission,

RemovedArticle 2 – paragraph 1 – point f a (new): (fa) ‘regulated market’ means a regulated market as defined in Article 4(1), point (21), of Directive 2014/65/EU;

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

RemovedArticle 3 – title: Maintenance of national provisions on multiple-vote shares

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

RemovedArticle 3 – paragraph 1: Member States may maintain in force national provisions that allow companies to adopt multiple-vote share structures in situations not covered by this Directive.

AddedActing in accordance with the ordinary legislative procedure,

RemovedArticle 4 – paragraph 1: 1. Member States shall ensure that companies that do not have shares that are admitted to trading on a trading venue have the right to adopt multiple-vote share structures for the admission to trading of shares on a regulated market or an SME growth market in one or more Member States. Member States shall not prevent the admission to trading of shares of a company on a regulated market or an SME growth market on the ground that the company has adopted a multiple-vote share structure.

AddedWhereas:

RemovedArticle 4 – paragraph 2: 2. The right referred to in paragraph 1 encompasses the right to adopt multiple-vote share structures in time prior to seeking the admission to trading of shares on a regulated market or an SME growth market.

Added(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.

RemovedArticle 4 – paragraph 3: 3. Member States may make the exercise of the enhanced voting rights attached to the multiple-vote shares conditional upon the admission to trading of shares on a regulated market or an SME growth market in one or more Member States.

Added(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.

RemovedArticle 5 – title: Safeguards in companies that have adopted a multiple-vote share structure

Added(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.

RemovedArticle 5 – paragraph 1 – introductory part: 1. Member States shall ensure that in companies that have adopted a multiple-vote share structure in accordance with this Directive, appropriate safeguards are in place to provide for adequate protection of the interests of shareholders who do not hold multiple-vote shares. To that effect, Member States shall do the following:

Added(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▌.

RemovedArticle 5 – paragraph 1 – point a – subparagraph 1: ensure that a multiple-voting structure can only range between a one to two ratio and a one to five ratio;

Added(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.

RemovedArticle 5 – paragraph 1 – point a – subparagraph 2: deleted

Added(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.

RemovedArticle 5 – paragraph 1 – point b – introductory part: (b) a provision to avoid that the enhanced voting rights attached to multiple-vote shares continue to exist after a period of ten years (time-based sunset clause);

Added(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. ▌

RemovedArticle 5 – paragraph 1 – point b – point i: deleted