Italian and European Company Law Transformation, Mergers & Divisions PDF

Trasformation, mergers and divisions Italian and European Company Law – A.A. 2024/2025 Dott.ssa Giulia Serafin Transformation Transformation is an extraordinary operation involving a change in the type of partnership or company or a change from a limited liability company (s.p.a.,...

Trasformation, mergers and divisions Italian and European Company Law – A.A. 2024/2025 Dott.ssa Giulia Serafin Transformation Transformation is an extraordinary operation involving a change in the type of partnership or company or a change from a limited liability company (s.p.a., s.a.p.a., s.r.l.) to another legal entity, and vice versa. The main feature of this operation is the rule of continuity of legal relations: the transformed entity retains the rights and obligations and continues in the relations of the entity that carried out the transformation (art. 2498 c.c.). The current legislation provides for two kind of trasformation: → homogeneous transformations: transformations in which for-profit companies or partnerships transforme themselves into another for-profit companies or partnerships → heterogeneous transformation: transformation in which for-profit companies or partnerships transforme themselves into an entity with a different purpose, and vice versa Homogeneous transformations The law regulates the transformation of partnerships into limited liability companies (art. 2500-ter c.c. et seq.) and the transformation of limited liability companies into partnerships (art. 2500-sexies c.c.). Procedure (quorum) → approval following the rules provided for the amendments to the instrument of incorporation (partnership agreement) → trasformation from a partnership into a LLC: majority calculated according to the profit share, right to withdrawal → trasformation from a LLC into a partnership: resolution of the extraordinary shareholders’ meeting with a higher majority, consent of those who will assume unlimited liability, right to withdrawal Procedure: resolution of transformation → Form and content requirements for the instrument of incorporation (partnership agreement) of the type of company/partnership chosen and compliance with the rules provided for incorporation From LLC to partnership → directors must draw up a report explaining the reasons and the effects of the transformation, which must remain deposited at the company’s office during the thirty days before the meeting that will decide on the transformation From partnership to LLC → the resolution must be drawn up with the form of public deed and must contain the information required by the law for the instrument of incorporation of the type of company chosen → check by the notary → recording in the Business register The assets of the partnership must be subject to valuation, in accordance with the rules established for the valuation of contributions in kind (art. 2500-ter, par. 2, c.c.). The share capital will be established in an amount not exceeding the amount of the net assets resulting from the valuation. After the recording in the Business register of the resolution the procedure has been completed, and the transformation take effect. Once the resolution is recorded in the register, the invalidity of the transformation resolution can no longer be pronounced (art. 2500-bis c.c.). (without prejudice to the right to compensation for damages by damaged shareholders or third parties) Each members have the right to receive a number of shares or a quota in proportion to his/her participation (art. 2500-quater, c.c. – art. 2500-sexies, par. 3, c.c.). Member liability for the corporate obligations 1) Whether by the transformation the members assume unlimited liability: → is required the consent of the members who will assume an unlimited liability (art. 2500-sexies, par. 1, c.c.; this liability also covers the corporate obligations prior to the transformation: art. 2500-sexies, par. 4, c.c.) 2) Whether with the transformation the unlimited liability of the members is lost (art. 2500-quinquies c.c.) → members are not released from liability for corporate obligations prior to the registration of the resolution of transformation in the Business register → creditors’ consent to transformation counts as consent to the release of all unlimited members; the consent is presumed if the resolution of transformation has been communicated to the creditors (individually, by appropriate means) and they have not expressly denied their consent to the transformation (within 60 days after the receipt of the communication) Merger Merger is an extraordinary operation that consist in the the unification of two or more companies/partnerships into one. Main types of merger → merger in strict sense: two or more companies merging together to form a new company → merger through absorption: an existing company absorbs one or more other companies → homogeneous merger: is the merger between same type of companies → heterogeneous merger: is the merger between different type of for-profit companies or between for-profit companies and non-profit entities (in this case it must be applied the same limits provided in the case of heterogenous transformation, because it implies also the transformation of one or more companies or entities involved in the merger) After this procedure «the company resulting from the merger or the absorbing company shall take on the merging companies’ rights and obligations, continuing whit all the relationships exixting prior to the merger,…» (art. 2504-bis, par. 1, c.c.) Merger procedure: 1) Draft terms of merger 2) Merger decision 3) Deed of merger 1) Draft terms of merger (art. 2501-ter c.c.) → competence: administrative bodies → content → filing in the Business register → drawning up of the following documents: up-to-date balance sheet (art. 2501-quater, c.c.), report by the administrative body (art. 2501-quiquies, c.c.), experts’ report (2501-sexies, c.c.) → documents filing at the registerd offices of the companies involved or publishing on their website (during the thirty days preceding the meeting) (art. 2501-septies c.c.) 2) Merger decision (art. 2502 c.c.) → competence → quorum (companies, partnerships) → recording in the Business register (art. 2502- bis c.c.) → merger implementation and opposition of the companies’ creditors (art. 2503 c.c.) 3) Deed of merger (art. 2504 c.c.) → drawning up of the merger deed by the legal representatives of all the companies involved → public deed → recording in the Business register → effects of a merger (art. 2504-bis c.c.) → invalidity of the merger deed (art. 2504-quater c.c.) Division Main types of division (art. 2506 c.c.) → total division: the entire assets of the company are transferred to more than one company, and the divided company is dissolved → partial division: only part of the company's assets are transferred to one or more companies, so that the divided company does not dissolve but continues its activity → division in strict sense: the beneficiaries of the division are new incorporated companies → division through absorption: the beneficiaries of the division are companies that have already been incorporated Division procedure: 1) Draft terms of division (art. 2506-bis c.c.) 2) Division decision 3) Deed of division → unless otherwise provide by the law, it will apply the rules provided for mergers → effects of a division (art. 2506-quater c.c.)  Company Groups Italian and European Company Law – A.A. 2024/2025 Dott.ssa Giulia Serafin The phenomenon A company group is a set of companies that maintain their autonomy and independence from a formal point of view, but that are managed under a unified leadership. All the companies of the group act under the dominant influence of a single company, which controls them (directly or indirectly) and directs them by pursuing a common purpose (the so-called group interest). By an economic point of view, we have one business activity, but by a legal point of view we have different companies. Structure and configuration Groups with a star structure Company B Company E Company A Company C Company D Structure and configuration Groups with a chain structure Company A Company B Company C Purpose of the regulation governing the company groups: → Ensure adequate information on the phenomenon of groups, and the relationship between the companies belonging to the group → To prevent choices made in the interest of the group from undermining the interests of those who rely solely on the performance of a specific company that belongs to the group (shareholders and creditors) → Preventing cross-shareholdings between companies from undermining the assets of companies involved and from altering the functioning of corporate bodies Under article 2359, par. 1, c.c., is controlled the company that is under the dominant influence of another company and the latter is therefore able to direct its activities. 1) companies in which another company holds the majority of the voting rights that can be exercised in the ordinary shareholders’ meeting (de jure internal control) 2) companies in which another company holds sufficient voting rights to exercise a dominant influence in the ordinary shareholders’ meeting (de facto internal control) 3) companies under the dominant influence of another company by virtue of specific contractual obligations with the latter (de facto external control) Under article 2359, par. 3, c.c., is relevant also the significant influence: Influence are considered significant when at least 1/5 of the voting rights can be exercised in the ordinary shareholders’ meeting or 1/10 in the case of a listed company. Cross-shareholdings (art. 2359-quinquies c.c.) Subscription by the subsidiary of the capital increase resolved by the parent company is prohibited. In case of violation, the subscription shall be deemed to be made by the directors of the subsidiary company. Art. 2359-bis, (2359-ter c.c.) Purchase of shares when there is a controlling relationship: → the purchase of shares or quotas of the parent company by the subsidiary companies is considered a purchase of its own shares, so it is subject to the same rules: - shares must be fully paid-up - limits of the profits available for distribution and available reserves - the nominal value of the shares purchased must never exceed one fifth of the share capital of the parent company when the latter is an open company (taking into account the shares held also by the parent company and by the other companies that it controls) - the purchase must be approved by the ordinary shareholders’ meeting - the controlled company cannot exercise the voting rights Consolidated financial statement is a financial statement drawn up by the parent company, in addition to its own financial statements. It represents the equity, financial and economic situation of the group considered as a whole and is drawn up on the basis of the financial situation of the group. It is an instrument of information on the overall situation of the group, and it is regulated by the Italian legislative decree n. 127/1991. Consolidated financial statements must be drawn up by the parent company when one of the following situations occurs: - absolute majority of voting rights may be exercised - a dominant influence may be exercised - a dominant influence may be exercised due to clauses in article of associations or based on a contract - the majority of voting rights may be exercised based on shareholder agreements. The management and coordination activity The law provide specific rules on: → the parent company’s liability → disclosure that the company belongs to a group → the obligation to justify decisions that are influenced by the party managing the company on a unified basis → the conditions when it is permitted to exercise a right of withdrawal to the shareholders in the company subject to a management and coordination activity → the rules applicable to intra-group financing When do these rules apply? From a legal point of view, when is there management and coordination activity and so the rules for groups of companies will apply? Art. 2497-sexies and 2497-septies c.c. The exercise of management and coordination activity by a company is presumed when: → there is an obligation to consolidate the financial statements → one of the situations provided for in Article 2359 of the Civil Code exists → also, it is presumed that there is a management and coordination activity when there is a contract (or clauses in the bylaws) whereby companies agree to conform to a unified direction (so-called joint or horizontal group) Liability (art. 2497 c.c.) Companies that manage and coordinate other companies which act undermining the interest of the controlled companies - are directly liable towards the shareholders of said companies (for any damage caused to the value of their shareholding) - are directly liable towards the creditors of said companies (for any damage caused to the integrity of company’s assets) Liability is excluded when: → the damage is missing in light of the overall results of the management and coordination activity or has been eliminated → through specific group operations the shareholder or creditor has been satisfied by the subsidiary company Disclosure (art. 2497-bis c.c.) → indication if the company is subject to the management and coordination activity (documentation and correspondence) → Business register: dedicated section for the management and coordination activity → directors' liability (towards shareholders and creditors) Justification of decision (art. 2497-ter c.c.) Decision influenced by the management and coordination activity of the controlled companies must be analitically justified and clear indicating the reasons and the interests that influenced that decision. Right of withdrawal (art. 2497-quater c.c.) → shareholders of a company subject to a management and coordination activity may withdraw when certain events occur affecting the parent company and that result in a change in the original risk conditions of the investment in the controlled company. Shareholders/quotaholders of a company subject to management and coordination activities may withdraw: 1) if the parent company pass a resolution to transform the company (a transformation that imply a change of its purpose) 2)if the parent company pass a resolution to change the company’s object (and doing so alter the economic conditions of the subsidiary company) 3) if in favour of the shareholder/quotaholder there is a decision of the court ex art. 2497 c.c. (direct liability of the parent company towards the controlled companies’ shareholders/quotaholders) 4) at the beginning and at the end of the management and coordination activity (this cause of withdrawal doesn’t apply to listed companies) Loans in the context of management and coordination activity (art. 2497-quiquies c.c.) In order to avoid excessive indebtedness within the group, to the loans made by the parent company (or by other controlled companies by the same) to the controlled company will apply the rule provided by art. 2467 c.c. → the repayment of these loans is subordinate to that of other creditors Companies’ dissolution and liquidation Italian and European Company Law – A.A. 2024/2025 Dott.ssa Giulia Serafin → Articles 2484-2496 c.c. → The regulations are set for all limited liability companies Grounds for dissolution: 1) expiration of the time limit set in the instrument of incorporation 2) the achievement of the corporate’s object or the impossibility to achieve it 3) the inability of the shareholders’ meeting to function or its continued inactivity 4) the reduction of share capital due to losses below the legal minimum 5) Resolution of the extraordinary shareholders' meeting to dissolve as a result of the withdrawal of one or more shareholders, or inability to reimburse shares without reducing the share capital, or the upholding of the opposition of corporate creditors to the material reduction 6) the extraordinary shareholders’ meeting pass a resolution to dissolve the company before the time limit set in the instrument of incorporation 7) any other reasons provided for by the instrument of incorporation or by the bylaws → For S.A.P.A. (Partnership limited by shares) the Civil Code states another cause of dissolution: if all the managing partners cease to hold office, the partnership shall be dissolved unless they are replaced and the replaicement managing partners accept their appointment within 180 days (art. 2458, par. 1, c.c.) Art. 2485 c.c. → verification and publicity of the cause of dissolution → running of effects → company’s name (art. 2487-bis, par. 2, c.c.) → liability of the directors Liquidation → purpose of the liquidation procedure → directors: powers (art. 2486 c.c.) → other bodies: shareholders’ meeting and board of statutory auditors (art. 2488 c.c.) → revocation of liquidation status (art. 2487-ter c.c.) Liquidators → appointment and content of the resolution (art. 2487, par. 1, c.c.) → duration of their office → removal (art. 2487, par. 4, c.c.) → publicity (art. 2487-bis, par. 1, c.c.) Liquidators’ powers, duties and liabilities (art. 2489 c.c.) are based on the powers, duties and liabilities held by the directors, with some adaptations → they have to carry out their duties with the diligence and professionalism required by their role → they must receive the company’s assets and the other documents handed over by the directors and they have to drawn up an inventory of all the company’s assets → they must take all action necessary to liquidate the company, unless otherwise provided in the bylaws or in their appointment → Their main task is to liquidate the company's assets and pay the company’s creditors: - prohibition to distribute the company’s assets among the shareholders (exception by providing suitable guarantees) - insufficiency of funds → They have to drawn up the financial statements and submit it to the shareholders’ meeting for the approval every year, as long as the liquidation lasts (art. 2490, c.c.) → When the liquidation is complete liquidators must drawn up the final liquidation financial statements and the so-called distribution plan (art. 2492 c.c.) - filing in the Business register (also with the report of the statutory auditors and of the external legal auditors) → approval mechanism: each shareholder/quotaholder (not the meeting) – tacit approval (art. 2493 c.c.) - complaints from shareholders/quotaholders within 90 days from the filing - if there are no complaints within this 90 days, the final liquidation financial statements shall be deemed approved Cancellation of the company from the Business register (art. 2495 c.c.) → after the approval of the final liquidation financial statements, the liquidators ask for the cancellation of the company from the Business register → If there are company’s creditors who have not been paid, they may ask for the payments to the shareholders/quotaholders but only up to the limit of what they have received from the liquidation. Also, they can ask the payments still duo to the liquidators if the non-payment is due to their fault Companies limited by quotas Italian and European Company Law – A.A. 2024/2025 Dott.ssa Giulia Serafin Main features of CLQ: Article 2462, par. 1, c.c. → liability for company obligations: Article 2468, par. 1, c.c. → quotaholders’ equity stakes cannot be rapresented by shares and nor may they be offered to the public as financial products Main benefits: → lower capital requirements → lower operating and incorporation costs → greater organizational flexibility Incorporation Incorporation → The incorporation by public subscription is not allowed → Minimum capital required: 10.000 Euro → The company name can be freely determined but must contain the term s.r.l. → Companies limited by quotas can be incorporate also without a timelimit → The instrument of incorporation must been drawn up in the form of a public deed → The instrument of incorporation can have the form of an agreement or of a unilateral act (art. 2463, par. 1, c.c.) → In the last case we will have a single-member company, but some specific rules will apply with regard to: a) contribution (art. 2464, par. 4 and 7, c.c.) b) publication (art. 2470, par. 4-7, c.c.) → unlimited liability of the sole quotaholder if he/she fails to fulfill his/her obligations under the previous rules → Content of the instrument of incorporation: 2463, par. 2, c.c. Article 2463, par. 3, states that Articles 2329, 2330, 2331, 2332 [and 2341] apply to the CLQ → 2329: Incorporation requirements → 2330: Filling the instrument of incorporation and registering the company → 2331: Effects of the registration → 2332: Nullity of the company Contributions Article 2464, par. 2, c.c., states that «any asset item which can be valued may be contributed». → cash → assets in kind and receivables → work and services → general rule to grant the integrity of the capital: the total value of contributions cannot be lower than the total amount of the company’s capital Contributions in cash → default rule (unless otherwise stated in the instrument of incorporation, contribution must be made in cash) → at the time of incorporation is required the payment at least of 25% of the cash contribution (100% in the event of a single- member CLQ); paid directly to the directors appointed in the instrument of incorporation → the payment can be replaced by an insurance policy or a bank guarantee of at least the same amount (and then they can also be replaced at any time by paying the corresponding amount in cash) Contributions of assets in kind and receivables (art. 2465 c.c.) → sworn report by a legal auditor or an audit firm (enrolled the Regoster of Legal Auditors) → content and purpose → check by the directors? → Potentially Risky Acquisitions (art. 2465, par. 2 and 3, c.c.) - procedure of valuation - authorization (derogable) Contributions of work and services → in this case, the quotaholder obligates himself to work for the company or to give his services to the company → these kind of contributions must be guaranteed through an insurance policy or a bank guarantee (if it is provided for by the instrument of incorporation the guarantee can be replaced by paying the correspondent amount to the company in cash, as a security (cauzione) → even though the law does not provide for it, it is believed that these contributions should be subjected to estimation Failure to make contributions (art. 2466 c.c.) → formal notice from directors (30 days to make the contribuitions) → if the deadline elapses, the quota can be sold → exclusion of the quotaholder and capital reduction → these rules apply also if the insurance policy or the bank guarantee expires or becomes invalid Minimum capital required: 10.000 Euro... → at the time of incorporation, it can also be determined in a smaller amount, as long as it is equal to one euro: SRL with a reduced capital (art. 2463, par. 4 and 5, c.c.) → in this case, contributions must be made in cash and must be fully paid up → special rules about the legal reserve formation apply Simplified SRL (art. 2463-bis c.c.) → Can be established by agreement or unilateral act only by natural persons → the company name must contain the indication SRLS → the capital must be at least one euro and less than ten thousand euros → only cash contributions are allowed, which must be fully paid up → must be incorporated by a public deed, but is exempted from registration fees in the Business register → the notary's fee is not due → the instrument of incorporation must be drafted in accordance with the standard model provided for by a special decree of the Minister of Justice (the clauses of the standard model are mandatory) → even though the law does not provide for it, it is believed that the special rules about the legal reserve formation for the SRL with a reduced capital apply Quotaholder loans (art. 2467 c.c.) → repayment of quotaholder loans is subordinated to the other creditors payment if… → loans (in any form) that are given when there is an excessive imbalance between the company’s level of debt and its equity or if, considering the company's financial situation, a contribution would have been more reasonable Debt securities (art. 2483 c.c.) → provision in the instrument of incorporation → body responsible → resolution content → limit to circulation → change to the term or to the conditions Equity stakes → personalistic criteria → quotas can be very different from each other The value of the quotas is proportional to the contributions, but the instrument of incorporation may provide that the value of the quotas can be also determined in a manner that is not proportional to the contributions. Article 2468, par. 3, c.c. The instrument of incorporation may grant to individual quotaholders special right regarding the running of the company or the distribution of profits. → circulation of special rights Transfer, effectiveness and publicity of quotas (art. 2469 and 2470 c.c.) → quotas are freely transferable unless otherwise provided in the instrument of incorporation (limits to the circulations and the right of withdrawal) → the transfer takes effect in respect of the company only when it is filed in the Business register (form required: certified deed by a notary) → conflicts among several buyers → in the case of transfer, the transferor shall be jointly and severally liable with the purchaser for any payments still due, for a period of three years from when the transfer is recorded in the Business register (art. 2472, c.c.) For Companies limited by quotas, it is absolutely forbidden to subscribe or purchase their own quotas, accept their own quotas as collateral, or provide guarantees for their purchase or subscription (art. 2474 c.c.). Art. 100-ter, TUF Notwithstanding the provisions of Article 2468, first paragraph, of the Civil Code, quotas in companies limited by quotas may be subject of public offerings of financial products, including through crowdfunding platforms, within the limits provided by Regulation (EU) 2020/1503 on European crowdfunding service providers for business. Alternative quotas circulation scheme As an alternative to the provisions of Article 2470, second paragraph, of the Civil Code and Article 36, paragraph 1-bis, of Decree-Law No. 112 of June 25, 2008, converted, with amendments, by Law No. 133 of August 6, 2008, as well as, in reference only to the units representing the capital of small and medium-sized enterprises, by article 26, paragraph 2-bis, of decree-law no. 179 of 18 October 2012, converted, with amendments, by law no. 221 of 17 December 2021 for the subscription and subsequent transfer of quotas representing the capital of companies limited by quotas: → the subscription may be made through financial intermediaries → intermediaries shall carry out the subscription of the quotas in their own name and on behalf of the subscribers or purchasers who have joined the crowdfunding offer → within 30 days after the closing of the offering, licensed intermediaries shall file in the Business register a certification attesting their ownership on behalf of third-party → the transfer of quotas by a subscriber or subsequent purchaser takes place by simply recording the transfer in the records kept by the intermediary → The execution of subscriptions, purchases and disposals of financial instruments issued by companies limited by quotas or of quotas representing their capital, carried out in the manner described, does not require the conclusion of a written contract Withdrawal (art. 2473 c.c.) → grounds of withdrawal provided by the articles of associations → grounds of withdrawal by the law (mandatory) → groud of withdrawal if the company has been incorporated with an indefinite duration → when the right of withdrawal cannot be exercised Reimbursement of the quota → the value is determined in proportion to the company's assets, taking into account its market value → if there is disagreement on the determination of the value, it is determined by an expert appointed by the court → repayment must be made within 180 days of the notice made to the company The quota of the member who has exercised the right of withdrawal is: (a) offered to the other quotaholders in proportion to their quota or to a third party identified by the quotaholders (b) if there are no buyers, repayment is made using the company's available reserves, or if there are none, through a capital reduction (c) if the reduction is not possible, the company is dissolved Exclusion Article 2473-bis states that the instrument of incorporation may states specific grounds of exclusion for just cause. Quotaholders’ decisions Art. 2479 c.c. → Decisions on matters that are reserved to the quotaholders → Others matters provided in the instrument of incorporation → Items that one or more directors or the quotaholders representing at least 1/3 of the quota capital submit for their approval → Collegial decision-making method (default rule) → Other methods: written consultation or consent expressed in writing (in this case, decisions are adopted with the approval of the majority representing half of the quota capital) → Matters in which there must be adopted the collegial decision-making method Quotaholders’ meeting procedure → it is left to the instrument of incorporation the determination of the manner of calling the meeting → if nothing is provided for in the instrument of incorporation, the meeting is called by the directors with a registered letter (sent at least eight days before the meeting) → if the instrument of incorporation do not provide otherwise, the meeting shall be held at the registered office → chair and resolution minute → All quotaholders may attend the meeting → unless the instrument of incorporation provide otherwise, the member may freely be represented at the meeting → the right to vote is proportional to the stake Quorum: → the meeting is duly constituted with the presence of many members who represent at least half of the quota capital and passes resolutions with the absolute majority of the capital present in the meeting (50%+1) → for some decision a higher majority is required (changes to the instrument of incorporation, decision to complete operation that would substantially change the company object or that would significantly alter quotaholders’ right): positive vote of quotaholders representing a majority of the capital → Plenary quotaholders’ meeting Invalidity of quotaholders’ decisions → Annullability: - decisions that are not taken in accordance with the law or the instrument of incorporarion may be appealed by the quotaholders who did not consent to them (absent, dissenting, and abstaining), by each director, and by the board of statutory auditors - decisiond taken with the determining vote of the quotaholder with a conflict of interest - within 90 days after the registration of the decision in the book of quotaholders’ decisions - replacement of the invalid decision → Nullity: - Decisions that have unlawful or impossible object - Decisions made in the absolute absence of information → May be appealed by anyone with an interest within three years after the registration of the decision in the book of quotaholders’ decisions Running and monitoring of the company Directors → Art. 2475, par. 1, c.c. states that the directors are responsible for the obligation to enstablish a suitable organisational, administrative and accounting structure. → Art. 2479 allows for quotaholders to contribute to the running of the company. Indeed, to the quotaholders may be given certain responsibilities… - matters provided in the instrument of incorporation - items that one or more directors or the quotaholders representing at least 1/3 of the quota capital submit for their approval. → limits: some matters cannot be assigned to the responsibility of the quotaholders (art. 2479, par. 5, c.c.) Appointment → directors must be chosen among the quotaholders (unless otherwise provided in the bylaws) → exclusive competence of the quotaholders → recording of the appointment in the Business register → grounds for ineligibility and removal → remuneration and non-competition obligation Duration and termination → unless otherwise provided, directors shall hold office without a time limit → causes of termination of office: death, withdrawal, removal, expiration of the deadline (if any) Management systems → sole director → board of directors (delegated bodies: executive committee, managing directors) → procedure → Managment model based on powers that are excercised severally or jointly - instrument of incorporation - application of articles 2258 and 2259 c.c. → limits: certain matters must fall under the responsibilities of the administrative body (art. 2475, par. 5, c.c.) The power of representation of the directors (art. 2475-bis c.c.) → instrument of incorporation → limits on directors’ powers Conflicts of interest (art. 2475-ter c.c.) → par. 1: contracts signed by directors (with the power of representation) who have a conflict of interest → par. 2: decisions adopted by directors with a conflict of interest Directors’ liability → liablity action on behalf of the company → liability action by individual quotaholders and third parties → liability action by company’s creditors → Liability of quotaholders with a management role (art. 2476, par. 8, c.c.) Monitoring of management → quotaholders role (art. 2476, par. 2, c.c.) → statutory auditors and external auditors (art. 2477 c.c.) Changes to the instrument of incorporation, quota capital increase and decrease Changes to the instrument of incorporation → Article 2480 provides that the decision of the quotaholders shall be made with the higher majorities provided for in Article 2479- bis and that the procedure provided in the Article 2436 shall apply. Material quota capital increase → the decision cannot be implemented until any outstanding contributions have been made in full → delegated increase of the quota capital (instrument of incorporation) → right to subscribe (exclusion→right of withdrawal) → new contributions Free quota capital increase → methods Material quota capital reduction → methods → execution and opposition of the company’s creditors Quota capital reduction due to losses → optional (losses that affect capital by less than one- third) → mandatory - losses that affect capital by more than one-third - losses that affect capital by more than one-third and affect also the minimum capital required by the law  Companies with shares listed in a regulated market Italian and European Company Law – A.A. 2024/2025 Dott.ssa Giulia Serafin  Regulation European Directives and Regulations Secondary EU Regulation Italian Civil Code Italian Financial Consolidate Law (Ialian Legislative Decree n.58/1998) Consob secondary rules (Issuers Regulation_Regolamento emittenti) Corporate Governance Code  What does a listed company mean? It means that the company's shares are listed on a “regulated market”. “Regulated market” means a multilateral system operated and/or managed by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in financial instruments – in the system and in accordance with its non-discretionary rules – in a way that results in a contract, in respect of the financial instruments admitted to trading under its rules and/or systems, and which is authorised and functions regularly. [MiFID II] When the shares of a company (the issuer) are admitted to trading on a regulated market, special rules apply to the company and also to the shares. Also, the company is subject to supervision by the national financial market authority.  Purpose of the Financial Market discipline Ensuring the efficient functioning of financial markets. Promoting trust in financial markets. Protect investors. Eliminate the information asymmetries between market operators and investors.  Purpose of the Listed Companies discipline Ensuring the efficient functioning of the capital markets and the investors protection. Ensuring transparency of corporate information. Ensuring efficient corporate governance systems. Ensuring transparency in the corporate control market. Ensuring the protection of minority shareholders. The Consob supervisory function Regulatory power Powers of information and investigation Powers of inspection Powers of intervention Corporate governance of listed companies Shareholders’ meeting Shareholders’ rights Directive 2007/36/EC (SHRD I) → exercise of the voting rights a. timely access of shareholders to all information relevant to general meeting b. right to actively participate in the general meeting c. facilitation the cross-border exercise of voting rights by correspondence and by proxy d. abolition of practices that constitute major obstacles to voting (in particular for institutional investor, i.e. investment funds) → Art. 5 - Information prior to the general meeting → Art. 6 - Right to put items on the agenda of the general meeting and to table draft resolutions → Art. 7 - Requirements for participation and voting in the general meeting → Art. 8 - Participation in the general meeting by electronic means → Art. 9 - Right to ask questions → Art. 10 - Proxy voting → Art. 12 - Voting by correspondence → Art. 14 - Voting results Consolidated Financial Law → the role of the website → the notice of call: content and disclosure → disclosure of the items put in the agenda → the information to be made available after the meeting → integration of the items listed in the agenda → presentation of new proposal of resolution → right to submit questions prior to the shareholders’ meeting The so-called record date Entitlement to participate in the meeting is determined by the so-called record date rule: those who hold shares on the seventh market day before the meeting are entitled to participate in the meeting. Transfer of shares made after these date are not relevant in terms of assuring the legitimate exercise of voting rights at the shareholders' meeting. Article 125-bis. Notice of call to shareholders’ meetings → The notice of call must be published on the company’s website and in extract form in the daily newspapers. → The notice of call must be published within thirty days prior of the date of the meeting. → For shareholders’ meetings called to appoint, by means of list voting, members of the board of directors and internal control bodies, the time limit for publication of the notice of call shall be at least forty days prior to the date of the meeting. Article 125-ter. Disclosure of items on the agenda By the date of publication of the notice of call to the shareholders' meeting provided for each of the items on the agenda, the board of directors shall make a report on each of the items on items of the agenda available to the public at the company's registered office and on the company website. Article 125-bis. Notice of call to shareholders’ meetings The notice of call shall contain: a) the indication of the day, time and place of the meeting and the list of matters on the agenda; b) a clear, precise description of the procedures to be applied in order to attend and vote at the shareholders' meeting; c) the record date, with the specification that those who become holders of shares only after that date shall not have the right to attend and vote at the shareholders' meeting; d) the terms and conditions for collecting the full text of the proposed resolutions, together with the explanatory reports and documents to be submitted to the shareholders' meeting; d-bis) the terms and conditions for presenting lists to elect the members of the board of directors and minority members of the board of auditors or the supervisory board; e) the address of the website where to find all information and documents relating to the matters discussed and the exercise of voting rights; f) the other information which must be indicated in the notice calling the meeting pursuant to other provisions. Information that must be published before the shareholders’ meeting in the company’s website: a) within the terms for the publication of the notice calling the meeting, as provided for each of the items on the agenda to which they refer, or subsequent terms as provided by the law for publication, the documents will be submitted to the shareholders' meeting; b) within the terms for the publication of the notice calling the meeting, the forms that can be optionally used for voting by proxy and for correspondence voting; where the forms cannot be made available in electronic format for technical reasons, the same website will specify how to obtain hard copies and, in this case, the company must send them free of charge, on request, by mail, also through the intermediaries; c) within the terms of publication of the notice calling the meeting, information on the amount of the share capital specifying the number and categories of shares into which it is divided. After the shareholders’ meeting must be published in the company’s website a summary report of the votes containing the number of shares represented at the shareholders’ meeting and the shares on which a vote was expressed, the percentage of capital represented by those shares, the number of votes in favour and against the resolution and the number of abstentions, shall be made available on the company web site within five days the date of the meeting. The minutes of the shareholders’ meeting pursuant to Article 2375 of the Civil Code shall in any event be made available on the website within thirty days of the date of the meeting. Integration of the items listed in the agenda and presentation of new proposal of resolution Shareholders, who individually or jointly account for one fortieth of the share capital, may ask for the integration of the list of items on the agenda, specifying in the request, the additional items they propose or presenting proposed resolution on items already on the agenda. The proposal are presented in writing, by correspondence or electronically and are disclosed in the same ways as prescribed for the publication of the notice calling the meeting. The agenda cannot be supplemented with items on which, in accordance with the law, the shareholders' meeting resolved on proposal of the administrative body or on the basis of a project or report prepared by it. Right to submit questions prior to the shareholders’ meeting All those with voting rights may submit questions on the items on the agenda even prior to the shareholders' meeting. Questions received before the meeting will be answered at the latest during the said meeting. The company may provide a single reply to questions with the same content. Proxies in listed companies (art. 135-novies et seq.) The SHRD states «apart from the requirement that the proxy holder possess legal capacity, Member States shall abolish any legal rule which restricts, or allows companies to restrict, the eligibility of persons to be appointed ad proxy holders». → ratio legis? → The limits provided by the article 2372 c.c. do not apply. → It applies the conflict of interest regulation for proxies (if there is a conflict of interest between the shareholder and the representative, the latter must inform the shareholder in written form. the shareholder is obliged to give voting instructions to the representative, who must exercise the vote in accordance with the instructions). → The appointed representative of listed companies. → Solicitation of proxies… Shares: → Saving shares → Multiple-voting shares → Vote increase → Dematerialization regime for circulation * See slides on shares  The regulation of the shareholders’ agreements In whatever format they may be stipulated, agreements regarding the exercise of voting rights in companies with listed shares and their parent companies, within five days of stipulation shall be: a) communicated to CONSOB; b) published in extract form in the national daily newspapers; c) filed at the Companies Register of the place where the company has its registered office; d) communicated to listed companies. This article shall also apply to agreements, in whatsoever form concluded, that: a) create obligations of consultation prior to the exercise of voting rights in companies with listed shares or companies that control them; b) set limits on the transfer of the related shares or of financial instruments that entitle holders to buy or subscribe for them; c) provide for the purchase of shares or financial instruments referred to in paragraph b); d) have as their object or effect the exercise, jointly or otherwise, of a dominant influence on such companies. d-bis) which aim to encourage or frustrate a takeover bid or exchange tender offering, including commitments relating to non- participation in a takeover bid Agreements shall be null and void in the event of non-compliance with the requirements laid down by the law. Voting rights attached to listed shares for which the requirements have not been satisfied may not be exercised. In the event of non-compliance, the resolution can be contested (annullability). The resolution may also be contested by CONSOB.  The board of directors (article 147-ter et seq.) Composition: the administrative body must necessarily consist of several members. → Requirements: persons who perform an administrative or management role must satisfy the integrity requirements established in the regulation issued by the Minister of Justice (they must not have been convicted of certain types of criminal offence or subjected to preventive measures). Failure to satisfy the requirements shall result in disqualification from the position. → Article 2382 of the Civil Code applies. → Additional requirements laid down in the articles of association. → List voting mechanism: The Statute provides for members of the Board of Directors to be elected on the basis of the list of candidates and defines the minimum participation share required for their presentation, at an extent not above a fortieth of the share capital or at a different extent established by CONSOB with the regulation taking into account capitalization, floating funds and ownership structures of listed companies. The articles of association can rule that the leaving Board of Directors may submit a list of candidates for the election of the members of the Board. Lists are deposited with the issuer, also by means of remote communication, in compliance with any requirements strictly necessary to identify the applicants indicated by the company, by the twenty- fifth day prior to the date of the meeting called to resolve on the appointment of the members of the board of directors and made available to the public at the company's headquarters, on the company's website and in the other ways envisaged by CONSOB by regulation, at least twenty-one days prior to the date of the shareholders' meeting. → Director elected by the minority: at least one member shall be elected from the minority list that obtained the largest number of votes and is not linked in any way, even indirectly, with the shareholders who presented or voted the list which resulted first by the number of votes. → Indipendent director: at least one of the members of the Board of Directors, or two if the Board of Directors is composed of more than seven members, should satisfy the independence requirements established for members of the board of statutory auditors and, if provided for in the Articles of Association, the additional requirements established in codes of conduct drawn up by regulated stock exchange companies or by trade associations. → Gender Equality: The Statute also stipulates that the division of directors to be elected should be made on the basis of a criterion that ensures a balance between genders. The less-represented gender must obtain at least two fifths of the directors elected. Consob warning. Administrative sanctions. The board of statutory auditors (article 148 et seq.) Composition: The Articles of Association of a company shall establish, for the board of auditors: a) the number, not less than three, of auditors; b) the number, not less than two, of alternates. Requirements: The following persons may not be elected as auditors and, where elected, they shall be disqualified from office: a) persons who are in the conditions referred to in Article 23 82 of the Civil Code; b) spouses, relatives and the like up to the fourth degree of kinship of the directors of the company, spouses, relatives and the like up to the fourth degree of kinship of the directors of the companies it controls, the companies it is controlled by and those subject to common control; c) persons who are linked to the company, the companies it controls, the companies it is controlled by and those subject to common control or to directors of the company or persons referred to in paragraph b) by self- employment or employee relationships or by other relationships of an economic or professional nature that might compromise their independence. Requirements: Integrity and experience requirements for the members of the board of statutory auditors provided by the Decree of the Ministry of Justice n. 162/2000. List voting mechanism (statutory auditor elected by the minority) CONSOB establishes the rules for the election procedure by list vote of a member of the Board of Statutory Auditors by minority shareholders, that are not directly or indirectly associated with the shareholders that submitted or voted the list qualifying as first for the number of votes received. The Chairman of the Board of Statutory Auditors The chairman of the board of statutory auditors shall be appointed by the shareholders’ meeting from among the auditors elected by the minority shareholders. Gender Equality The Articles of Association of the company shall also state that the division of members shall be made in such a way that the less- represented gender shall obtain at least two fifths of the regular members of the board of auditors. Limits on the cumulation of positions The position of member of the control body of an issuer may not be assumed by those who hold the same position in five issuers. The relationship between the board of statury auditors and Consob: → The board of auditors shall notify CONSOB without delay of irregularities found in the performance of its oversight activity and shall transmit the related minutes of the meetings and investigations conducted with all other relevant documentation. → CONSOB, where it has a well-founded suspicion of serious irregularities in the performance of the supervisory duties of the board of auditors, the supervisory board or the management control committee may report the facts to the courts pursuant to Article 2409 of the Civil Code. Transparency Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market Efficient, transparent and integrated securities markets contribute to a genuine single market in the Community and foster growth and job creation by better allocation of capital and by reducing costs. The disclosure of accurate, comprehensive and timely information about security issuers builds sustained investor confidence and allows an informed assessment of their business performance and assets. This enhances both investor protection and market efficiency. → Periodic information (Chapter 2) → Ongoing information (Chapter 3) [→ Occasional information provided by the Consob Issuers Regulation] Periodic information: - Annual financial report - Half-yearly financial reports The issuer shall make public its annual financial report at the latest four months after the end of each financial year and shall ensure that it remains publicly available for at least 10 years. The annual financial report shall comprise: (a) the audited financial statements; (b) the management report; and (c) statements made by the persons responsible within the issuer, whose names and functions shall be clearly indicated, to the effect that, to the best of their knowledge, the financial statements prepared in accordance with the applicable set of accounting standards give a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer. The issuer of shares or debt securities shall make public a half-yearly financial report covering the first six months of the financial year as soon as possible after the end of the relevant period, but at the latest three months thereafter. The half-yearly financial report shall comprise: (a) the condensed set of financial statements; (b) an interim management report; and (c) statements made by the persons responsible within the issuer, whose names and functions shall be clearly indicated, to the effect that, to the best of their knowledge, the condensed set of financial statements which has been prepared in accordance with the applicable set of accounting standards gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer. Ongoing information: - Information about major holdings. - Information for holders of securities admitted to trading on a regulated market to grant the participation in meetings and the exercise of their rights. - Inside information: Regulation (EU) n. 596/2014 on market abuse (MAR). Major shareholdings (transparency of ownership structures) Those who participate in the share capital of a listed company shall notify the investee company and Consob: (a) the exceeding of the 3% threshold in case the company is not an SME (5% if it is a SME); (b) reaching or exceeding the thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 50%, 66.6% and 90%; (c) the reduction of participation below the thresholds indicated in (a) and (b). CONSOB may, by order motivated by the requirements of investor protection as well as efficiency and transparency of the corporate control and capital market, provide, for a limited period of time, lower thresholds. “Declaration of intentions” When acquiring an interest in listed company equal to or exceeding the thresholds of 10%, 20% and 25% of the relevant capital, the person making the notifications shall declare the objectives he or she intends to pursue during the following six months. The declaration shall indicate: (a) the means of financing the acquisition; (b) whether it is acting alone or in concert; (c) whether it intends to stop its purchases or to continue them as well as whether it intends to acquire control of the company or otherwise exercise influence over the management of the company and, in such cases, the strategy it intends to adopt and the operations to put it into effect (d) its intentions regarding any agreements and shareholders' agreements to which it is a party; (e) whether it intends to propose the integration or removal of the company's administrative or controlling bodies. Share capital: Share capital means capital represented by voting shares. In companies whose bylaws allow for increased voting rights or have provided for the issuance of multiple voting shares, capital means the total number of voting rights. Shareholdings → Shares of which a person is the holder, even if the voting right is attributed to a third party or is suspended. → Persons who do not own the shares but are entitled to vote. → Holders of other financial instruments (refers to financial instruments that result in an entitlement to acquire, on such holder's own initiative alone, under a formal agreement, shares to which voting rights are attached, already issued, of an issuer whose shares are admitted to trading on a regulated market). → Aggregated holdings. Shall be comprised in the first and in the second point of the previous slide: a) the right to vote accrues as a pledgee or usufructuary creditor; (b) the right to vote accrues as a custodian or account holder, provided that such right may be exercised discretionally; (c) the right to vote accrues by virtue of a proxy, provided that such right may be exercised discretionally in the absence of specific instructions from the proxy giver; (d) the right to vote accrues under an agreement providing for the provisional and remunerated transfer thereof. Those who are members of a shareholders' agreement also count the voting rights referring to the shares contributed to the agreement by the other members. [Relevant kind of shareholders agreements: - shareholders’ agreements establishing prior consultation requirements for the exercise of voting rights - shareholders’ agreements having as their object or effect the exercise of a dominant influence over such companies] The disclosure of major shareholdings, shareholdings in financial instruments and aggregate shareholding shall be made promptly and in any case within four trading days, using the disclosure template provided by the CONSOB. → Exemptions → Administrative sanctions → Suspension of voting rights → Claim against the resolution (the resolution can be annulled ex art. 2377 c.c.; also Consob can contest the resolution) Provisions about information for holders of securities admitted to trading on a regulated market refer to those information necessary to enable holders of shares/debt securities to exercise their rights. → Information requirements for issuers whose shares are admitted to trading on a regulated market (art. 17) → Information requirements for issuers whose debt securities are admitted to trading on a regulated market (art. 18) Inside information: Regulation (EU) n. 596/2014 on market abuse (MAR) → An issuer shall inform the public as soon as possible of inside information which directly concerns that issuer. An integrated, efficient and transparent financial market requires market integrity. The smooth functioning of securities markets and public confidence in markets are prerequisites for economic growth and wealth. Market abuse harms the integrity of financial markets and public confidence in securities and derivatives. Inside information: information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments. The insider dealing crime Insider dealing arises when a person owns inside information and uses that information by acquiring or disposing of, for its own account or for the account of a third party, directly or indirectly, financial instruments to which that information are related. Occasional information provided by the Consob Issuers Regulation → Mergers, divisions and increase of the share capital with contributions other than in cash → Assets allocated to a specific business project → Significant takeovers or sales → Given facts related to amendments to the bylaws → Issue of bonds → Purchase and sale of treasury shares (i.e. own shares) → Reduction of the share capital → Issuers of securities other than shares  Rules on takeovers bids (Directive 2004/25/EC of the European Parliament and of the Council of 21 april 2004 on takeover bids) Italian Financial Consolidate Law definition: Public takeover bids (cash payment) or exchange offers (payment in the form of other financial instruments) represent an irrevocable offer made, under the same conditions, to all the holders of the financial products referred to therein. Any clause to the contrary shall be null and void. (art. 103, par. 1, t.u.f.) Directive definition: ‘Takeover bid’ or ‘bid’ shall mean a public offer (other than by the offeree company itself) made to the holders of the securities of a company to acquire all or some of those securities, whether mandatory or voluntary, which follows or has as its objective the acquisition of control of the offeree company. → "Securities" means financial instruments that grant the right to vote, even limited to specific matters, at ordinary or extraordinary shareholders' meetings. → Voluntary takeover bids → Mandatory takeover bids General rules → Supervision of the CONSOB (powers) → The ‘offer document’ → The target company press release and the report drawn up by the directors → The period for the acceptance of the offer → Possible competing offers → Closing of the bid The mandatory takeover bid → anyone who, as a result of purchases or an increase in voting rights, comes to hold a participation in excess of the threshold of 30% or to have voting rights in excess of 30% of the same, promotes a takeover bid addressed to all holders of securities on all the securities admitted to trading on a regulated market in their possession. The mandatory takeover bid Participation means a stake, held even indirectly through trustees or intermediaries, in securities issued by a company that confer voting rights in shareholders' meeting resolutions concerning the appointment or removal of directors or the supervisory board. → Takeover bid is also promoted by any person who, as a result of purchases, comes to hold a participation exceeding the 25% threshold in the absence of another shareholder holding a higher participation → obligation to make a takeover bid follows purchases of more than 5% or the increase of voting rights by more than 5% of the voting rights by those who already hold a participation of more than 30% without holding a majority of the voting rights in the ordinary shareholders' meeting → Calculation of voting rights in case of multiple voting shares or increased voting rights → Price of the offer → Calculation of the percentage (derivative financial instruments, indirectly holdings, consolidation) → Cases in which mandatory takeover bid does not apply Purchase obligations → Any person who comes to hold a stake of more than 90 % of the capital represented by securities admitted to trading on a regulated market shall be obliged to purchase the remaining securities admitted to trading on a regulated market from those who request it, unless he or she restores within 90 days a free float sufficient to ensure the orderly conduct of trading. Purchase obligations → A bidder who comes to hold, as a result of a total public offering, an interest of at least 95% of the capital represented by securities in a listed Italian company is obliged to purchase the remaining securities from those who request them. Right to purchase A bidder who comes to hold as a result of a total public offering a participation of at least 90% of the capital represented by securities in a listed Italian company has the right to purchase the remaining securities within three months of the expiration of the deadline for acceptance of the offer, if it has declared in the offer document its intention to avail itself of this right. Breach of any obligation to launch a takeover bid → voting rights and resolution → obligation to sell → Passivity rule (Defence Techniques) During the period of acceptance of the offer, the board of the offeree company shall obtain the prior authorisation of the general meeting of shareholders given for this purpose before taking any action, other than seeking alternative bids, which may result in the frustration of the bid and in particular before issuing any shares which may result in a lasting impediment to the offeror’s acquiring control of the offeree company. Broadly speaking, the law obliges target companies to refrain from engaging in transactions that conflict with a takeover bid (encouraging the so-called change of control). The purpose of this rule is to allow the company to adopt defensive techniques to contrast the takeover bid, putting the decision in the hands of the shareholders (and not the directors, avoiding actions that could undermine the interest of the company on their part). → Breakthrough rule The articles of association of listed companies may provide that when a takeover or exchange offer concerning the securities issued by them is made, the following rules shall apply: 1. During the period of acceptance of the offer, the limitations on the transfer of securities provided for in the bylaws shall have no effect on the offeror, nor shall the limitations on voting rights provided for in the bylaws or in shareholders' agreements have any effect in the meetings called to decide on the defensive acts and transactions. In the same meetings, shares with multiple voting rights confer only one vote, and increased voting rights shall not be counted. 2. When, as a result of a public takeover bid, the offeror comes to hold at least 75% of the capital with voting rights in resolutions concerning the appointment or removal of directors or members of the management or supervisory board, at the first meeting following the closing of the bid, convened to amend the bylaws or to remove or appoint directors or members of the management or supervisory board, multiple voting shares shall confer only one vote and shall have no effect: (a) limitations on voting rights provided for in the articles of association or in shareholders' agreements; (b) any special rights regarding the appointment or removal of directors or members of the management or supervisory board provided for in the articles of association; (c) the increased voting rights. The first rule aims to neutralize the most common defensive techniques implemented by the control group against takeover bids by making them ineffective during the offer acceptance period. The second rule aims to neutralize the effectiveness of certain clauses in the articles of association or shareholders' agreements that could prevent the successful bidder from achieving the actual result pursued by the takeover bid (and thus apply after the offer). Passivity rule and breakthrough rule are subject to the so-called reciprocity clause. Indeed, they do not operate when the takeover bid is launched by a person or an entity that is not itself subject to these rules or equivalent provisions. [This is obviously a compromise included in the directive to reach the agreement of all EU member states]. Companies limited by shares Italian and European Company Law – A.A. 2022/2023 Dott.ssa Giulia Serafin The amendments to the bylaws These amendments refers to all changes to the objective content of the bylaws or the instrument of incorporation. Amendments of the subjective content of these documents are not considered amendments (in particular, those involving the persons of directors, statutory auditors, and shareholders). From a formal point of view, amendments are the removal or the modification of clauses contained in the bylaws and the introduction of new clauses. The following rules will applies only in the case of change to the objective content. Procedure (art. 2346 c.c.) 1. extraordinary shareholders’ meeting resolution 2. notary checks → 2.1. (eventually) judicial control 3. recording in the Business register 1. extraordinary shareholders’ meeting resolution → Article 2365 c.c. → In some cases, the bylaws may give to the administrative body the competence for amendment (art. 2365, par. 2, c.c.) →the same rules of procedure will apply → In non-listed companies, higher deliberative quorums for the second call of the shareholders’ meeting are required for some amendments (art. 2369, par. 5, c.c.) 2. notary checks (art. 2346, par. 1, c.c.) → the minute is drawn up by a notary (the amendments of the bylaws are subject to the same form provided for the drawning up of this document: public deed) → legal control (not just a formal check) 3. recording in the Business register → the notary must apply for registration of the resolution within 30 days → formal control by the Business register Office 2.1 (eventually) judicial control → If during the checks, the notary finds that the conditions required by law are not met, he shall promptly notify the directors → directors have two options: call a shareholders’ meeting to take appropriate action or apply to the court to see if the conditions required by law are met (art. 2346, par. 3, c.c.) → If the directors do not provide the resolution will have no effect → effectiveness of the resolution: it shall not take effect until it has been recordered in the Business register (there are, however, cases in which effectiveness is conditioned or deferred) → legal publicity: in order to allow the current content of the bylaws to be known, an updated copy of the bylaws must be filed in addition to the resolution of amendment The right of withdrawal → ratio legis → grounds of withdrawal → liquidation of the shares Grounds of withdrawal A. mandatory (not derogable) B. derogable by the bylaws C. provides for by the bylaws (closed companies) D. withdrawal in case of indefinite-term company (art. 2437, par. 3, c.c., non-listed companies) E. withdrawal in case of delisting (listed companies, art. 2437-quinquies, c.c.) A. mandatory (not derogable) → shareholders absent, dissenting, abstaining can exercise the right of withdrawal, for all or part of their shares, in those cases: a. Amending of the corporate purpose b. Transformation of the company c. [Transferring the company’s headquarter abroad]: abrogated d. Revoking liquidation status e. Elimination of one or more of the derogable grounds of withdrawal f. Changes of the criteria to value the shares in the event of withdrawal g. Changes concerning the voting rights or the participation rights → in these cases any agreement aimed at excluding the right of withdrawal or making the latter more difficult is null and void (2437, par. 6, c.c.) B. derogable by the bylaws a. Extension of the term of the company’s duration b. Introduction or removing of restrictions on the circulation of shares Terms and procedure for exercising the right of withdrawal (art. 2347-bis, c.c.) → registered letter → within 15 days from the recording of the resolution in the Business register → if the ground of withdrawal doesn’t refer to a resolution, within 30 days from the day the shareholder becomes aware of the fact → Non-transferability and deposit of shares → When the right of withdrawal has no effect or can’t be exercised (art. 2437-bis, par. 3, c.c.) Criteria to determine the value of the shares (art. 2347-ter, c.c.) → unlisted companies limited by shares → listed companies limited by shares → alternative criteria established by the bylaws → shareholder’s opposition Procedure to liquidate shares (art. 2437-quater, c.c.) a. Offer to shareholders and convertible bondholders b. non-listed companies: offer to third parties; listed companies: offer on regulated markets c. reimbursement through purchase of the own shares by the company d. capital share reduction (creditors opposition) or dissolution of the company The Civil Code provides specific regulations for certain amendments to the bylaws: the increase and the reduction of share capital; transformations, mergers and divisions of the companies. The amendments to the share capital Increase of the share capital: → material increase (or paid increase) → nominal increase (or free increase) Reduction of the share capital: → material reduction → nominal reduction (reduction for losses) → cases other than losses where reduction is mandatory Increase of the share capital material increase nominal increase (or paid increase) (or free increase) SC SC SC SC Material (or paid) share capital increase → new financial resources = new contributions → issuance of new shares → conditions: previous contributions have to be fully paid-up; there must be no losses that would require a compulsory reduction → competence → the delegated increase (art. 2443 c.c.) → term for the subscription of the new shares → non-divisible and divisible increase → rules for new contributions Directive (EU) 2017/1132 Article 68 - Decision by the general meeting on the increase of capital 1. Any increase in capital shall be decided upon by the general meeting. Both that decision and the increase in the subscribed capital shall be published in the manner laid down by the laws of each Member State, in accordance with Article 16. (in Italy: through the Business register) 2. Nevertheless, the statutes or instrument of incorporation or the general meeting, the decision of which is to be published in accordance with the rules referred to in paragraph 1, may authorise an increase in the subscribed capital up to a maximum amount which they shall fix with due regard for any maximum amount provided for by law. Where appropriate, the increase in the subscribed capital shall be decided on within the limits of the amount fixed by the company body empowered to do so. The power of such body in this respect shall be for a maximum period of five years and may be renewed one or more times by the general meeting, each time for a period not exceeding five years. Directive (EU) 2017/1132 Article 69 - Paying up shares issued for consideration Shares issued for consideration, in the course of an increase in subscribed capital, shall be paid up to at least 25 % of their nominal value or, in the absence of a nominal value, of their accountable par. Where provision is made for an issue premium, it shall be paid in full. Directive (EU) 2017/1132 Article 70 - Shares issued for consideration other than in cash 1. Where shares are issued for consideration other than in cash in the course of an increase in the subscribed capital, the consideration shall be transferred in full within a period of five years from the decision to increase the subscribed capital. 2. The consideration referred to in paragraph 1 shall be the subject of a report drawn up before the increase in capital is made by one or more experts who are independent of the company and appointed or approved by an administrative or judicial authority. Such experts may be natural persons as well as legal persons and companies and firms under the laws of each Member State. The right of pre-emption (art. 2441 c.c.) → persons entitled to exercise the pre-emption right → ratio legis → term for the exercise → shares on which pre-emption rights have not been exercised (preferencial right on the inopted shares) → circumstances in which the right of pre-emption can be excluded (cases in which the shares have to be issued with a premium) → indirect exercise of the pre-emption rights → Recording in the Business register Directive (EU) 2017/1132 Article 72 - Increase in capital by consideration in cash 1. Whenever the capital is increased by consideration in cash, the shares shall be offered on a pre-emptive basis to shareholders in proportion to the capital represented by their shares. […] 3. Any offer of subscription on a pre-emptive basis and the period within which this right shall be exercised shall be published in the national gazette appointed in accordance with Article 16. However, the laws of a Member State need not provide for such publication where all of a company's shares are registered. In such case, all the company's shareholders shall be informed in writing. The right of pre-emption shall be exercised within a period which shall not be less than 14 days from the date of publication of the offer or from the date of dispatch of the letters to the shareholders. 4. The right of pre-emption may not be restricted or withdrawn by the statutes or instrument of incorporation. This may, however, be done by decision of the general meeting. The administrative or management body shall be required to present to such a meeting a written report indicating the reasons for restriction or withdrawal of the right of pre-emption, and justifying the proposed issue price. The general meeting shall act in accordance with the rules for a quorum and a majority laid down in Article 83. Its decision shall be published in the manner laid down by the laws of each Member State, in accordance with Article 16. 5. The laws of a Member State may provide that the statutes, the instrument of incorporation or the general meeting, acting in accordance with the rules for a quorum, a majority and publication set out in paragraph 4 of this Article, may give the power to restrict or withdraw the right of pre-emption to the company body which is empowered to decide on an increase in subscribed capital within the limit of the authorised capital. This power may not be granted for a longer period than the power for which provision is made in Article 68(2). […] 7. The right of pre-emption is not excluded for the purposes of paragraphs 4 and 5 where, in accordance with the decision to increase the subscribed capital, shares are issued to banks or other financial institutions with a view to their being offered to shareholders of the company in accordance with paragraphs 1 and 3. → so-called indirect exercise of the pre-emption rights. Directive (EU) 2017/1132 Article 84 - Derogation from certain requirements 1. Member States may derogate from the first paragraph of Article 48, the first sentence of Article 60(1)(a) and Articles 68, 69 and 72 to the extent that such derogations are necessary for the adoption or application of provisions designed to encourage the participation of employees, or other groups of persons defined by national law, in the capital of undertakings. → Exclusion of pre-emptive right in case the new shares are offered to the company's employees Nominal (or free) share capital increase (art. 2442 c.c.) → assets that can be used for the free share capital increase → methods that can be used for the free share capital increase Reduction of the share capital Material share capital reduction (art. 2445 c.c.) → causes and conditions → ways of execution → the shareholders’ meeting notice of call → recording, execution and creditors’ opposition Directive (EU) 2017/1132 Article 73 - Decision by the general meeting on reduction in the subscribed capital Any reduction in the subscribed capital, except under a court order, shall be subject at least to a decision of the general meeting acting in accordance with the rules for a quorum and a majority laid down in Article 83 without prejudice to Articles 79 and 80. Such decision shall be published in the manner laid down by the laws of each Member State in accordance with Article 16. The notice convening the meeting shall specify at least the purpose of the reduction and the way in which it is to be carried out. Directive (EU) 2017/1132 Article 75 - Safeguards for creditors in case of reduction in the subscribed capital 1. In the event of a reduction in the subscribed capital, at least the creditors whose claims antedate the publication of the decision on the reduction shall at least have the right to obtain security for claims which have not fallen due by the date of that publication. Member States may not set aside such a right unless the creditor has adequate safeguards, or unless such safeguards are not necessary having regard to the assets of the company. Member States shall lay down the conditions for the exercise of the right provided for in the first subparagraph. In any event, Member States shall ensure that the creditors are authorised to apply to the appropriate administrative or judicial authority for adequate safeguards provided that they can credibly demonstrate that due to the reduction in the subscribed capital the satisfaction of their claims is at stake, and that no adequate safeguards have been obtained from the company. 2. The laws of the Member States shall also stipulate at least that the reduction shall be void, or that no payment may be made for the benefit of the shareholders, until the creditors have obtained satisfaction or a court has decided that their application should not be acceded to. 3. This Article shall apply where the reduction in the subscribed capital is brought about by the total or partial waiving of the payment of the balance of the shareholders' contributions. Nominal share capital reduction (due to losses) 1. The optional reduction (decrease of less than 1/3 of the share capital): there are no rule, hence in this event the reduction is optional, but if there are losses profits cannot be distributed... 2. Mandatory reduction: 2.1 Decrease of more than 1/3 of the share capital that does not affect the legal minimum capital 2.2. Decrease of more than 1/3 of the share capital affecting the legal minimum capital Share capital: 90.000 optional reduction Legal minimum mandatory reduction ex art. capital: 50.000 2446 c.c. mandatory reduction ex art. 2447 c.c. 2.1 Decrease of more than 1/3 of the share capital that does not affect the legal minimum (art. 2446 c.c.) → calling of the shareholders’ meeting → up-to-date balance sheet, directors' report and observations of the board of statutory auditors → appropriate measures of the shareholders' meeting → compulsory reduction: within the next financial year the loss has not decreased to less than 1/3 (ordinary shareholders’ meeting) Directive (EU) 2017/1132 Article 76 - Derogation from safeguards for creditors in case of reduction in the subscribed capital 1. Member States need not apply Article 75 (Safeguards for creditors in case of reduction in the subscribed capital) to a reduction in the subscribed capital the purpose of which is to offset losses incurred… 2.2. Decrease of more than 1/3 of the share capital affecting the legal minimum capital (art. 2447 c.c.) → calling of the shareholders’ meeting → measures that must be taken Directive (EU) 2017/1132 Article 77 - Reduction in the subscribed capital and the minimum capital The subscribed capital may not be reduced to an amount less than the minimum capital laid down in accordance with Article 45. However, Member States may permit such a reduction if they also provide that the decision to reduce the subscribed capital may take effect only when the subscribed capital is increased to an amount at least equal to the prescribed minimum. Companies limited by shares Italian and European Company Law – A.A. 2024/2025 Dott.ssa Giulia Serafin Bonds To raise funding, companies limited by shares may issue bonds. Bonds are debt securities that represent equal-value fractions of a unit operation in the form of a loan. Like shares, bonds have: → equal nominal value → grant equal rights (not administrative rights) Unlike shares: → bonds grant the status of creditor of the company → funds raised by the company from bondholders are not provided as contributions, but go to form the so-called loan capital, and they are placed in the company's assets as loans → so, the bondholders have the right to receive a fixed remuneration (interests), which normally doesn’t depend on the financial results of the company; also, at the deadline set for the loan, they have the right to receive repayment of the capital loaned. Except for these few common rules, there are many kinds of bonds: → index-linked bonds (structured bonds) → convertible bonds → warrant bonds → subordinated bonds → participating bonds Bond issuance limits → ratio → art. 2412, par. 1, c.c.: bonds may be issued for an amount that in the aggregate does not exceed twice the share capital (subscribed capital, not just paid-up capital), plus the legal reserve and the available reserves resulting from the latest approved financial statements; the statutory auditors shall certify compliance with this limit → guarantees that the company has eventually given for bonds issued by other companies are also calculated in this sum (art. 2412, par. 4, c.c.) → in addition, those financial instruments that contain an obligation to repay the capital, including conditional repayment, should be calculated The ratio between bonds issued and capital plus reserves must remain unchanged during the life of the bond, so: → the company may not pass a resolution to voluntarily reduce the share capital (i.e. material reduction) if the limit would no longer be met → compulsory reduction for losses (ex art. 2446 and 2447 c.c.) is allowed, but in this case (or also when reserves are reduced) profits cannot be distributed until the ratio between bonds and capital plus reserves is restored There are some situations where the limit (ratio between bonds and capital plus reserves) can be exceeded (so bonds can be issued for an amount exceeding the legal limit): 1. subscription by institutional investor that are subject to prudential supervision 2. bonds are guaranteed by a first priority mortgage (ipoteca) 3. for reasons that involving the national economy 4. bonds are to be listed on regulated markets or another multilateral trading venue 5. convertible and warrant bonds a mortgage is a right in rem that ensures that the creditor has priority satisfaction on a property (bene immobile) Issuance procedure → competence: the issuance of bonds is approved by the directors (unless otherwise provided by the bylaw or the law) → the minute must be drawn up by a notary, so it is subject to a legality check → the minute must be recorded in the Business register → the resolution shall only take effect and may only be implemented after its recording → bonds content (art. 2414, c.c.) → bond register (art. 2421, c.c.) Convertible bonds Convertible bonds are bonds that give the right to subscribe shares of the same company, based on a predetermined exchange ratio (conversion rate), using the amounts paid when the bonds are purchased as contributions. The one who exercises the conversion right ceases to be a bondholder and becomes a shareholder. The issuance of convertible bonds implies the need to also pass a resolution for a share capital increase (against contributions, i.e. material increase) that will be subscribed when the bondholders exercise their right to subscribe the new shares (right of conversion). → persons eligible to subscribe to the convertible bonds (shareholders and holders of convertible bonds already issued, art. 2441, par. 1, c.c.) → conditions for issuance 2420-bis: - share capital must have been fully paid up - convertible bonds cannot be issued for an amount lower than their nominal value (and that of the shares offered for conversion: it will apply art. 2346 c.c.) → Competence (art. 2420-bis c.c.): extraordinary shareholders’ meeting → delegation of competence to directors in the instrument of incorporation: 2420-ter c.c. (the delegation must determine a specified amount and a maximum period, which may not exceed five years) → Content of the issuance resolution: conversion rate, period and procedure → Rules that prevent the right of conversion from being affected: 1) in the event of a paid capital increase and of new issues of convertible bonds, pre-emptive rights also accrue to existing convertible bond holders 2) in the case of a free capital increase and a reduction for losses, the conversion rate is automatically adjusted to the amount of the increase or reduction 3) the company may not pass a resolution to materially reduce the share capital, to merge, to divide, or to change the criteria for the distribution of profits until the deadline set for conversion has expired (unless the bondholders are granted the option of early conversion) Organization of bondholders (art. 2415-2418 c.c.) → bondholders’ meeting → bondholders’ common representative Bondholders’ meeting: → ratio legis → competences → rule of the extraordinary shareholder’s meeting → call → changes to the bond terms and conditions: higher majority → recording in Business register Bondholders’ common representative → appointment and removal → termination of office → competences Participating equity instruments → Companies limited by shares can issue paticipating equity instrument to acquire assets other than from contributions. → Those assets contributed are not subject to the same rules as for contributions (they will not be attributed to the share capital). → Introduced with the 2003 reform. Discipline → Very flexible in terms of rights wich may be granted to them (rules provided by the Italian Civil Code are very generic) → Rights of patrimonial nature → Administrative right (not the right to vote in the general meeting) → With the bylaws the company has full autonomy to provide rules on how and under what conditions those instruments can be issued, the rights attributable and the rules for their circulation.  Financial statements Italian and European Company Law – A.A. 2024/2025 Dott.ssa Giulia Serafin Definition and purpose The financial statements are the accounting document that gives a true and fair view of the company’s assets and the financial position at the end of each financial year, as well as the economic result for the year (i.e. profits made, or losses incurred during the year). Its essential function is to periodically verify the state of assets (static aspect) and profitability (dynamic aspect) of the company. Applicable provisions Italian Civil Code (articles from 2423 to 2435-ter) and National accounting standards (issued by Organismo Italiano di Contabilità - OIC). International Accounting Standards: IAS/IFRS issued by the International Accounting Standards Board (IASB) and recognised by the European Union through EU regulations.  European Union Regulations Fourth Company Law Directive 78/660/EEC, on accounting standards, now replaced by Directive 2013/34/EU. Seventh Company Law Directive 83/349/EEC, on group accounts, now replaced by Directive 2013/34/EU. Regulation 2002/1606/EC of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (IAS/IFRS). General Principles “Financial statements must be drawn up in a clear way and must provide a true and fair view of the company’s assets, liabilities and financial position and of its result for the year.” (Art. 2423, par. 2, c.c.) “Financial statements shall present fairly the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Conceptual Framework for Financial Reporting (Conceptual Framework)”. (IAS 1, par. 15) General principles and their application The principle of clarity is developed in the rules governing the structure and content of financial statements. The principles of true and fair view find development in the rules that establish the valuation criteria for assets. Additional accounting standards (art. 2423-bis c.c.) Financial statements must… be prudently assessed (1), on a going concern basis (1), taking into account substance over formal aspects (1-bis) be referred to that financial year regardless of when collection or payment (3), taking into account only revenues which are sure (2), and also risks/losses which are unsure (4) assess different elements separately (5) drawn up without changing the valuation criteria from one year to the next (6)  Composition: documents (Italian Civil Code) Internal documents External documents 1. Balance sheet 1. Report of directors 2. Income statement 2. Report of the internal control 3. Explanatory notes body 4. Cash-flow statement 3. Report of the external legal Auditor  Composition: documents (International Accounting Standards) Internal documents External documents 1. Statement of financial position 1. Report of directors 2. Statement of profit or loss and 2. Report of the internal control other comprehensive income body 3. Statement of cash flows 3. Report of the external legal 4. Statement of changes in equity Auditor 5. Notes to the financial statements Different types of financial statements Ordinary financial statements for the financial year and other financial statements. Abridged Financial Statements (art. 2435-bis c.c.). Financial statements of micro-enterprises (art. 2435- ter c.c.). Procedure for the approval of the financial statements Financial Shareholders’ year end meeting 120/180 days 15 days 30 days 30 days timeline  Invalidity of the resolution passed to approve the financial statements No action for nullity or annulment may be taken if the financial statements of the following year have been approved (2377 and 2379 c.c.). If the external legal auditor issues a positive evaluation on the financial statements, then the resolution passed to approve the financial statements may only be contested by shareholders representing at least five per cent of the share capital. Listed companies: power of CONSOB to contest the financial statements. The distribution of profits The resolution to approve the distribution of profits (dividends). Capital losses in previous years. Reserves (the legal reserve; the statutory reserves; optional reserves). Profits that may be distributed. Leonine pact limit and limits resulting from the existence of special categories of shares. Fictitious distribution of profits and its consequences. Sustainability and the Accounting Law Directive 2014/95/EU as regards disclosure of non- financial and diversity information by certain large undertakings and groups Directive (EU) 2022/2464 as regards corporate sustainability reporting Companies limited by shares Italian and European Company Law – A.A. 2024/2025 Dott.ssa Giulia Serafin Alternative Administration and Control Systems Administration and control systems: → traditional system (administrative body and board of statutory auditors; default system) → two-tier system (supervisory board and management board) → one-tier system (board of directors and management control committee) Two-Tier System The management board carry out the functions of the board of directors. The functions of the supervisory board are peculiar, because it is given both the typical functions of the internal control body and some functions that, in the traditional system, are under the responsibility of the shareholders’ meeting (and which can also be increased by the bylaws). The audit of account shall be entrusted, without exception, to an external legal auditor or to an audit firm. Supervisory board → Number → Appointment → Professionalism, respectability and independence requirements may be provided by the bylaws → Remuneration → Duration → Removal → Publicity of appointment and termination of office in the Business register Function → supervision activities → it appoints and removes the members of the management board; determines their compensation unless the bylaws attribute this power to the shareholders' meeting → it approves the financial statements and the consolidated financial statement; the shareholders’ meeting maintains the competence to approve the distribution of profits. Also, the bylaws may provide that the financial statements be approved by the shareholders' meeting if the supervisory board fails to approve them or when a request is made by at least one-third of the members of the management board or of the supervisory board → it can decide to promote the liability action against the members of the management board, competence that it is also maintained by the shareholders’ meeting → if it is provided by the bylaws, the supervisory board may also pass the resolutions on strategic transactions and on the company’s business plans and financial plans drawn up by the management board (liability) Functioning → the chair → meeting → quorum → resolution validity → liability Management board → almost all the rules provided for the board of directors in the traditional system will apply → composition, appointment and removal → duration of the office → replacement mechanisms for directors do not apply Corporate liability action against management directors is specifically regulated in some respects (art. 2409-decies c.c.): → the action can also be promoted by the supervisory board → removal → renunciation and settlement of the liability action by the supervisory board One-Tier System This system is characterized by the absence of the board of statutory auditors. The management is exercised by the board of directors and the control by a management control committee, which is established within the first and performs the functions of the board of statutory auditors. The audit of account shall be entrusted, without exception, to an external legal auditor or an audit firm. Board of directors → the rules provided for the board of directors in the traditional system will apply as they are compatible → the members of the internal committee that performs the functions of the board of statutory auditors (management control committee) are appointed among the members of the board of directors → at least one third of the members of the board of directors must meet the independence requirements established for statutory auditors (in listed companies s. art. 147-ter tuf) → in listed companies one directors must appoint by the minority throughout the list voting mechanism Management control committee: functions Its role corresponds to that of the board of statutory au