Italy looking to boost loyalty shares scheme to help Milan bourse

By Giuseppe Fonte

ROME (Reuters) – Italy is looking to boost the ability of listed companies to issue shares with enhanced voting rights, a Treasury official said on Thursday, as part of efforts to stop a steady flight of businesses from Milan to the Netherlands.

Such an option, however, will be considered as long as it is accompanied by provisions to guarantee the rights of small investors who share ownership with more powerful shareholders, Treasury Junior Minister Federico Freni told Reuters.

A regulatory set-up that helps leading shareholders preserve a tight grip on companies has recently driven several Italian companies to opt for a Dutch legal domicile or even listing in Amsterdam.

“Many stakeholders are calling for a stronger set of measures to allow long-term shareholders in listed companies to increase their voting power over time. We are looking into it,” Freni said.

Prime Minister Giorgia Meloni’s government in April presented to parliament a bill that, among a range of measures to encourage listing, enhanced the right to issue multiple-voting shares but limited that option to the pre-IPO stage.

As a result, listed companies can only tap a so-called “loyalty share scheme” which confers a maximum of two voting rights to long-standing shareholders of at least 24 months.

Freni said the ruling coalition could reinforce the loyalty regime with additional measures to help the Milan stock exchange compete with European peers.

“A dynamic and efficient capital market is a key factor to boost Italy’s economic growth at a time when higher interest rates are making banking credit increasingly costly,” he said.

Some lawmakers are proposing to adopt in Italy a French law dating back to 2014 that made enhanced voting rights a default option, unless shareholders in a company voted to opt out of it.

But Freni disagrees with such regulatory setting arguing that shareholders need to have a say on whether to differentiate voting power, as opposed to only voting against what would become the default option.

The Treasury official also urged caution on parliamentary calls to curb a governance arrangement whereby the outgoing board puts forward a list of candidates to name new directors.

Last month businessman Francesco Gaetano Caltagirone, a rebel investor in Generali (BIT:), told a parliamentary hearing that set-up has allowed investment bank Mediobanca (OTC:) to excessively influence the insurer.

“We do not see any urgency to take action on this issue,” Freni said.

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