Conversion of Ordinary Shares into Non-Voting Shares

The conversion of ordinary shares into non-voting shares can lead to the inefficient expropriation of outside shareholder interests.  It does, however, provide a low-cost and flexible way of rearranging the ownership structure of a company.  After verifying that conversion offers may have a coercive character under a rule requiring an additional dividend of additive nature, we recommend a control of such offers founded on the fiduciary duties of  insiders, which normally requires that they abstain from voting at general meetings where conflictive issues are decided.  Alternative solutions are rejected because they lead to costly rigidities.

Reprinted in D. Heremans and H. Cousy (eds.), Financial Markets and Insurance, MAKLU, Antwerp, 1996, 129-62.