Enhancing Multi-Class Share Disclosures Act
Floor Speech
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Mrs. WAGNER. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2795) to amend the Securities Exchange Act of 1934 to require issuers with a multi-class stock structure to make certain disclosures in any proxy or consent solicitation material, and for other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows: H.R. 2795
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE.
This Act may be cited as the ``Enhancing Multi-Class Share Disclosures Act''. SEC. 2. DISCLOSURE RELATING TO MULTI-CLASS SHARE STRUCTURES.
Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n) is amended by adding at the end the following:
``(l) Disclosure Relating to Multi-class Share Structures.--
``(1) Disclosure.--The Commission shall, by rule, require each issuer with a multi-class share structure to disclose the information described in paragraph (2) in any proxy or consent solicitation material for an annual meeting of the shareholders of the issuer, or any other filing as the Commission determines appropriate.
``(2) Content.--A disclosure made under paragraph (1) shall include, with respect to each person who is a director, director nominee, or named executive officer of the issuer, or who is the beneficial owner of securities with 5 percent or more of the total combined voting power of all classes of securities entitled to vote in the election of directors--
``(A) the number of shares of all classes of securities entitled to vote in the election of directors beneficially owned by such person, expressed as a percentage of the total number of the outstanding securities of the issuer entitled to vote in the election of directors; and
``(B) the amount of voting power held by such person, expressed as a percentage of the total combined voting power of all classes of the securities of the issuer entitled to vote in the election of directors.
``(3) Multi-class share structure.--In this subsection, the term `multi-class share structure' means a capitalization structure that contains 2 or more classes of securities that have differing amounts of voting rights in the election of directors.''.
Mr. Speaker, I rise in support of H.R. 2795, the Enhancing Multi- Class Share Disclosures Act.
Mr. Speaker, I thank my colleague from the other side of the aisle, Congressman Meeks, for his work on this thoughtful piece of bipartisan legislation that improves the information shareholders receive about voting powers in the companies in which they invest.
Since the late 1800s, U.S. companies have utilized multi-class share structures. The original intent behind these structures was to allow companies, particularly family-run enterprises, to maintain voting control without having to own the majority of equity in their company.
There have been several efforts to limit the availability of multi- class share structures in the past. For example, starting in 1926 and ending in 1985, some national securities exchanges restricted the number of multi-class shares that were allowed to list on those exchanges.
In response to the increasing competitiveness of national securities exchanges in the 1980s, the exchanges eased those restrictions on multi-class share structures. While the SEC Investor Advisory Committee has called for more mandatory disclosures from companies with multi- class shares, the SEC does not currently require companies to disclose the gap between the equity an individual holds in the company and the number of voting shares they control, although many companies already disclose those for their shareholders voluntarily.
By requiring disclosures regarding voting power, particularly regarding officers and directors and those who have more than 5 percent voting power, H.R. 2795 will ensure that shareholders receive more uniform information in proxy materials.
Mr. Speaker, rather than prohibiting multi-class share structures altogether, H.R. 2795 represents a thoughtful and balanced approach to enhance transparency without eliminating class structures that encourage founders that may not otherwise go public to do so.
Mr. Speaker, for these reasons, I support H.R. 2795, and I urge my colleagues to support this bill.
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Mrs. WAGNER. Mr. Speaker, are there further requests for time on the other side or does the gentlewoman from California yield back?
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Mrs. WAGNER. Mr. Speaker, I simply urge my colleagues to support H.R. 2795, and I yield back the balance of my time.
Ms. JACKSON LEE. Mr. Speaker, I rise today in support of H.R. 2795, the Enhancing Multi-Class Share Disclosures Act.
H.R. 2795 would amend the Securities Exchange Act of 1934 to require issuers with a multi-class stock structure to make certain disclosures in any proxy or consent solicitation material, and for other purposes.
A multi-class share structure occurs when a company issues two or more classes of shares that have different voting rights.
Under the bill, the issuer must disclose certain information about each director, director nominee, named executive officer, and each beneficial owner of securities with 5% or more of the total combined voting power of all classes of securities entitled to vote in the election of directors.
Specifically, the issuer must disclose (1) the number of shares of all classes of securities entitled to vote in the election of directors beneficially owned by such person, and (2) the amount of voting power held by such person.
The Enhancing Multi-Class Share Disclosures Act is both timely and necessary to close documented gaps in transparency around multi-class governance structures.
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Mrs. WAGNER. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
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