On 4 December 2024, as a part of the so-called Itemizing Act bundle, the EU adopted Directive (EU) 2024/2810 on a number of voting share buildings, generally referred to as the MVS Directive. This directive requires EU Member States to permit corporations searching for admission to buying and selling on multilateral buying and selling services (MTFs) to introduce or keep a number of voting share buildings, offered that sure safeguards are revered (see “Europese richtlijn betreffende meervoudig stemrecht voor genoteerde vennootschappen gepubliceerd – Company Finance Lab”).
A gaggle of authorized specialists working underneath auspices of the Belgian Centre for Firm Regulation has used the MVS Directive as a place to begin for proposing a complete and extra far-reaching reform of a number of voting rights in Belgian listed corporations (see “MVS proposal Belgian Centre for Firm Regulation”) . The principle components of this proposal have already been set out in an earlier blogpost (see “A number of voting shares in listed corporations in Belgium”).
Past merely implementing the MVS Directive, the working group additionally proposes sure revisions to the Belgian Takeover Act[1] (overnamewet / loi relative aux offres publiques d’acquisition) to make sure that the principles on public takeover bids mirror the brand new actuality of a number of voting rights. This adaptation is crucial as a result of the present takeover regime, centred on share possession thresholds, doesn’t adequately handle the disconnect between financial possession and voting energy that MVS buildings introduce.
- From securities to voting energy: redesigning the necessary bid threshold
Beneath the Belgian Takeover Act, a compulsory takeover bid is triggered when an individual, performing alone or in live performance with others, acquires 30% of the securities with voting rights in a Belgian listed firm. This technique assumes a one-to-one relationship between shares and votes. However when a number of voting rights are launched, this hyperlink breaks down, as holding 30% of the securities would possibly end in way over 30% of the voting rights.
One might recall that when the BCCA launched the likelihood for Belgian listed corporations to subject loyalty shares, which grant their holder underneath sure circumstances a further vote per share, the Belgian legislator didn’t change the necessary takeover bid threshold, though some students argued that this was wanted to adjust to Article 5 (3) of the EU Takeover Directive, which requires the brink to mirror “a sure proportion of the voting rights within the firm which confers management” (see “Verplicht bod en meervoudig stemrecht – Company Finance Lab”). With the transposition of the MVS Directive, this dialogue resurfaces.
To align with Article 5 (3) of the EU Takeover Directive, the working group proposes a vital and inevitable change: the necessary bid threshold ought to be expressed as 30% of the voting rights, not of the securities[2]. This proposed change ensures that management (which is presumed when a celebration holds 30% of the voting rights), and never merely possession of securities, triggers the duty to launch a public takeover bid for the remaining securities with voting rights or granting entry to voting rights. It additionally prevents acquirers from circumventing the takeover guidelines by way of twin class voting buildings that enable them to acquire management over a listed firm with out crossing the standard threshold of 30% of the securities with voting rights.
In contrast, the working group didn’t handle to succeed in consensus on whether or not this new threshold also needs to apply to loyalty voting rights (i.e., on whether or not loyalty voting rights ought to rely towards the 30% threshold for necessary takeover bids in Belgium). The working group outlines two options choices:
The primary choice is to incorporate loyalty voting rights within the threshold calculation similar to ‘actual’ a number of voting rights, as they symbolize precise voting energy and affect over the corporate. On this method, a compulsory bid could possibly be triggered for shareholders who cross the 30% threshold ‘passively’. Certainly, in an organization that has applied a system of loyalty voting rights, the 30% threshold might be crossed upward by a shareholder (i) when the shareholder has held his shares in registered kind for an uninterrupted interval of two years or (ii) when different shareholders switch their loyalty shares and thus lose their further voting rights, thereby lowering the overall variety of voting rights. To mitigate any potential detrimental influence on shareholders, a couple of safeguards are proposed:
- To extend authorized certainty for shareholders, Article 5 of the Takeover Act would make clear that the overall variety of voting rights have to be calculated on the premise of the latest public announcement by the corporate of the so-called ‘denominator’ (i.e., the overall variety of voting rights) on the premise of Article 15 of the Transparency Directive.
- An specific risk for shareholders could be launched to resign their loyalty votes voluntarily by way of a waiver, with a purpose to keep away from triggering a compulsory bid.
- The prevailing short-term exceedance exemption of Article 52, § 1, 7° of the Takeover Decree, allowing a short upward crossing of the 30% threshold (with a most of two%) with out triggering a compulsory bid, would develop into out there as soon as this exemption has been adjusted to the brand new threshold for voting rights.
The second choice is to exclude loyalty voting rights from the brink calculation, as is the case right now. Solely abnormal or a number of voting rights could be taken under consideration. This resolution has the advantage of simplicity and administrative readability, by making monitoring and enforcement extra easy. On the draw back, the truth that loyalty voting rights and a number of voting rights are handled in another way for functions of the calculation of the necessary bid threshold may increase questions underneath the constitutional rules of equal therapy and non-discrimination, in addition to the already talked about potential violation of Article 5 (3) of the EU Takeover Directive.
- Implications for the grandfathering regime
If the necessary bid threshold is redefined when it comes to voting rights, because the working group proposes, the transitional provision in Article 74 of the Belgian Takeover Act may also want be amended to make clear that shareholders who made use of the grandfathering exemption from the necessary bid obligation will be capable to proceed to profit therefrom so long as they keep greater than 30% of the voting rights, and never merely 30% of securities with voting rights. This is able to create flexibility for current reference or controlling shareholders to decrease their possession under 30% whereas sustaining their voting rights above 30% by making use of twin class voting buildings with out having to worry that they could possibly be obliged to launch a compulsory takeover bid.
- Adjusting the framework for corporations listed on a Multilateral Buying and selling Facility (MTF)
At the moment, Article 5 (6) of the Belgian Takeover Act prohibits a number of voting rights for corporations whose securities are listed on a MTF, besides within the type of loyalty voting rights. Oddly sufficient, and in contrast to for corporations whose securities are listed on a regulated market, this prohibition shouldn’t be laid down within the BCCA itself[3].
Given the MVS Directive’s new requirement, this prohibition will in any case need to be repealed (i.e., even when the Belgian legislator wouldn’t comply with the proposal of the working group of the Belgian Centre for Firm Regulation).
To forestall extreme focus of voting energy, the working group proposes to introduce a most ratio of 1:20 for a number of voting rights in corporations listed on a MTF, in addition to in corporations listed on a regulated market (see “A number of voting shares in listed corporations in Belgium”).
- Different implications
Moreover these amendments essential to adapt the takeover regulation to a number of voting rights, proposed by the working group, it ought to be famous that different guidelines within the Takeover Act and the Takeover Decree[4] already take into consideration the potential for twin class share buildings[5]. These guidelines might develop into extra vital if twin class voting buildings are allowed and their sensible software might result in discussions.
By the use of instance,
- the item of a (voluntary or necessary) takeover bid should embrace all securities with voting rights or giving entry to voting rights issued by the goal firm which aren’t but within the possession of the bidder or of individuals related with the bidder (Article 3, 1° of the Takeover Decree);
- if the bid pertains to securities of various lessons, the costs provided for every class might not include variations aside from these ensuing from the respective traits of every class (Article 3, 5° of the Takeover Decree);
- if, in the course of the bid interval, the bidder or individuals performing in live performance with him purchase securities of the goal firm at the next worth than the bid worth, or have dedicated themselves to take action, the bid worth might be adjusted to that increased worth (Article 15, §2 (juncto Article 57) of the Takeover Decree).
Minority shareholders are protected by the truth that a bidder will be unable to restrict his bid to a number of voting rights shares (though holders of non-voting shares aren’t protected). Alternatively, since worth discrimination between abnormal shares and a number of voting rights shares might be potential, minority shareholders might not share within the ‘management premium’ that’s paid by the bidder.
Conclusion
The transposition of the MVS Directive by the EU Member States, which is due by 3 December 2026, have to be paired with cautious changes to the present authorized framework on public takeover bids. Troublesome questions will have to be tackled throughout this legislative train, similar to whether or not or not loyalty voting rights will rely towards the necessary bid threshold. The broader problem might be to stability flexibility for issuers with predictability and equity for buyers.
Carl Clottens is a lawyer at NautaDutilh in Brussels and visitor lecturer in company legislation on the College of Leuven and the College of Antwerp and a member of the Belgian Centre for Firm Regulation and of the working group that authored the proposal for implementation of the MVS Directive in Belgium.
Göktug Celik is a lawyer at NautaDutilh in Brussels and voluntary educational researcher at Ifese.
[1] Act of 1 April 2007 on public takeover bids, as amended.
[2] C. Clottens, Proportionaliteit van stemrecht en risico in kapitaalvennootschappen, Antwerpen, Biblo, 2012, p. 338, no. 397.
[3] See C. Clottens, “Meervoudig stemrecht in genoteerde vennootschappen?”, in M. Wyckaert, V. Colaert en S. Cools (eds.), Feestschrift voor Koen Geens, Roeselare, Roularta, 2023 (296) 299.
[4] Royal Decree of 27 April 2007 on public takeover bids, as amended.
[5] See additionally C. Clottens, Proportionaliteit van stemrecht en risico in kapitaalvennootschappen, Antwerpen, Biblo, 2012, p. 339-341, no. 398-399.
