Promoting access to capital markets for companies is one of the objectives set by Paris financial center. Last September, the Haut Comité Juridique de la Place Financière de Paris (HCJP) voted in favour of a reform allowing companies wishing to list on the stock exchange to use multiple voting preference shares.
The HCJP has been joined by the European Union since the European Commission submitted a proposal for a directive along these lines on 7 December 2022. More specifically, this proposal aims to allow companies wishing to enter a SME growth market for the first time to issue shares with multiple voting rights. Although the HCJP does not distinguish between regulated markets and multilateral trading systems, there is a willingness to extend this mechanism to companies wishing to list on the stock exchange.
In a sign of the strong competition between financial centers, some European countries have not waited for the change in European regulations to change their local practices. Italy, for example, to face competition from the Amsterdam Stock Exchange, approved a bill in April authorizing multiple voting shares (up to 10 voting rights for each share held). Marked by Brexit, the London Stock Exchange has also changed its practices in order to improve its attractiveness. Indeed, the London Stock Exchange authorized the issue of multiple voting shares in 2021, thus abandoning the “one share one vote” principle that had previously prevailed.
Therefore, the harmonization expected at the European level would prevent certain companies wishing to raise funds from being placed at a competitive disadvantage. This reform would also eliminate distortions between the practices of the various European stock exchanges. The proposal for a Directive is currently being discussed by the European Council.
What is next in France? The recommendations of the HCJP
The HCJP has issued recommendations to allow proper implementation of multiple voting rights in the French market:
- Exclusion of already listed companies
- Issuance to a small group of persons: “exercising an executive function”
- Allocation of voting rights linked to a minimum holding of capital
- Number of voting rights attached to each share capped by the Articles of Association
- Term of voting rights limited by the Statute
- Exclusion of the use of multiple voting rights for voting on certain resolutions: say on pay, appointment of the Statutory Auditors and approval of related-party agreements
- Loss of profit on transfer
Uptevia is keen to support companies of all sizes in their bid to go public, and is closely monitoring all of this work.