Bonds and Their Issuance

Study Notes

Bonds are a way for companies limited by shares to raise funding.
Bonds are debt securities representing equal-value fractions of a unit operation in the form of a loan.
Like shares, bonds have equal nominal value and grant equal rights (not administrative rights).
Unlike shares, bonds give holders creditor status.
Funds raised from bondholders form loan capital, not contributions.
Bondholders receive a fixed remuneration (interest).
Bondholders have the right to receive capital repayment at the expiry date.
Bond types include index-linked (structured), convertible, warrant, subordinated, and participating.

A ratio must be maintained between capital plus reserves and bonds.
Bonds cannot exceed twice the subscribed share capital, plus legal and available reserves (as per Article 2412, paragraph 1).
Guarantees made by the company for other companies' bonds are also factored into the calculation. (Article 2412, paragraph 4)
The ratio between bonds and capital plus reserves must remain constant throughout the bond's lifecycle.
Companies can't reduce share capital voluntarily if it would violate this ratio.
Compulsory reductions due to losses may occur (per Articles 2446 and 2447), but profits are restricted during this period until the ratio is restored.

Directors approve bond issuance.
Notarial minutes detailing the resolution, along with legality checks and Business Register recording are necessary.
Bond content must be detailed in the resolution, including company information (name, objects, and registered office).
Bond register details bonds issued, bondholders' names, and any associated transfer.

Convertible bonds allow holders to subscribe to company shares.
This is based on a pre-determined exchange ratio (conversion rate).
Funds paid upon purchase are added to share capital.
Exercising conversion rights changes the holder from bondholder to shareholder.
Issuing convertible bonds entails a simultaneous share capital increase, with contributions used to subscribe the share.

Previously-subscribed share capital must be fully paid up.
Convertible bonds cannot be issued for less than their nominal value.
Shareholders and existing convertible bond holders are granted pre-emptive rights when issuing.
Convertible bond conversion rates are adjusted automatically in scenarios like increases or reductions in capital.
Company resolutions for changes in relation to share capital, merging, dividing, or profit distribution criteria are restricted until the conversion deadline expires (unless bondholders have early conversion options).

Bondholders' organization has two bodies: the bondholders' meeting and the common representative.
The bondholders' meeting deals with changes in bond terms and conditions, and matters requiring a higher voting majority.
Resolutions must be registered in the Business Register.
The common representative manages bondholder interests vis-à-vis the company and third parties.

Companies can use these instruments to acquire assets not just from contributions.
These assets are not subject to the same rules as contributions; hence, they aren't added to the share capital.
These instruments were introduced by the 2003 reform.

Bondholders have very flexible rights dictated by the relevant Italian Civil Code, which are generally presented in generic terms.
Rights typically concern financial matters.
Bondholders do not possess voting rights in general meetings.

Companies have autonomy to set guidelines on issuing, attributing rights, and governing procedures in accordance with bylaws.
Situations where the bond limit can be exceeded include subscriptions made by institutions under supervision, bonds backed by first-priority mortgages, instances involving the national economy, bonds listed on regulated markets, and convertible/warrant bonds.