Council and Parliament adopt provisional agreement to ease SMEs’ access to finance

The Council and the European Parliament reached a provisional agreement on the directive on multiple-vote share structures for companies seeking admission to trading of their shares on an SME growth market.

The directive aims at encouraging company owners, especially owners of SMEs, to list the shares of their company for the first time on an SME growth market using multiple-vote share structures, so that they can retain sufficient control of their company after listing; moreover, the Directive protects the rights of newly entering shareholders by introducing safeguards.

The provisional agreement extends the scope of the directive to include more markets than just SME growth markets, defines the safeguards necessary for investors entering a multiple-vote share structure and establishes the necessary transparency rules for this kind of undertaking.


SMEs are the backbone of the European Economy and need good access to financial markets to grow, progress and create jobs. The multiple-vote share structure Directive will widen the portfolio of financial options available to them, making access to markets easier, safer and adapted to their business model. At the same time, it will make EU capital markets more attractive and competitive.

Paul Van Tigchelt, Belgian Deputy Prime Minister and Minister for Justice and the North Sea

Encouraging SME listing

The Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR) allowed for the creation of ‘SME growth markets’, a trading venue facilitating access to capital for SMEs. However, many entrepreneurs do not list their companies on these markets for fear of losing control due to the entry of new shareholders. One instrument to prevent this is the multiple-vote share structure, which enables controlling shareholders (i.e. company founders) to have more votes per share than new investors.

Currently, some Member States allow multiple-vote share structures, while in others they are prohibited. The Directive aims to reduce inequalities for companies seeking to raise funds on SME growth markets by creating minimum harmonisation in the Single Market that removes obstacles to SME growth markets access generated by regulatory barriers.

At the same time, the proposed Directive protects the rights of shareholders with fewer votes per share by introducing safeguards on issues such as how key decisions are taken at general meetings.

Main elements of the agreement

Scope

The provisional agreement extends the scope of the Directive to include, besides SME growth markets, any other Multilateral Trading Facility that allows the admission to trading of SME shares. A possible future extension of the scope to regulated markets could be included in the review clause.

Safeguards

The co-legislators have agreed on either a maximum voting ratio (this is the value of the votes per share that existing shareholders may hold compared to entering shareholders) being set, leaving its value to Member States’ discretion, or a restriction for (most) qualified majority decisions by the general meeting. Other safeguards remain optional.

Transparency

To help investors make the right decisions, the agreement provides for the disclosure of the annual financial statements at the time of admission to trading and, thereafter, only when such information has not previously been published or has changed since its last publication.

The co-legislators have also agreed to give a mandate to the European Securities and Markets Authority for developing regulatory technical standards on the most appropriate way of marking such shares.

Next steps

The provisional agreement reached with the European Parliament now needs to be endorsed and formally adopted by both institutions.

Background

The proposal was adopted by the Commission on 7 December 2022. On 19 April, the Council adopted its negotiating mandate for negotiations with the European Parliament, with a view to reaching an agreement at first reading.

The proposed Directive is part of the Listing Act package, a set of measures to make public capital markets more attractive to EU companies and to facilitate access to capital for small and medium-sized companies.