Digitalization and climate protection are linked to extensive investments that also need to be financed in the private sector. Therefore, the German government has set the goal with the Future Financing Act to strengthen the performance of the capital market and promote the attractiveness of the German financial center.

The new regulation is intended to particularly facilitate access to the capital market for startups, growth companies, and medium-sized businesses. The government expects many innovation drivers within this circle. The aim is to make the journey to the stock market more appealing and streamlined for them through more flexible and easier admission procedures. Additionally, founders who do not want to quickly relinquish control of their business idea should be given the opportunity to retain influence through multiple voting rights, while still preserving minority rights and investor protection.

Another aspect of the law to support startups is the promotion of employee capital participation through improved tax conditions. The success of young companies depends on attracting and retaining highly qualified professionals in the international competition for talent.

Not only startups are expected to benefit from further facilitations, such as in the implementation of capital increases. The introduction of electronic shares is also intended to advance the financial center.

Whether the Future Financing Act will give a boost to the German startup scene and slow down the trend of IPO migration is controversial. Capital market experts warn against having too high expectations, especially for the instrument of multiple voting rights for founders. While the departure from "one share, one vote" is a global trend, its broad impact is considered limited.

Mehrstimmrechtsaktien, or shares with multiple voting rights, were abolished in Germany in 1998 through the Law on Control and Transparency in Business. In other European countries such as Sweden, Italy, or the Netherlands, they are allowed, and there are plans for harmonization at the EU level. Especially in the United States, super-voting stocks with prominent founders like Larry Page at Google or Mark Zuckerberg at Facebook/Meta are recognized as a successful formula. Thus, more IPOs with multiple voting rights have been registered in the US market in the startup and technology segment. In other countries, such as the UK, multiple voting rights have been hardly used since the reform.

Klaus von der Linden, a partner at the law firm Linklaters, points out the ambivalence of multiple voting rights. From the lawyer's perspective, the Future Financing Act as a whole is an important impulse for the German capital market. "The components related to stocks are significant and are intended to create a sense of new beginnings. The return to multiple voting rights can create options for founders. However, I doubt that this instrument can be widely used," he notes.

The question of "whether" the statutory reintroduction of multiple voting rights is needed does not need to be discussed, adds von der Linden. The political will is there, and there are comparable plans at the EU level in the Listing Act. "Germany wants to get ahead of the wave, and that is to be welcomed. It's a positive signal to founders. It shows that they are in the focus of politics, and there is a desire to support them," he summarizes the scenario.

However, whether multiple voting rights will have the politically hoped-for effect in practice is not guaranteed. "This needs to be viewed with nuance," explains the corporate lawyer. The intention is to facilitate the path for founders to the capital market by allowing them to retain control over their company through multiple voting rights shares. "This is welcome, but in substance, it's not really something new because even today, you can preserve the founders' influence through preferred shares or KGaA structures."

The whole thing has a flip side, and that's the investors. "Who enters into such special capital structures, who is interested in a participation that conveys only a proportionately reduced influence?" asks von der Linden. Investors, in his view, are likely to view multiple voting rights shares in the hands of founders with caution. "Why should they invest if someone else has sole control?" The preferred share has, as compensation, priority access to profits, but this advantage is eliminated in the model of multiple voting rights shares. Nevertheless, there are examples from abroad where it has been successful in convincing investors of the merits of multiple voting rights. The Porsche IPO, for instance, where only non-voting preferred shares were issued, was very well received in the market, emphasizes the expert in stock and corporate law.

Investors must be incentivized to subscribe to shares despite multiple voting rights. "It requires a special incentive. Investors must be convinced by an outstanding business model and an exceptional founder. Only then will they be willing to accept less influence to financially participate as funders in an extraordinary and promising idea," von der Linden emphasizes. Every founder aiming to secure additional influence over their company must be aware of this.

A peculiarity of multiple voting rights compared to a KGaA or preferred shares is that, according to the legislative plans, multiple voting rights expire ten years after the IPO, and they also cease to exist in the event of the sale or transfer of shares. Therefore, there is no need for a change in legal form or stock conversion to exit from this structure. Some investors, however, may not be able to acquire shares without voting rights according to their investment guidelines, so they cannot access preferred shares but can access common shares with relatively low voting rights.

The German fund association BVI generally rejects multiple voting rights shares because they limit shareholder rights. BVI considers the "One share, one vote" principle essential for institutional investors' engagement in strengthening corporate governance and advancing the sustainable transformation of the economy.

"Multiple voting rights are not exclusively advantageous from the perspective of founders either," cautions Linklaters partner von der Linden. The common stock with restricted voting rights could potentially have a valuation discount on the stock market, thus impacting the company's market capitalization. Furthermore, multiple voting rights may not generate much takeover speculation. "When the founder has matured the company and wants to exit, a problem arises for them. Their stock package has more value for them than for the acquirer, as the multiple voting rights expire upon transfer. Whoever exercises genuine capital and voting control ultimately receives more money for their package than someone who holds 10% with 10 times the voting rights but cannot pass on this disproportionate influence," summarizes the lawyer.

Considering all arguments, founders should carefully assess in which cases multiple voting rights can be meaningful. "Not relinquishing control comes at a cost. It is only worth considering if you have multiple investors on board for whom entry is still interesting. An IPO becomes more challenging as a result," warns the Linklaters partner.

Preventing companies from migrating to foreign stock exchanges will be difficult with this instrument. "Multiple voting rights are not crucial for companies deciding on an IPO in the USA," says von der Linden. "They encounter a more mature capital market there, as well as a more pronounced investment and risk culture. Moreover, there is sometimes a deeper understanding of certain business models in the US capital market, such as in biotechnology. These differences cannot be regulated away by law."

Martin Back, a lawyer specializing in corporate and capital market law at Pinsent Masons, does not see euphoria either. From his perspective, the provisions of the Future Financing Act are fundamentally "very welcome." However, he does not believe that Germany will take a pioneering role as an investment location in international comparison. "There are legislative changes on the horizon with which Germany does not create a new lead – except for one, presumably. The electronic share ('E-Aktie') is indeed something that I have not seen as a legal standard in other legal jurisdictions," says Back. The innovation allows shares to be issued, among other things, via a blockchain. "The technology used for Bitcoin can thus also be used for shares. This way, more direct and simpler communication between the company and its shareholders should be possible. At least in European comparison, Germany is leading by example in this regard."

Martin Back also views the benefits of multiple voting rights critically. "It only partially helps founders in preserving influence over the company," he says. He points to the protection of minority rights. According to the legislative plans, important resolutions at the shareholders' meeting, such as those regarding capital increases, require not only a majority of votes but also a majority of the represented capital. Therefore, multiple voting rights alone do not provide direct intervention in such cases. The situation is different for supervisory board elections, where a simple majority of votes is sufficient for the vote.

"At least on a shareholders' meeting, decisions against the founder's will cannot be made," says Back. The founder can prevent unwanted shareholders' meeting resolutions through their multiple voting rights. However, in the case of the required capital majority, the founder, with their multiple voting rights alone, cannot enforce anything. "The instrument does not guarantee the founder full control over the company because capital measures, especially for a young company, are among the most important decisions to promote growth."