PYRAMIDAL STRUCTURES AND CROSSSHAREHOLDING - MECHANISMS FOR DEVIATION FROM THE PRICIPLE “ONE SHARE – ONE VOTE”

Abstract

Shares in joint stock companies may sometimes carry unequal voting rights or other mechanisms of strengthening control (control enhancing mechanisms: CEM), such as pyramidal structures. All those represent a deviation from the principle of proportionality. The CEMs, and among them, especially widely used pyramidal structures, play important role in corporate takeovers. In this paper, after the taxonomy of the CEMs is provided, special attention is devoted to those that are widely used
on the capital market, i.e. pyramidal structures and companies that hold each other’s shares (cross-shareholding). Before going into detailed analysis into each of the two, the paper investigates how those particular CEM’s generally might affect behaviour of (minor and major) shareholders and board members, in case when the target company is experiencing voluntary or hostile takeover bid and whether the behaviour of mentioned stakeholders differs in companies with dispersed or concentrated ownership. Empirical data relevant for CEMs in some European countries are also presented and analyzed. In last chapter special attention is devoted to problem of calculation of the voting power when pyramidal structures and cross-sharegoldings
are used, followed by authors’ final remarks.