Sittings · Document

DRAFT OPINION (COM(2022)0761 – C90416/2022 – 2022/0406(COD)) 2023-07-03

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

Committee on Legal Affairs · Rapporteur: René Repasi

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SHORT JUSTIFICATION

This proposal is part of the Listing Act package, a set of measures to make public capital markets more attractive for EU companies and facilitate access to capital for small and medium-sized companies (SMEs). The Rapporteur agrees with the overall objective to achieve a minimum harmonisation of national laws on multiple-vote share structures of companies listing on SME growth markets, while leaving sufficient flexibility to Member States for its implementation.

This opinion focuses on the safeguards required to protect minority shareholders and the interests of the company, as well as the general interest. A coordinated approach in this respect is required. The Rapporteur proposes that harmonised safeguards include protection against decisions creating risks for or resulting in adverse human rights, climate change, and environmental consequences, in line with the upcoming Corporate Sustainability Due Diligence Directive. The aim is to prevent controlling shareholders from blocking resolutions aimed at achieving sustainable development goals. This is particularly important considering that evidence shows that companies with multiple-vote share structures underperform their peers on social and environmental indicators.

Among additional safeguards that Member States should be given discretion to introduce, the Rapporteur proposes including corporate governance ones, as they may provide more reassurance to investors. Corporate governance safeguards, aimed at enhancing the independence of directors, avoiding entrenchment and expropriation risks and protecting minority shareholders, are common in comparative law.

AMENDMENTS

The Committee on Legal Affairs calls on the Committee on Economic and Monetary Affairs, as the committee responsible, to take the following into account:

Amendment 1

Proposal for a directive

Recital 1

Text proposed by the Commission

Amendment

(1) To reinforce the attractiveness of SME growth markets 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 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 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.

(1) To reinforce the attractiveness of SME growth markets 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 appropriate safeguards, 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 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.

Or. en

Amendment 2

Proposal for a directive

Recital 5

Text proposed by the Commission

Amendment

(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.

Or. en

Amendment 3

Proposal for a directive

Recital 9

Text proposed by the Commission

Amendment

(9) Companies may adopt multiple-vote share structures through a new issuance of shares or through another type of corporate transaction, such as the conversion of already issued shares. Companies should have the flexibility to choose the most appropriate type of corporate transaction to adopt multiple vote share structures in compliance with national law. Furthermore, companies should also have the flexibility as to the timing of the adoption of multiple-vote share structures, provided they do so to seek a first time admission of shares to trading on a SME growth market. 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 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 SME growth markets.

(9) Companies may adopt multiple-vote share structures through a new issuance of shares or through another type of corporate transaction, such as the conversion of already issued shares. Companies should have the flexibility to choose the most appropriate type of corporate transaction to adopt multiple vote share structures in compliance with national law. Furthermore, companies should also have the flexibility as to the timing of the adoption of multiple-vote share structures, provided they do so to seek a first time admission of shares to trading on a SME growth market. 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. Moreover, Member States should ensure that it is also possible to adopt a multiple-vote share structure at the moment of the creation of a company in its articles of association. 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 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 SME growth markets.

Or. en

Amendment 4

Proposal for a directive

Recital 11

Text proposed by the Commission

Amendment

(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. Furthermore, Member States should limit the voting weight of multiple-vote shares by introducing restrictions either on the design of the multiple-vote share structure or 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.

(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. With a view to protecting the shareholders who do not hold multiple-vote shares after the adoption of a multiple-vote share structure, national law may provide for a separate vote amongst these shareholders in addition to the vote of the general shareholders’ meeting prior to the adoption of a multiple-vote share structure. 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.

Or. en

Amendment 5

Proposal for a directive

Recital 13

Text proposed by the Commission

Amendment

(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 thereby strengthen their confidence in well-functioning capital markets.

Or. en

Amendment 6

Proposal for a directive

Recital 15

Text proposed by the Commission

Amendment

(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 5 years following the date of transposition.

Or. en

Amendment 7

Proposal for a directive

Article 5 – paragraph 1 – point a – paragraph 2

Text proposed by the Commission

Amendment

For the purposes of this point, where there are several classes of shares, such decisions shall also be subject to a separate vote for each class of shareholders whose rights are affected;

For the purposes of this point, where there are several classes of shares, such decisions shall also be subject to a separate vote for each class of shareholders whose rights are adversely affected;

Or. en

Amendment 8

Proposal for a directive

Article 5 – paragraph 1 – point b – introductory part

Text proposed by the Commission

Amendment

(b) limit the voting weight of multiple-vote shares on the exercise of other shareholders’ rights, in particular during general meetings, by introducing either of the following:

(b) introduce a maximum weighted voting ratio of up to one-to-five, and a requirement on the maximum percentage of the outstanding share capital that the total amount of multiple-vote shares can represent;

Or. en

Amendment 9

Proposal for a directive

Article 5 – paragraph 1 – point b – point i

Text proposed by the Commission

Amendment

(i) a maximum weighted voting ratio and a requirement on the maximum percentage of the outstanding share capital that the total amount of multiple-vote shares can represent;

deleted

Or. en

Amendment 10

Proposal for a directive

Article 5 – paragraph 1 – point b – point ii

Text proposed by the Commission

Amendment

(ii) a restriction on the exercise of the enhanced voting rights attached to multiple-vote shares for voting on matters to be decided at the general meeting of shareholders and that require the approval by a qualified majority.

(ba) introduce a restriction on the exercise of the enhanced voting rights attached to multiple-vote shares for voting on matters to be decided at the general meeting of shareholders and that require the approval by a qualified majority;

Or. en

Amendment 11

Proposal for a directive

Article 5 – paragraph 1 –point b b (new)

Text proposed by the Commission

Amendment

(bb) introduce a requirement to ensure that the enhanced voting rights cannot be used to block the adoption of decisions by the general shareholders’ meeting, aiming at preventing, reducing or eliminating adverse impacts on human rights and the environment related to the company’s operations in accordance with [the Corporate Sustainability Due Diligence Directive], as well as decisions aiming at ensuring that the business model and strategy of the company are aligned with the objectives of the transition to a sustainable economy and with the limiting of global warming to 1.5°C in line with the Paris Agreement and the objective of achieving climate neutrality as established in Regulation (EU) 2021/1119 (European Climate Law) as regards its operations in the Union, including its 2050 climate neutrality target and the 2030 climate target.

Or. en

Amendment 12

Proposal for a directive

Article 5 – paragraph 2 – introductory part

Text proposed by the Commission

Amendment

2. Member States may provide for further safeguards to ensure adequate protection of shareholders and of the interests of the company. Those safeguards may include in particular:

2. Member States may provide for further safeguards to ensure adequate protection of shareholders, of employees and of the interests of the company. Those safeguards may include in particular:

Or. en

Amendment 13

Proposal for a directive

Article 5 – paragraph 2 – point b

Text proposed by the Commission

Amendment

(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);

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

Or. en

Amendment 14

Proposal for a directive

Article 5 – paragraph 2 – point d

Text proposed by the Commission

Amendment

(d) a requirement to ensure that the enhanced voting rights cannot be used to block the adoption of decisions by the general shareholders’ meeting aiming at preventing, reducing or eliminating adverse impacts on human rights and the environment related to the company’s operations.

deleted

Or. en

Amendment 15

Proposal for a directive

Article 5 – paragraph 2 – point d a (new)

Text proposed by the Commission

Amendment

(da) any necessary requirements to ensure that companies commit to enhanced corporate governance measures, including by strengthening the independence and accountability of their directors.

Or. en

Amendment 16

Proposal for a directive

Article 6 – paragraph 2 a (new)

Text proposed by the Commission

Amendment

2a. Member States shall ensure that companies with multiple-vote share structures whose shares are traded or are to be traded on an SME growth market are identified with a unique stock marker 'WVR' (Weighted Voting Rights) at the end of their stock name. National competent authorities and SME growth markets shall promote investor understanding and awareness of this marker.

Or. en

Amendment 17

Proposal for a directive

Article 7 – paragraph 1 – introductory part

Text proposed by the Commission

Amendment

By [five years after the entry into force], the Commission shall submit a report to the European Parliament and the Council on the implementation and effects of this Directive. To that effect by [four years after the entry into force], Member States shall provide the Commission with information in particular on the following:

By [three years after the entry into force], the Commission shall submit a report to the European Parliament and the Council on the implementation and effects of this Directive. To that effect by [two years after the entry into force], Member States shall provide the Commission with information in particular on the following:

Or. en

Amendment 18

Proposal for a directive

Article 8 – paragraph 1

Text proposed by the Commission

Amendment

1. Member States shall bring into force the law, regulations and administrative provisions necessary to comply with this Directive by 2 years after the date of entry into force of this Directive. They shall immediately inform the Commission thereof. When Member States adopt those measures, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States.

1. Member States shall bring into force the law, regulations and administrative provisions necessary to comply with this Directive by 1 year after the date of entry into force of this Directive. They shall immediately inform the Commission thereof. When Member States adopt those measures, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States.

Or. en