Published On : 02/01/2024

EU agrees new rules to cut the cost of listing companies

By Huw Jones

LONDON (Reuters) -The European Union on Thursday agreed new rules to cut the cost of listing a company and encourage founders to take their firms public by enabling them to retain a large degree of control over decision-making.

The EU’s Belgian presidency said EU states and the European Parliament had reached agreement on the bloc’s new Listing Act and on allowing multiple-vote share structures, which give founders more voting weight than ordinary shareholders.

The bloc is trying to boost its capital markets by making listing on its exchanges cheaper and more attractive for startups, helping to raise funds for investment in growth and ease the heavy reliance of companies on bank loans for finance.

A post-Brexit Britain is also reforming its listing rules in similar ways, as it too faces companies opting to list in New York rather than on a local exchange.

“It is important that we continue to encourage companies to list on the stock exchange while at the same time ensuring high levels of investor protection and market integrity throughout Union,” Belgium’s Finance Minister Vincent Van Peteghem said in a statement.

The deal negotiated on the Listing Act, which still needs rubberstamping by full parliament and EU states, allows banks and brokers to “re-bundle” payments for research on companies with fees for executing share orders.

The mandatory unbundling of fees, aimed at giving buyers of research more transparency on what they are paying for, has been blamed for a decline in research on smaller firms, with Britain also taking a similar step.

The Act also streamlines the information companies must give when listing for the first time or issuing shares in a secondary offering

The EU’s multiple-vote share structure directive aims to encourage owners of small and medium-sized enterprises (SMEs) to list on growth markets, the Belgian presidency said.

Multiple voting, a reference to different voting rights, is common in the U.S., encouraging tech companies to list, but has been banned in some EU states, creating barriers in the internal capital market.

The directive introduces a minimum level of harmonisation of multiple-vote share structures across all 27 EU states with safeguards to protect the rights of newly entering shareholders.

(Reporting by Huw Jones; Editing by Mark Potter and Jan Harvey)

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