Loyalty- and multiple voting shares and regulatory competition in the EU – Corporate Finance Lab

A Comparative Perspective on Loyalty- and Multiple Voting Shares: Regulatory Competition in the EU, Towards Where?

In our contribution to the special issue of European Company Law, we analyse an increase in regulatory competition between European countries regarding loyalty and multiple voting shares. We compare recent (legislative) developments in seven jurisdictions and examine the different approaches to voting ratios, allocation criteria, majority thresholds, agenda carve-outs, and sunset provisions. We argue that two distinct models have emerged — one more focused on ex ante regulation and the other on ex post judicial review — and reflect on the risks and opportunities that each approach has.

This competition has been fuelled by a wave of cross‑border redomiciliations and a race to attract IPOs. Over the past fifteen years, listed companies—most visibly several Italian issuers moving to the Netherlands—have migrated to jurisdictions offering more permissive voting structures, prompting lawmakers elsewhere to streamline their legal systems in order to stem corporate outflows and court new listings. Amongst others England, Germany, Italy, France, Belgium and Spain have all amended their laws since 2014, in most cases expressly citing competitiveness as a motive. Meanwhile, the Netherlands has stayed its hand, relying on market practice rather than statute and thereby marketing flexibility at the price of legal certainty.

Two macro‑drivers underpin the new situation. First, the steady decline in European IPO volumes has made capital‑market policymakers eager to advertise governance flexibility as a listing incentive. Second, continental attitudes towards the one‑share‑one‑vote paradigm have softened, influenced by the prevalence of dual‑class companies in the United States. Member States now compete not only with one another but also with US exchanges that provide for an mature and established environment.

The divergence between Member States has produced two competing regulatory logics. Most jurisdictions legislate ex ante, prescribing voting caps, holding periods, super‑majority thresholds or topic‑specific carve‑outs before loyalty or multiple voting shares may be issued. That model promises predictability for investors but can look rigid in the eyes of founders choosing where to incorporate. By contrast, the Dutch regime — essentially an ex post model in which courts police abuses after the fact — offers founders significant room for tailor-made arrangements. At the same time, it potentially shifts much of the compliance burden to later litigation, although such litigation has for now been rare. Such permissiveness may however risk an “upward spiral” of ever‑looser designs. If not managed well by the market actors, it could damage a jurisdiction’s reputation if a court is eventually forced to strike down a high‑profile structure.

The competitive pressure can itself also undermine legal certainty. Certain Member States introduced cautious rules only to relax them within a few years when take‑up proved limited; others have lengthened or scrapped sunset clauses to keep pace with more liberal neighbours. Such legislative “flip‑flopping” can unsettle investors just as surely as judicial unpredictability does. Whether competition ultimately converges on stricter statutory criteria or on a broader reliance on judicial oversight remains unresolved. Absent broader (EU‑level) harmonisation, issuers will continue to engage in legal arbitrage between predictable but restrictive regimes and flexible but uncertain ones.

What to Do With Nessie in Our Bed?

Marieke Wyckaert likens multiple‑voting‑rights reforms to inviting Nessie into one’s bed: once the one‑share‑one‑vote principle is abandoned, control is hard to regain. She discusses the 2024 Multiple Voting Shares (MVS) Directive, which obliges Member States to allow multiple voting rights for multilateral trading facility (MTF) listings, and observes that most jurisdictions already permit some form of unequal voting, yet market uptake has been meagre and the hoped‑for boost to EU capital‑market attractiveness remains doubtful. Still, the genie is out of the bottle: countries now compete to brand their company law as the most founder‑friendly.

Against that backdrop, Wyckaert shares four reflections. First, flexibility needs boundaries; voting ratios that diverge too far from economic risk become problematic. Second, the choice of a default rule signals what is normal and shapes judicial review. Third, general standards—good faith, equal treatment, fiduciary duties—must remain enforceable for minority shareholders. Fourth, extra share classes exacerbate Europe’s chronic liquidity shortage. Wyckaert cautions lawmakers that grand legislative promises may disappoint if investors and issuers stay away, and urges ongoing vigilance as Nessie settles in.

Incremental Progress in Spain

Francisco Marcos explains that Spain still treats the one‑share‑one‑vote principle as the default rule, yet recent reforms now allow carefully limited deviations. Listed companies may adopt loyalty shares (double voting rights after two years); the scheme requires 60 % shareholder approval and lapses automatically after five years, unless re‑confirmed.

Multiple‑voting shares are legally possible but are used only by a handful of family‑controlled groups, showing investors’ continuing caution. Marcos notes that the forthcoming MVS Directive will oblige Spain to design rules for smaller issuers on MTFs, probably introducing statutory voting caps and additional minority safeguards. He concludes that Spain’s incremental approach offers founders some additional flexibility while keeping proportionality, liquidity and investor protection at the forefront, making a rapid spread of unequal‑voting structures unlikely.

Shifting Tides in Germany

Sebastian Mock traces Germany’s uneven relationship with multiple‑voting shares, from their Weimar‑era popularity and 1937 ban to the cautious revival via the 2023 Future Financing Act. He explains that the new legal regime again permits such shares, but only as registered stock, capped at a maximum of ten votes per share, and solely when created with the consent of every single affected shareholder.

For listed companies, the extra votes lapse automatically ten years after listing; a single extension of up to ten more years is possible but requires a 75 % capital majority and must be voted upon within the final year of the initial term. For certain agenda items—auditor appointments and shareholder‑requested special investigations—the shares revert to one vote each, reflecting a policy choice to safeguard core oversight rights.

Mock argues that these restrictions make widespread use of multiple voting shares unlikely. He concludes that meaningful uptake will depend on whether future reforms relax the unanimity rule, broaden eligibility beyond registered shares, or ease sunset and agenda limitations. Without such steps, the reform may remain more of a political signal than a practical tool.

Continuing Flexibilizations in Italy

Irene Pollastro reviews Italy’s 2024 Legge Capitali, which markedly broadens the country’s control‑enhancing arsenal. The reform keeps the existing structure intact—multiple‑voting shares remain the preserve of closely held companies under Civil Code article 2351, while loyalty shares stay available to listed firms under the Consolidated Law on Finance—yet multiplies their force by lifting the maximum ratio to ten votes per share for both instruments.

Pollastro links this strong increase to the recent wave of Italian groups reincorporating abroad and argues that lawmakers hope the higher ceiling will stem further corporate migrations and perhaps entice some firms to come back home. Safeguards remain in place however: introducing either mechanism still requires a qualified majority, and dissenters may invoke the right of withdrawal, although Pollastro questions whether exit pricing and new takeover‑bid exemptions adequately protect minority shareholders. She concludes that the ten‑vote limit gives founders a far stronger hold, but the reform’s success will depend on market reception and on whether enforcement and investor protections keep pace.

From Dual-Class Shares Lite to Full Fat

Bobby Reddy traces the London Stock Exchange’s oscillation on dual‑class shares, from past acceptance through prohibition to cautious re‑admission. He explains that the Hill Review’s 2021 reforms created ‘specified weighted voting rights shares’ (SWVRS) — director‑only, five‑year, 20:1 voting rights, effective chiefly as a takeover blocker — and notes that no issuer adopted them.

The 2024 listing‑rule changes unveil ‘SWVRS 2.0’: enhanced‑vote shares must remain unlisted, but potential holders now include founders, early investors, employees and sovereign funds. In addition, most resolution restrictions are lifted, leaving carve‑outs only for some listing changes, delisting and certain pay or issuance approvals. The time‑limit vanishes for individual holders; corporate holders face a ten‑year sunset, and the former voting‑ratio cap is scrapped. Reddy welcomes the shift from a ‘regulatory paradigm’ to a market‑led ‘contracting paradigm’, yet warns that looser related‑party‑transaction rules could invite the next controlling‑shareholder scandal.

The Netherlands: Legal and Empirical Considerations

Harm‑Jan de Kluiver and Joti Roest describe the Netherlands as Europe’s most permissive jurisdiction for deviating from the one‑share‑one‑vote principle. They note that Dutch law offers at least five techniques in that regard—depositary receipts, non‑voting shares, different‑nominal‑value dual class shares, loyalty shares and true multiple‑voting shares. Since the reforms of 2012, each of those options is open to private companies, while listed companies of the N.V. type retain wide discretion to create dual‑class and loyalty schemes. Public companies face almost no statutory restrictions: apart from the rule that each share must carry at least one vote and voting power must correspond to the share’s nominal value, ratios and sunsets are left to the articles, so voting ratios such as 1:10, 1:25 or even 1:1000 can be—and have been—adopted.

In practice, most Dutch dual‑class and loyalty arrangements are used by foreign‑centred groups that move their seat to the Netherlands before listing elsewhere, attracted by the flexibility and absence of prescriptive safeguards. Oversight is largely ex post: courts rely on “reasonableness and fairness” and equal‑treatment principles to strike down disproportionate entrenchment, though such interventions remain exceptional.

The forthcoming MVS Directive is expected to leave this private‑ordering model broadly intact; Dutch legislators have signalled that additional statutory requirements are “neither necessary nor desirable”, preferring to preserve the country’s competitive edge. Thus, the Netherlands continues to market maximum structural freedom, with legal certainty and investor confidence safeguarded mainly through judicial review rather than ex‑ante rules.

Developments in France

Edmond Schlumberger traces France’s path from early scepticism about unequal voting rights to today’s twin system of loyalty and multiple‑voting shares. He recalls that listed companies have long relied on loyalty shares that double the votes of holders who keep registered stock for two years, a mechanism consolidated by the 2014 Florange Act, which even made double voting the default.

Two statutes adopted in 2024 have adjusted this landscape. One fine‑tunes the loyalty‑share regime; the other, more strikingly, lets companies introduce multiple‑voting shares at the moment of an IPO. For offerings on a regulated market there is no statutory cap on the voting ratio, while listings on MTFs face a 1‑to‑25 ceiling. In every case, the extra votes expire on transfer and after ten years unless a single, five‑year extension secures a qualified majority of independent shareholders.

Schlumberger doubts that multiple‑voting shares will overtake loyalty shares: the new instrument arrives late, is usable only at the stage of the IPO, and carries constraints that may render it less attractive than France’s now‑familiar double‑vote model.

Belgium: Current Legal Framework and Policy Proposals

Tom Vos and Theo Monnens explain that Belgian company law still bars true multiple‑voting shares and permits listed companies only a loyalty‑voting mechanism (double votes after two years). Take‑up has been modest, and the instrument functions mainly as a means for existing block‑holders to consolidate control rather than as a tool for attracting new listings. 

Because neighbouring jurisdictions now offer broader voting‑rights flexibility, the authors warn that Belgium risks becoming less competitive. They therefore advocate a measured opening: allow multiple‑voting shares at IPO or mid‑stream, impose a voting‑ratio ceiling (of 1:20), require approval by a qualified majority of independent shareholders, and dispense with mandatory sunset clauses. At the same time, they would raise the adoption threshold for loyalty shares to the safeguards of minority shareholders. Such reforms, they conclude, could balance founder flexibility with credible investor protection. 

Conclusion

From tight statutory limits to near‑total private ordering, European countries offer a spectrum of responses to loyalty and multiple voting shares, each balancing control, mobility and shareholder confidence in their own way. The contributions included in European Company Law illustrate these choices and their implications. Dive into the special issue to follow the debate—and to glimpse where European corporate governance may move next.

Bastiaan Kemp and Titiaan Keijzer

Bastiaan Kemp is professor of corporate governance and corporate regulation at Maastricht University and partner at Loyens & Loeff, Amsterdam. Titiaan Keijzer is assistant professor of corporate law at Erasmus University.