The UK government said Thursday it will review the rules around initial public offerings as it looks to make post-Brexit Britain more appealing to tech founders seeking to take their companies public.
The review includes measures that would give founders more influence over their companies upon listing, including the allowance of dual-class share structures that give some shareholders—notably founders—more voting rights per share than others.
Free float rules are also under review. Currently, companies listing on the London Stock Exchange must make 25% of their shares public. A lower free float threshold would let entrepreneurs maintain more control after going public.
Not everyone is a fan of the changes suggested.
“Traditionally, many institutional investors are wary of dual-class structures in the UK because they value the principle of one share, one vote,” said Claire Keast-Butler, a London-based partner with law firm Cooley who herself has been advocating for the use of dual-class shares. “They think that it is potentially bad for corporate governance because they’re putting too much power in the hands of a founder, or founders, rather than the shareholders as a whole.”
Keast-Butler said there has been a lot of resistance in the investor community to changing the system. Many fear rule changes could make founders less accountable. A case study often pointed to by critics is WeWork. The co-working giant imploded as it was preparing to go public in 2019, largely due to founder Adam Neumann taking advantage of a multi-class voting structure to wield outsized influence and thus eliminating any checks and balances on the company’s governance.