When implemented, the new legislation would significantly increase listed company’s administrative burden if the company had, for example, several series of shares or otherwise multiple-vote share structures. It is very unfortunate that the positive proposal of the EU Commission has since turned 180 degrees in the European Parliament, contrary to the Commission’s supportable goals.
EK stresses that Europe is just waking up to the reality where companies are increasingly seriously considering whether listing in the United States would be more profitable than in Europe. Thus, making listings even more difficult represents a very harmful development for the EU’s securities markets. The positive EU Listing Act package is in jeopardy.
What are multiple-vote shares?
According to the current Finnish Limited Liability Companies Act, all shares in the company produce equal rights. However, the articles of association may stipulate that the company has or may have shares that differ from each other in terms of rights or obligations. In this case, the articles of association must state the differences between the shares. Different kinds of shares are those that: differ from each other in terms of the number of votes produced by the share or the right produced when the company’s assets are distributed; or otherwise specified in the articles of association as different types.
In Finland, several well-known listed companies use multi-vote share structures. In Finland, investors are also always aware of possible different series of shares in the company in which they are investing. Essentially, it is about freedom of contract and the central principles of Nordic company law, which the Parliament’s amendments would affect in a rather unpleasant way.
In December 2022, the Commission issued the so-called The Listing Act legal package, the aim of which was to increase stock market listings in Europe and make it easier to stay on the list by easing the administrative burden of listed companies in a modest way. With the proposal for a directive on multiple-vote shares, the Commission aimed to ensure that the rules of the game are the same throughout the Union and that multiple-vote shares are allowed everywhere. EK, like the Finnish government, considered these goals to be worthwhile.
Since then, dark clouds appeared in the sky of the legal project as the proceedings progressed in the European Parliament. The Parliament’s ECON and JURI committees present “safeguards” for the proposal for a directive on multiple-vote shares that go so far that it practically even threatens to stop the use of multi-vote shares or similar structures in the EU.
The problem is particularly acute in Finland and other Nordic countries, where a lot of multiple-vote share structures have been used. Companies using multiple-vote shares would have very extensive reporting and disclosure obligations, as well as the use of shares would be significantly restricted from the current one.
Timetable of the file – MEPs in a decisive role
EK has widely appealed to the members of the aforementioned parliamentary committees to put the matter on the right track. The Swedish and Danish business associations are also very worried about the development of the show.
Next up are the committee votes and, of course, the plenary session of the Parliament and the so-called trilogy negotiations.