As a matter of fact, SME growth markets have struggled to attract listings since their inception in 2018. For example, Euronext Growth Brussels and Euronext Access Brussels currently host fewer than 10 companies each. A primary barrier is the fear among SME founders and family-owned businesses of losing control over decision-making when going public. Multiple-vote share structures present a solution, allowing majority shareholders to retain influence while accessing the benefits of public markets.
Multiple-vote share structures enable company owners to retain their decision-making power while raising capital through the stock market. These structures assign different voting rights to different classes of shares, allowing founders to maintain a say in key decisions despite public ownership. Belgian law currently bans these structures for listed companies under SA and SRL frameworks, although they are allowed for unlisted firms. According to the Commission, this discrepancy has led to uneven competition among EU Member States, as some allow multiple voting rights for listed SMEs, whereas others do not.
The new directive aims to harmonize rules across Member States, setting a baseline for multiple-vote share structures without requiring uniform legislation. Key protections are included to safeguard minority shareholders. For instance, any adoption or modification of multiple-vote shares affecting voting rights will need approval by a qualified majority at shareholder meetings.
Furthermore, Member States must set limits on voting weights for shares with multiple voting rights, either at the time of issuance or when certain voting thresholds are triggered.
Belgium, for instance, will have to amend Title VII of the Belgian Code of Companies and Associations (BCCA) within two years of the directive’s entry into force, which would be the 20th day from its date of publication in the Official Journal of the European Union. This amendment will allow listed SA and SRL companies to issue multiple-vote shares, aligning Belgian law with the directive’s provisions.
Enterprises that wish to enter a growth market will have to meet a set of transparency requirements. Prospective listings must publish detailed prospectuses outlining share capital structure, including any non-traded securities, share class distinctions, restrictions on share transfers, and identity of shareholders with special control rights. These disclosures are designed to inform investors about ownership structures and ensure accountability.
The European Commission will report to Parliament within five years on the directive’s effectiveness, covering metrics such as the number of SMEs using multiple-vote shares, their industry distribution, and investor protection measures.
This is not the only proposal for a growth-market-focused directive that has been adopted by the Council. In fact, on the same day, the European Council also adoped a proposal to update Directive 2014/EU, aiming to enhance EU capital market appeal and ease SME access to funding. This proposal aims to facilitate development and research services that are carried out by investment firms or third parties and that are used by, or communicated to, investment firms, their clients, or potential clients. Such communications can be designated as “issuer-funded research” only if they are carried out in accordance with the EU code of conduct that applies to issuer-funded research. Otherwise, they are merely commercial communications.
Moreover, Member States must ensure that only companies with at least €1 million in anticipated market capitalization and a free float of 10% qualify for regulated market listing. Where capitalization cannot be estimated, companies must have €1 million in capital and reserves, including profit and loss, based on the prior financial year.
Additionally, the issuer of the security must be notified and must not object to its security being traded on an alternative platform.
Member States will have 18 months after the directive comes into force to adapt their legislation. The directive will enter into force 20 days after its publication in the Official Journal of the European Union. Within 4 years following its entry into force, the Commission will assess the effects of this directive on growth markets.
The effect of these legislative changes on SME growth markets remains to be seen. Euronext Access Brussels and Euronext Growth Brussels have yet to achieve significant uptake. Concerns over control dilution and the financial burden of going public continue to deter SMEs from listing.
Unlike the summer, which never waits for the swallow, SME listings on growth markets may take longer to flourish.
