The EU Listing Act: A New Directive on Multiple-Vote Share Structures Explained

Authors: Antti Kuha, Jon Termonen, and Samuel Åkerlund

Key takeaway: The new directive on multiple-vote share structures (“MVSSs”) aims at encouraging owners of European small and medium-sized enterprises (“SMEs”) to list the shares in their company on an SME growth market using MVSSs so that they can retain sufficient control of their company after listing. As Finnish legislation already allows for multiple-vote share structures in companies listed on SME growth markets, a minimum implementation of the directive will not have any significant impact on Finnish companies seeking for listing on First North Finland.

As a part of its Listing Act package submitted on 7 December 2022, the European Commission put forward a proposal for a new directive on MVSSs with the intention of achieving a minimum harmonisation of national laws on MVSSs of companies listing on SME growth markets. The legislative texts agreed on by the European Parliament and the Council, including the new directive on MVSSs, were formally adopted by the Council on 8 October 2024 and the new directive will enter into force on the 20th day following its publication in the Official Journal of the European Union. After the date of entry into force, Member States will have two years to implement the new rules into their national legislation.

The new directive on MVSSs aims at encouraging owners of especially SMEs to list the shares in their company for the first time on an SME growth market using MVSSs, so that they can retain sufficient control of their company after listing. The new directive also introduces safeguards to protect the rights of shareholders holding shares with lower voting rights. During the legislative process, the Parliament’s ECON committee proposed to include protective measures and sunset clauses in the directive that would, contrary to the Commission’s original proposal, have restricted the use of MVSSs on both regular markets and SME growth markets in all Member States. These proposals caused concern in Member States with well-functioning MVSSs, for instance in Finland and Sweden, and included, for example, maximum voting ratios of 1:5, limitations on voting at general meetings, and timeline to abolish the existing MVSSs. However, the Parliament later changed its position, and the final texts agreed on by the Parliament and the Council are more in line with the Commission’s original intentions of allowing and encouraging the use of MVSSs in all Member States.

Key Elements of the New Directive

• The directive applies to companies seeking the admission to trading of their shares on multilateral trading facilities (“MTFs”), which include SME growth markets, and that do not have shares already admitted to trading on an MTF or a regulated market.
• Companies shall have the right to adopt a MVSS when the company first lists its shares on an MTF, while ensuring that the company’s decision to adopt a MVSS is taken by the general meeting by at least a qualified majority as specified in national law.
• The directive includes both optional and mandatory safeguards that Member States shall provide for the adequate protection of the interests of shareholders who do not hold multiple-vote shares.
• In accordance with the mandatory safeguards, Member States shall do the following:
  • ensure that a company’s decision to modify a MVSS in a way that affects the voting rights of shares, is taken by the general meeting by at least a qualified majority; as well as
  • limit the impact of the multiple-vote shares on the decision-making process at the general meeting by introducing at least one of the following:

1. 1. 1. 1. a maximum ratio of the number of votes attached to multiple-vote shares to the votes attached to shares with the least voting rights;
         2. a requirement that decisions by the general meeting subject to a qualified majority of the votes cast (excluding the appointment and dismissal of members of the administrative, management and supervisory bodies of the company, and operational decisions to be taken by such bodies which are submitted to the general meeting for approval) are to be adopted by:
            1. a qualified majority both of the votes cast and either of the share capital or of the number of shares represented at the meeting; or
            2. a qualified majority of the votes cast and are subject to a separate vote in each class of shares the rights of which are affected.

• The optional safeguards which Member States may implement include in particular transfer-based, time-based and event-based sunset clauses relating to enhanced votes attached to multiple-vote shares.
• The directive also sets out disclosure requirements for companies with MVSSs that apply both at the point of admission to trading and continuously in connection with the company’s annual financial reporting.
  • The disclosure requirements include information on the share structure and the different classes of shares, any restrictions on the transfer or voting rights of shares, as well as the identity, if known to the company, of shareholders holding multiple-vote shares representing more than 5% of the voting rights of all shares in the company.
• Member States shall require investment firms and market operators operating an MTF to ensure, by complying with the regulatory technical standards to be developed by ESMA, that the shares of companies with MVSSs admitted to trading on their MTF are clearly identified as such by those investment firms and market operators.

Impact on Finnish Legislation

As Finnish legislation already allows for MVSSs in companies listed on SME growth markets and the provisions of the Finnish Companies Act comply with the above-mentioned mandatory safeguards, the new directive will not entail major amendments to Finnish legislation. A minimum implementation of the directive will therefore not have any significant impact on Finnish companies with MVSSs seeking for listing on First North Finland. For the sake of clarity, the new directive does not apply to regulated markets and will thus not impact companies seeking for listing on the Main Market of Nasdaq Helsinki. It remains to be seen whether the new directive will achieve its goals of encouraging more entrepreneurs to list their companies on SME growth markets in Member States where MVSSs are currently prohibited.