Changes from report parliamentary committee draft to plenary report

RemovedEXPLANATORY STATEMENT

AddedThis 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.

RemovedThe Rapporteur welcomes the Commission’s proposal for the Listing Act and its designed overhaul of the current EU framework for company listings.

AddedDefinitions

RemovedAs part of this proposal, a package of reviews to existing pieces of legislation is in front of us.

AddedFor the purposes of this Directive, the following definitions shall apply:

RemovedThe Commission proposals comprise the following:

Added(a) ‘company’ means a legal entity incorporated as one of the types of companies listed in Annex II to Directive (EU) 2017/1132;

Removed A proposal to amend (i) the Prospectus Regulation to harmonise requirements for the drawing up, approval, and distribution of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (2017/1129), (ii) the regulation on market abuse (MAR) aimed at preventing and detecting market abuse, market manipulation and insider dealing (596/2014), and (iii) the regulation on markets in financial instruments (MiFIR), which provides a legal framework for securities markets, investment intermediaries, and trading venues (600/2014);

Added(b) ‘multiple-vote shares’ means shares belonging to a distinct and separate class and that carry a higher number of votes per share than another class of shares with voting rights on matters to be decided at the general meeting of shareholders;

Removed A proposal to amend the directive on markets in financial instruments, MiFID II, designed to regulate financial markets and improve protections for investors (2014/65/EU), and to repeal the Listing Directive coordinating the conditions for admission of securities to official stock exchange listings and the information to be published on those securities (2001/34/EC);

Added(c) ‘multiple-vote share structure’ means the share structure of a company that contains at least one class of multiple-vote shares;

Removed A proposal for a new directive on multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market. The proposal aims to address the regulatory burden faced by companies during the phase preceding the initial public offering (IPO) and the imbalance across the EU when choosing appropriate governance structures when they list (2022/0406).

Added(d) ‘trading venue’ means a trading venue as defined in Article 4(1), point 24, of Directive 2014/65/EU;

RemovedAs a general approach, the Rapporteur approves simplification and standardisation of the listing framework in the EU, as long as this is not to the detriment of investors and/or the market. There is a general acceptance from all sides: work on the CMU has fallen too far behind, and it is not delivering results.

Added(e) ‘SME growth market’ means an SME growth market as defined in Article 4(1), point (12) of Directive 2014/65/EU;

RemovedThe EU capital market continues to lose ground when compared to other continent-wide markets. In relative terms but not only, the share of market capitalisation worldwide has been shrinking these last three years, and this with Brexit taken into account.

Added(f) ‘regulated market’ means a regulated market as defined in Article 4(1), point (21), of Directive 2014/65/EU;

RemovedThe Listing Act aims to reduce regulatory burdens, generally perceived as one of the main obstacles to progress towards a flourishing EU capital market. A reduction in regulatory burdens associated with listing must, however, not come at the expense of keeping strong investor protection rules in place.

Added(fa) 'multilateral trading facility' or ‘MTF’ means a multilateral trading facility as defined in Article 4(1), point (22), of Directive 2014/65/EU.

RemovedIn the spirit of attaining a balanced approach, the Rapporteur has met with a great number of market participants and regulators. On this basis, the Rapporteur is proposing to amend the Commission’s proposal on a number of elements while maintaining and enhancing its main raison d’etre.

Added▌

RemovedThe major changes relate to the following issues: threshold for prospectus requirements; length of the prospectus; strengthening of ESG requirements; MAR’s revision on insiders; proposed changes to the Mifid II Directive; and the widening of the Multiple Voting Structure Directive.

AddedAdoption of multiple-vote share structures

RemovedThreshold for prospectus requirements

Added1. 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, an SME growth market, or any other MTF, in one or more Member States. Member States shall not prevent the admission to trading of shares of a company on a regulated market, an SME growth market, or any other MTF, on the ground that the company has adopted a multiple-vote share structure.

RemovedThe Rapporteur believes that due to the current European market architecture, a uniform EUR 12 million threshold for exempting small offers of securities to the public from the obligation to publish a prospectus is not in the best interest of maintaining satisfactory regulation over the market at national level. Therefore, it is proposed to adopt the Commission’s approach on the sequencing of the prospectus, to also allow an increase of the threshold to EUR 12 million but at the same time giving flexibility to Member States to adopt lower thresholds with a minimum of EUR 5 million threshold.

Added2. 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, an SME growth market or any other MTF.

RemovedLength of the prospectus

Added3. 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, an SME growth market, or any other MTF, in one or more Member States.

RemovedAs part of the Listing Act proposal, the Commission is attempting to create an EU-level standardisation for prospectuses. This approach is generally welcomed by the Rapporteur. He fully agrees with the view that a uniform structure based on sequencing is ideal for all players on the market since it makes prospectuses more readable and comprehensible for both retail and professional investors.

Added3a. Member States shall ensure that a company’s decision to adopt or modify a multiple-vote share structure is taken by the general meeting of shareholders by at least a qualified majority of the votes cast, as specified in national law. Member States shall not make the adoption of such a structure conditional upon the provision of enhanced economic rights for shares without enhanced voting rights.

RemovedYet, the Commission also seeks to introduce a blanket length limit at 300 pages for prospectuses in order, it claims, to make it easier for retail investors to read such prospectuses. The Rapporteur recognises that prospectuses are lengthy and possibly unreadable for the average retail investor. Yet, data shows that retail investors do not read prospectuses, even in countries where prospectuses are lower than 300 pages. The prospectus in fact remains a professional document prepared for professional investors. It is seen as an instrument that covers issuers for legal liability, mostly read by professional investors or advisors operating out of investing funding agencies. They have, or should have, no problem with reading and understanding prospectuses, no matter their length. For these stated reasons, the Rapporteur adopts the Commission’s view on the sequencing of prospectuses while suggesting to remove page limits on prospectus documents.

AddedWhere there are several classes of shares, the decision to adopt a multiple-vote share structure shall in addition be subject to a separate vote within each class of shares the rights of which are affected.

RemovedStrengthening of ESG requirements

AddedSafeguards in companies that have adopted a multiple-vote share structure

RemovedThe Rapporteur welcomes the inclusion of ESG rules in the proposed framework, and is of the view that the placement of ESG rules needs to be strengthened in the prospectus presentation and elsewhere. Changes to the prospectus regulation must, in the Rapporteur’s view, remain coherent with the ongoing general EU reform commitment across this essential policy area, about which there is wide-ranging agreement.

Added1. Member States shall ensure that companies that have adopted a multiple-vote share structure in accordance with this Directive have appropriate safeguards in place to provide for the adequate protection of the interests of ▌ shareholders who do not hold multiple-vote shares ▌. To that effect, Member States shall▌:

RemovedMAR’s revision on insiders

Added(a) introduce a maximum voting ratio ranging from one-to-two to one-to-twelve and a limit on the maximum percentage of the outstanding share capital that the total amount of multiple-vote shares can represent;

RemovedThe Listing Act’s proposals for changes to the MAR are generally welcomed although the Rapporteur recognises the controversial nature of the Commission’s proposed revision on insiders and how to identify and monitor them. Here, the Rapporteur notes ESMA’s warning regarding the simplifications being proposed, which could harm the capacity of national supervisors to easily enforce the rules against market abuse. Therefore, the Draft Report proposes the removal of the Commission’s text on insiders list.

Added▌

RemovedProposed changes to the Mifid II Directive

Added(b) limit the impact of multiple-vote shares on the decision-making process at general meetings of shareholders by introducing a requirement that decisions by general meetings of shareholders that are subject to qualified majority voting, excluding the appointment and dismissal of directors as well as operational decisions to be taken by directors and submitted to the general meeting of shareholders for approval, are to be adopted either by:

RemovedOn a general note, the Rapporteur welcomes the elements introduced by the Commission to the Mifid II Directive and in this context recognises the efforts aimed at facilitating the listing of companies.

Added(i) a qualified majority, as specified in national law, of the votes cast and a qualified majority of either the share capital represented at the meeting or of the number of shares represented at the meeting; or

RemovedWith the aim of improving on the Commission’s proposals, the Rapporteur introduces the idea of regulatory technical standards by ESMA to establish an EU harmonised code of conduct for issuer-sponsored research. Furthermore, in view of reducing the risks of fragmentation of liquidity, the Rapporteur, extends the issuer non-objection requirement concerning the admission to trading of an instrument already admitted on SME Growth Markets, to any trading venue.

Added(ii) a qualified majority, as specified in national law, of the votes cast, and by separate vote within each class of shares the rights of which are affected;

RemovedWidening of Multiple Voting Structures while safeguarding investors

Added(ba) exclude the use of enhanced voting rights attached to multiple-vote shares at general meetings of shareholders during the votes on resolutions tabled by shareholders in accordance with Article 6(1) of Directive 2007/36/EC of the European Parliament and of the Council, in particular on matters related to the impact of the company’s operations on human rights and the environment.

RemovedThe Commission’s proposal for this Directive is that companies should be able to choose governance structures that best suit their development stage. The Rapporteur agrees with the approach with some proposed adjustments.

Added2. Member States may provide for further safeguards to ensure adequate protection of the interests of shareholders who do not hold multiple-vote shares and of the interests of the company. Those safeguards shall be communicated to the Commission and ESMA. Those safeguards may include in particular:

RemovedSpecifically, in order to increase the attractiveness of listing in the EU, the option for multiple voting structures should not be limited to SME growth markets but expanded to all regulated markets. Furthermore, in order to maintain a high level of trust in the market, the Rapporteur introduces a set of obligatory safeguards including a limited voting ratio and a 10-year (definite time-set) sunset clause.

Added(a) a provision to avoid that the enhanced voting rights attached to multiple-vote shares are transferred to third parties or continue to exist upon the death, incapacitation or retirement of the original holder of multiple-vote shares (transfer-based sunset clause);

Added(b) a provision to avoid that the enhanced voting rights attached to multiple-vote shares continue to exist after a designated period of time (time-based sunset clause);

Added(c) a provision to avoid that the enhanced voting rights attached to multiple-vote shares continue to exist upon the occurrence of a specified event (event-based sunset clause);

Added(d) a requirement that enhanced voting rights attached to multiple-vote shares do not apply in matters relating to executive remuneration and dividend policy or to the approval of related party transactions.

AddedTransparency

Added1. Member States shall ensure that companies with multiple-vote share structures whose shares are traded or are to be traded on a regulated market, an SME growth market, or any other MTF make publicly available, in the prospectus referred to in Article 6 of Regulation (EU) 2017/1129 of the European Parliament and of the Council or in the [EU Growth Prospetus referred to in Article 15a] of that Regulation▌ or in the admission document referred to in Article 33(3), point (c), of Directive (EU) 2014/65/EU and in the company’s annual financial report referred to in Article 78(2), point (g), of Commission Delegated Regulation (EU) 2017/565, detailed information on all of the following:

Added(a) the structure of their capital, including securities which are not admitted to trading on the relevant market in a Member State, with an indication of the different classes of shares and, for each class of shares, the rights and obligations attached to that class and the percentage of total share capital and total voting rights that such class represents;