Tag: multiple voting rights

Multiple voting rights vs. loyalty shares: exploring how Belgium’s governance framework might evolve

Belgian companies whose shares are listed on a regulated market or an MTF are currently not allowed to issue ‘true’ multiple voting rights shares (MVS). With the adoption of the Belgian Code on Companies and Associations (BCCA) in 2019, the legislator (re)introduced the possibility for non-listed companies to create MVS, but this option remained unavailable for listed companies. Instead, Article 7:53 of the BCCA only allows listed Belgian companies to include a provision in their articles of association for so-called ‘loyalty’ voting rights shares (LVS), which grant an extra vote per share to shareholders who have continuously held their shares in registered form for at least two years (and provided that the shares are fully paid-up)[1].

Five years since its introduction, the Belgian LVS regime has not quite delivered on its promise of strengthening long-term shareholder engagement in listed companies: its practical uptake has been modest, and its benefits largely concentrated among controlling shareholders[2]. Compared to MVS, the effectiveness of LVS as a control-enhancing mechanism is limited by the fact that (i) it only grants one additional vote per share and (ii) this additional vote is lost when the share is transferred (with limited exceptions). Moreover, LVS have not really contributed to more initial or secondary public offerings but have mainly allowed controlling shareholders to reduce their capital investment while maintaining the same level of voting control.

As part of the EU’s broader effort to make public capital markets more attractive, in particular for small and medium-sized enterprises (SMEs), the MVS Directive[3] requires Member States to permit MVS structures for companies listing on multilateral trading facilities (MTFs). In Belgium, there is growing momentum to go beyond the MVS Directive’s minimum requirements by allowing MVS structures not only on MTFs but also on regulated markets, and by enabling their introduction not just at the IPO stage but also later (hence also for companies that are already listed today). A group of legal experts working under the auspices of the Belgian Centre for Company Law has published a detailed proposal in this sense (see “MVS proposal Belgian Centre for Company Law” and “Multiple voting shares in listed companies in Belgium”) which has received attention in the newspapers recently.[4]

Hereafter, we explore how the introduction of MVS for listed companies may impact the current LVS regime in Belgium and the proposals formulated in this regard by the aforementioned legal expert group. The LVS regime falls outside the scope of the MVS Directive since it does not involve the creation of separate share classes[5]. Nonetheless, when transposing the MVS Directive, the Belgian legislator will have to make certain important policy choices that will also affect LVS.

Continue reading “Multiple voting rights vs. loyalty shares: exploring how Belgium’s governance framework might evolve”

Reshaping control: the Multiple Voting Shares Directive and its potential impact on the Belgian rules on public takeover bids

A post by Carl Clottens and Göktug Celik (NautaDutilh)

On 4 December 2024, as part of the so-called Listing Act package, the EU adopted Directive (EU) 2024/2810 on multiple voting share structures, commonly known as the MVS Directive. This directive requires EU Member States to allow companies seeking admission to trading on multilateral trading facilities (MTFs) to introduce or maintain multiple voting share structures, provided that certain safeguards are respected (see “Europese richtlijn betreffende meervoudig stemrecht voor genoteerde vennootschappen gepubliceerd – Corporate Finance Lab”).

A group of legal experts working under auspices of the Belgian Centre for Company Law has used the MVS Directive as a starting point for proposing a comprehensive and more far-reaching reform of multiple voting rights in Belgian listed companies (see “MVS proposal Belgian Centre for Company Law”) . The main elements of this proposal have already been set out in an earlier blogpost (see “Multiple voting shares in listed companies in Belgium”).

Continue reading “Reshaping control: the Multiple Voting Shares Directive and its potential impact on the Belgian rules on public takeover bids”

Loyalty- and multiple voting shares and regulatory competition in the EU

Following the special issue on loyalty- and multiple voting shares in European Company Law

European company law seems to be divided in two camps on how to regulate loyalty‑ and multiple‑voting shares: rule‑heavy ex ante regimes and flexible (and uncertain) ex post models. This blog post summarizes the new special issue of European Company Law, where seven country studies map recent developments in Belgium, France, Germany, Italy, the Netherlands, Spain, and the United Kingdom and analyse the race to attract IPOs. The discussion highlights the different approaches and shifting voting caps, sunset clauses and minority safeguards.

Continue reading “Loyalty- and multiple voting shares and regulatory competition in the EU”

Multiple voting shares in listed companies in Belgium

Discussion of a new policy proposal

Multiple voting shares have been prohibited for listed companies in Belgium for a long time. This will, however, be (partly) subject to change as the Belgian legislator is required to implement the Multiple-Vote Share Structures Directive (‘MVS Directive’). In this blog post, we will discuss the policy proposal of a working group within the Belgian Centre for Company Law (BCV-CDS) that offers advice to the Belgian legislator on transposing the MVS Directive and aims to facilitate a broader policy reform (full proposal available here). This fascinating topic will also be discussed at the Conference on Loyalty and Multiple Voting Rights in Europe, which will take place on the afternoon of 15 May 2025 at the University of Antwerp (Antwerp) (more information on the conference website).

MVS Directive

In December 2024, the EU adopted the MVS Directive[1], as part of the broader EU Listing Act package. The MVS Directive aims to facilitate access to capital markets for SME companies and requires that member states allow multiple voting shares in companies that seek admission to the trading on a multilateral trading facility (‘MTF’). The idea is that the attractiveness of listing on a capital market increases, as multiple voting shares allow the controlling shareholders to retain control over the company while raising funds from the public. 

In the case of Belgium, the transposition of the MVS Directive requires a change of stance towards multiple voting shares. Under current Belgian company law, it is prohibited for companies listed on a regulated market or MTF to issue multiple voting shares. They only have the possibility to adopt loyalty voting shares, which grant double voting rights to shareholders who have held their shares in registered form for at least two years. Therefore, Belgian law will need to be updated, (at least) allowing multiple voting shares for companies that seek a listing on an MTF (in Belgium: Euronext Access and Euronext Growth). 

However, the MVS Directive also offers the opportunity for a broader policy debate on the desirability of multiple voting shares for companies listed on regulated markets. To offer advice to the Belgian legislator on the implementation of the MVS Directive, a working group within the Belgian Centre for Company Law[2] has drafted a comprehensive policy proposal, which is available on the website of the Centre. 

In short, this policy proposal encompasses a broader reform of multiple voting shares and is based on three overarching principles: (i) it extends the scope of the reform to allow multiple voting shares not only for companies that seek listing on an MTF, but also for companies that seek listing on a  regulated market or that are already listed on an MTF or regulated market, (ii) it allows companies flexibility to design a multiple voting share structure in line with their needs, while also protecting minority shareholders when multiple voting shares are adopted by an already listed company (“midstream” adoption), and (iii) it adapts certain existing rules to make them more compatible with the new possibility for companies to adopt multiple voting shares.

Multiple voting shares for companies listed on a regulated market 

In the first place, the working group advises the Belgian legislator to extend the scope of the reform and allow multiple voting shares for companies that seek listing on a regulated market. The proposed extension of the scope is based on several arguments.

First, limiting the reform to MTFs will likely have a small effect on the attractiveness of stock exchange listings in Belgium, given the small size of both MTF markets in Belgium. Second, allowing multiple voting shares for MTFs, but not for regulated markets, would limit the possibility of ‘uplisting’ (i.e. transferring from trading on an MTF to trading on a regulated market). Third, the competitiveness of Belgium as an incorporation destination for listed companies requires that Belgium keeps up with the trend in other countries that already allow multiple voting shares for companies listed on a regulated market. 

Underlying these arguments is the working group’s belief that multiple voting shares could be valuable for at least some listed companies. Indeed, multiple voting shares can facilitate controlling shareholders to take their company public while retaining control over the company. Such controlling shareholders may have good incentives to monitor management and engage in long-term value creation due to their large share participation. At the same time, multiple voting shares entrench controlling shareholders and decouple their cash flow and voting rights, which may increase their incentives to extract private benefits, at the cost of the overall shareholder value. Nevertheless, on balance, the working group believes that companies should be free to decide on their optimal governance structure, including on the use of multiple voting shares. 

Maximum multiplicator of 1:20

Furthermore, the MVS Directive requires member states to adopt either of two safeguards to protect the interests of minority shareholders: a maximum voting ratio or the neutralization of the multiple voting rights for certain decisions of the general meeting that require a qualified majority. 

The working group recommends adopting a maximum voting ratio of 1:20: such a voting ratio is deemed high enough to be attractive, whilst being low enough to ensure that controlling shareholders retain some financial ‘skin in the game’. The second safeguard was deemed less appropriate, as it would detract from the purpose of the reform and harm the attractiveness of listing with multiple voting shares.    

In addition, the MVS Directive provides the possibility for member states to impose additional safeguards, such as sunset clauses which convert the multiple voting rights into normal voting rights under specific circumstances or after a designated period of time.  Although a sunset clause may make sense for some companies, and companies should be free to adopt such a clause, the working group opposes the idea of introducing a mandatory sunset clause. Indeed, it would be difficult to design a sunset clause that fits the needs of all companies. Moreover, sunset clauses diminish the controlling shareholders’ certainty that they will be able to retain their control over the company, which may discourage them from taking the company public in the first place.

Midstream adoption of multiple voting shares

Even though the scope of the MVS Directive is limited to companies that seek listing (on an MTF) for the first time, the working group recommends to also make it possible for multiple voting shares to be introduced when a company is already listed on a regulated market or MTF (i.e. ‘midstream’ adoption). Multiple voting shares may become useful during the lifecycle of the company, for example, when a cash-constrained controlling shareholder wants to raise additional capital to finance investment without losing control over the company. Moreover, since the Belgian companies that are already listed never had the opportunity to adopt multiple voting shares before the reform, banning midstream introductions of multiple voting shares would create an uneven playing field between companies that were already listed at the time of the reform and those that were not. 

However, the working group recognizes that there are significant risks to the midstream adoption of multiple voting shares. Multiple voting shares may be primarily extractive in some companies, and such risk of an inefficient midstream adoption may not have been discounted into the stock price, as multiple voting shares were banned. In addition, unlike at the moment of the IPO, when shareholders are free to invest in a company with multiple voting shares, the midstream adoption of multiple voting shares will likely not be approved by all shareholders. 

Nevertheless, the working group considers that the risks associated with midstream adoptions of multiple voting shares do not justify a complete ban but only require sufficient safeguards. To protect minority shareholders, the proposal provides that multiple voting shares can only be introduced – either through the issuance of new shares or an amendment to the articles of association – with the approval of a qualified majority of the disinterested shareholders. This would prevent the beneficiaries of the multiple voting rights, typically the controlling shareholders, from approving the midstream adoption of multiple voting shares unilaterally. 

Amendments to the loyalty voting shares regime 

Finally, the working group proposes some changes to the regime for loyalty voting shares. Currently, loyalty voting shares can be introduced with a lower majority threshold than regular amendments to the articles of association (two-thirds majority instead of 75% majority). This has led to the situation where loyalty voting shares have been introduced in the midstream phase supported by the existing reference shareholders (who tend to benefit from loyalty voting rights) but without the approval of minority shareholders. To better protect minority shareholders, the working group proposes to increase the majority requirement to a regular 75% majority. 

The working group also proposes that loyalty voting shares and multiple voting shares (if they were to be allowed) cannot be combined. The reason is to avoid abuses and to increase the transparency of each system. 

Conclusion

The policy proposal drafted by the working group within the Belgian Centre for Company Law aims to launch the debate on the implementation of the MVS Directive in Belgium and the desirability of a more flexible legal framework for multiple voting shares in Belgium. In addition, the introduction of multiple voting shares also requires technical changes to several other rules, such as the rules on amendment of class rights (article 7:155 BCCA), preferential subscription rights (article 7:188 BCCA), capital increases (article 7:193 BCCA) and mandatory bids (article 5 and 74 Takeover Law). We aim to discuss these proposals for technical changes in future blogposts.

We welcome feedback on this policy proposal, which can be found on the website of the Belgian Centre for Company Law (BCV-CDS).

We also invite you to discuss this topic with us during the conference on “Loyalty and Multiple Voting Rights in Europe”, which will take place on the afternoon of 15 May 2025 at the University of Antwerp (Antwerp) (more information on the conference website).

Carl Clottens, Steven Declercq, Jeroen Delvoie, Stijn Deschepper, Thierry L’Homme, Theo Monnens, Michiel Stuyts, Tom Vos and Marieke Wyckaert

[1] Directive (EU) 2024/2810 of the European Parliament and of the Council of 23 October 2024 on multiple-vote share structures in companies that seek admission to trading of their shares on a multilateral trading facility, OJ L 2810, 14 November 2024. 

[2] The working group consists of (in alphabetic order) Carl Clottens, Steven Declercq, Jeroen Delvoie, Stijn Deschepper, Thierry L’Homme, Theo Monnens, Michiel Stuyts, Tom Vos and Marieke Wyckaert. 

Conference on loyalty and multiple voting rights in Europe (15 May)

The Jean-Pierre Blumberg Chair (University of Antwerp), the Institute for Corporate Law, Governance, and Innovation Policies (ICGI) (Maastricht University) and journal European Company Law are pleased to announce the “Conference on Loyalty and Multiple Voting Rights in Europe”. The conference will take place on the afternoon of 15 May 2025 at the University of Antwerp (Antwerp). Further details and registration information are available on the conference website. 

The conference will discuss recent developments in loyalty and multiple voting rights in European corporate governance. In the last decade, several European jurisdictions have reconsidered their stance regarding deviations from the “one share, one vote” principle in listed corporations to boost the attractiveness of listing on the national stock exchange. More recently, the EU has also adopted the Multiple-Vote Share Structures Directive, as part of the broader EU Listing Act package, with the aim to facilitate access to capital markets for SME corporations, by partly harmonizing the rules of multiple voting rights on multilateral trading facilities.

From a policy perspective, legislators generally consider loyalty and multiple voting rights for two primary reasons. First, they could stimulate the number of listings on the national stock exchange by allowing founders or controlling shareholders to stay in control over the corporation, while taking their company public. Second, they empower the position of controlling shareholders, which could have a positive effect on the long-term performance of the company, as controlling shareholders may have better incentives to monitor management and engage in long-term value creation due to their relatively large participation. 

On the flipside, loyalty and multiple voting rights pose certain risks for minority shareholders. The entrenched position of controlling shareholders and the decoupling of cash flow and voting rights could incentivize controlling shareholders to take certain actions to extract private benefits, at the cost of the overall shareholder value. It is therefore important that minority shareholders are adequately protected, especially when loyalty and multiple voting rights are introduced while the corporation is already listed (so-called ‘midstream’ introduction). Possible safeguards could be a majority-of-the-minority vote with regards to the introduction of loyalty or multiple voting rights, a maximum voting ratio, sunset clauses or limitations to the use of loyalty and multiple voting rights in certain cases. 

Despite the attempt at harmonisation in the Multiple-Vote Share Structures Directive, significant differences in national approaches still exist. Some jurisdictions have long permitted loyalty and multiple voting rights, while others – traditionally more restrictive – have only recently considered or implemented more flexible regimes. In this context, the implementation of the Multiple-Vote Share Structures Directive will force certain European member states, including Belgium, to reconsider their ban on multiple voting rights for certain market segments, which in turn creates the opportunity for a broader policy debate. But the Multiple-Vote Share Structures Directive leaves significant discretion for member states to decide how to implement the possibility of multiple voting rights.

During the conference, we will discuss these recent legal developments in various European jurisdictions and reflect on the question how loyalty and multiple voting rights should be regulated. We have invited experts from several jurisdictions to share their insights and perspectives on this fascinating topic, with plenty of time for discussion following each presentation (see the programme below). 

If you would like to attend the conference, you can find more information and register (required) on the website of the conference. Registration is free for students and academics, while registration for practitioners costs 100 EUR and includes accreditation for the OVB, IBJ, and Compliance Officers of the FSMA. It is also possible to attend the conference online via a livestream. 

Programme

13h30 – 13h45 : Introduction – Tom Vos (University of Antwerp & Maastricht University) 

13h45 – 14h30 : Belgium: current legal landscape and proposed reform – Jeroen Delvoie (Vrije Universiteit Brussel) & Theo Monnens (University of Antwerp) 

14h30 – 15h00 : Germany – (To be announced)

15h00 – 15h30 : United Kingdom – Bobby Reddy (University of Cambridge) 

15h30 – 16h00 : France – Edmond Schlumberger (Université Paris 1 Pantéon-Sorbonne) 

16h00 – 16h30 : Coffee break

16h30 – 17h00 : Italy – Irene Pollastro (Università di Torino) 

17h00 – 17h30 : The Netherlands – Titiaan Keijzer (Erasmus University Rotterdam)

17h30 – 18h00 : Comparative conclusion – Bastiaan Kemp (Maastricht University) 

18h00 – 18h30 : Lessons for the future – Marieke Wyckaert (KU Leuven) 

18h30 – 19h30 : Reception

Tom Vos
Assistant professor, Maastricht University
Visiting professor, Jean-Pierre Blumberg Chair at the University of Antwerp
Attorney, Linklaters LLP

Theo Monnens
PhD Candidate, University of Antwerp