SME access to capital: Council adopts negotiating mandate on multiple-vote share structures

The Council has today (19 April 2023) adopted its position (‘negotiating mandate’) on the proposed directive on multiple-vote share structures. The directive aims at encouraging owners of small- and medium-sized companies to list their shares for the first time on SME growth markets using multiple-vote share structures.

This way they can retain sufficient control of their company after listing, while protecting the rights of shareholders through safeguards.

According to Gunnar Strömmer, Minister for Justice, “entrepreneurs should have access to capital without fear of losing control of their company. Multiple-vote share structures can help to make access to markets more attractive and we are determined to make this option available for all European SMEs as soon as possible across the whole internal market”.

Towards SME growth markets

The Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR) allowed the creation of SME growth markets, which are trading venues that facilitate access to capital for SMEs.

However, many entrepreneurs do not list their companies in public markets for fear of losing control by the entry of new shareholders. One instrument to prevent this is multiple-vote share structures, which enable controlling shareholders (i.e., the founders of the companies) to have more voting rights per share compared with other investors.

Currently some Member States allow multiple-vote share structures while in other Member States such structures are forbidden. The directive aims at reducing inequalities for companies seeking to raise funds on SME growth markets: it sets a minimum level of harmonization in the internal market by removing obstacles that hinder access to SME growth markets and that stem from regulatory barriers.

At the same time, the proposed directive protects the rights of shareholders who hold shares with a lower number of votes per share by introducing safeguards on issues like key decisions taken in general meetings.

Multiple-vote share structure

The Council negotiating mandate ensures member states’ national practices are considered in this Directive. It seeks to better distinguish between the adoption of multiple-vote share structures and safeguards in companies once they have adopted such a structure.

The Council position also ensures that safeguards protect shareholders with lower voting rights and accommodate differences in national practices.

Finally, the negotiating mandate clarifies transparency requirements by addressing both data protection considerations and member states’ concerns in this regard. The text now addresses the concerns raised in the opinion submitted by the European Data Protection Supervisor and recalls the applicability of the General Data Protection Regulation.

Next steps

The negotiating mandate agreed today formalises the Council’s negotiating position. It provides the Council presidency with a mandate to start discussions with the European Parliament as soon as it adopts its position.