Loyalty voting structures: A better dual class?
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Marco Becht
Abstract
Loyalty voting structures (LVS) are designed to provide registered shareholders with multiple voting rights following a specified holding period. In theory this concept strikes a balance between dual-class structures (DCS), which enshrine founder control, and open structures that allow for control challenges. LVS entail a single class of shares, enabling all shareholders to possess multiple votes without incurring additional costs, while also limiting the privilege through a transfer sunset provision. Notably, LVS also preserve a key control advantage of DCS for founders, as they minimize the likelihood of control challenges through contested board elections. However, in practice LVS distinguish between bearer shares that are fully fungible and registered shares that allow the company to verify the holding period. Institutional shareholders often find it impossible to register their shares, thereby being deprived of multiple voting rights. Consequently, LVS effectively function as a mechanism to enhance control akin to dual-class structures. Transforming loyalty voting structures into a better dual class for institutional shareholders would require some legal and significant procedural modifications.
© 2024 by Theoretical Inquiries in Law
Articles in the same Issue
- Frontmatter
- Controlling Shareholders and Control Enhancing Mechanisms
- Introduction
- Loyalty voting structures: A better dual class?
- Extending dual-class stock: A proposal
- Controlling shareholders and sustainable corporate governance: The role of dual-class shares
- The UK and dual-class stock-lite – Is it really even better than the real thing?
- Corruption and controlling shareholders
- Justifications for minority co-owned groups and their corporate law implications
- The (geo)politics of controlling shareholders
- Controlling non-controlling shareholders: The case of effective control
- Ousted
Articles in the same Issue
- Frontmatter
- Controlling Shareholders and Control Enhancing Mechanisms
- Introduction
- Loyalty voting structures: A better dual class?
- Extending dual-class stock: A proposal
- Controlling shareholders and sustainable corporate governance: The role of dual-class shares
- The UK and dual-class stock-lite – Is it really even better than the real thing?
- Corruption and controlling shareholders
- Justifications for minority co-owned groups and their corporate law implications
- The (geo)politics of controlling shareholders
- Controlling non-controlling shareholders: The case of effective control
- Ousted
