Investing in shares and other securities has become a popular way of appreciating finances in recent years. Publicly traded companies selling their shares on the stock exchanges, which represent ownership interests in the company itself, expect capital inflow from the purchase, and investors expect appreciation of their investment. For example, there are approximately 6,000 companies listed for public trading on the NYSE and Nasdaq exchanges in the US. For comparison, there are about 40 tradable entities at the Prague Stock Exchange as of today.

With the adoption of Directive 2022/0406 on structures involving shares with multiple voting rights in companies seeking admission of their shares to trading on the SME growth market, the European Union is seeking to balance these numbers. The objective of the European Commission is to make it easier for SME owners to access market funding. Member States have until October 2026 to implement the Directive.

In practice, entry among listed companies means dilution of ownership, which leads to reduced shareholder control over company decisions. According to the European Commission, it is the concern over the above that most often discourages company owners from listing at the stock exchange. Companies, especially small and medium-sized enterprises, are more likely to seek access to public markets if controlling shareholders can retain decision-making powers in the company after listing. This enables them to continue to shape the business in line with their strategic vision, while at the same time enjoying the benefits of being a listed company and raising sufficient funds to run the activities.

It is the structure of a public company with shares with multiple voting rights that is an effective way for owners to maintain control over corporate decision-making while raising capital in the public markets. This type of structure allows one shareholder (or a group of shareholders) to have a controlling interest in a company without having to make a proportionate economic investment corresponding to the size of the shareholding, which would be required for conventional shares with equal voting rights. This structure usually includes at least two different types of shares, each providing a different number of votes.

However, the creation of shares with reduced or no decision-making rights may put the shareholders who own such shares at risk. Such threats include, for example, the disposal of company assets, the acquisition of private benefits by a controlling shareholder or decisions that do not lead to long-term sustainable development of the company. In this context, the Directive also includes provisions relating to shareholder protection through the obligation for Member States to introduce a maximum number of votes with multiple voting rights, restrictions on the exercise of voting rights attached to shares with multiple voting rights, time limits on the existence of multiple voting rights or restrictions on transferability, in the sense of linking multiple voting rights to a shareholder instead of a share.

In EU Member States, the possibility of creating shares with multiple voting rights is currently generally permissible, but often limited. An example of this is the French legislation which limits the number of voting rights per share to twice the number of votes attached to an ordinary share. In this case, the Czech legislator is liberal by European standards. Our legislation does not impose any significant restrictions on the existence and enjoyment of such rights. An exception may be Section 276(2) of Act No. 90/2012 Coll., the Business Corporations Act, which provides that shares that do not carry voting rights may be issued only if the aggregate of their nominal values does not exceed 90% of the share capital.

As mentioned above, the possibility to admit shares with multiple voting rights to trading on the public market is already enshrined in Czech law. However, if the deadline is met, we can expect changes in the protection of shareholders holding other types of shares within two years. The question remains, of course, whether the implementation of the Directive will lead to a leap in the number of listed companies. Even if the answer to this question would be rather negative, the Directive is a step at the European level that will lead to a further elimination of inequalities between the markets of the individual Member States.