Regulation of Multiple Voting Shares: Evolution and Current Trends

Abstract

The master thesis examines the historical, economic, and regulatory context of multiple voting shares (MVS) and their profound impact on corporate governance and minority shareholder rights. The paper begins with an exploration of the cyclical evolution of MVS regulations across different jurisdictions, highlighting the inherent conflict of interest between founders seeking to preserve their idiosyncratic vision and institutional investors prioritising portfolio value maximisation. It highlights the urgent necessity for robust legal frameworks to balance these interests and protect public investors from the extraction of private benefits. The author examines the limited effectiveness of current liability frameworks, underscoring the fragmented jurisdictional approaches to shadow directorships and fiduciary duties, and emphasises the role of structural safeguards in mitigating the agency costs of entrenched control. Further research provides an in-depth analysis of the newly adopted European MVS Directive (Directive (EU) 2024/2810) and its impact on listing competitiveness. The paper critically evaluates the robustness of the Directive’s minimum harmonisation measures, particularly focusing on qualified majority voting requirements, maximum voting ratios, and the implementation of time-based, event-based, and transfer-based sunset clauses. The author also explores functional equivalents to MVS, distinguishing class-based MVS structures from person- based loyalty shares and non-voting preference shares. Moreover, the paper analyses the severe governance risks posed by “synthetic control” mechanisms (as seen in the Alibaba case study) and extreme triple-class share structures. Ultimately, the thesis proposes stringent legal mechanisms to prevent extreme control divergence, advocating for the EU-wide harmonisation of the shadow director doctrine and the reformulation of voting ratio safeguards into mandated minimum equity requirements to properly account for the dilutive effects of non-voting stock.