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Chiomenti
Studio Legale
Protected by the Law?
Improving the Protection of Minority
Shareholders in Italian Public Companies
Enrico Giordano
Chadi A. Salloum
Chiomenti
Studio Legale
Roadmap
Our approach to presenting MSPs
• Going “back to basics”
• Presenting key Minority Shareholders’ Protections and
• Suggesting guidelines for constructive shareholder
involvement
Chiomenti
Studio Legale
CG & MSPs: Legal Sources
Italian Civil Code
As amended by Law No. 6/2003 (on Corporate Law Reform)
Consolidated Financial Act
Legislative Decree No. 58 of February 24, 1998
Investor Protection Act
Law No. 262 of December 28, 2005 (on the protection of
savings; this law amended the Civil Code and the Consolidated Financial
Act)
Chiomenti
CG Systems: Overview
Studio Legale
Traditional
B of D
Shareholders
B of SA
 B of D in charge of ordinary and extraordinary management
 B of SA supervises proper management and compliance with law
and by-laws
Chiomenti
Studio Legale
CG Systems: Overview
Two-tier
Shareholders
Superv. Board
Mgmt. Board
 Superv. Board supervises proper management and compliance with
law and by-laws
 Mgmt. Board in charge of ordinary and extraordinary management
Chiomenti
Studio Legale
CG Systems: Overview
One-tier
B of D
Shareholders
Mgmt. Ctrl. Com.
B of D in charge of ordinary and extraordinary management
Mgmt. Ctrl. Com. supervises proper management and performs
other functions delegated by B of D
Chiomenti
Studio Legale
CG Systems: Overview
Fiduciary duties of directors
Duty of care
Duty of loyalty
Duty of candor
Conflict of interest
Duty to disclose
Chiomenti
Studio Legale
Listed Company: “Special S.p.A.”
Oversight by
Consob
Higher level
of scrutiny
Resulting in
additional protections
Stringent
legislative
framework
Chiomenti
Studio Legale
Listed Company: “Special S.p.A.”
 Key rights and protections

Participating in the election of corporate bodies

Reporting irregularities to the board of statutory auditors

Requesting Court intervention

Requesting the call of a shareholders’ meeting and additions to
its agenda

Instituting legal action against the company’s corporate bodies

Challenging the board of directors and shareholders’ meeting
resolutions
Chiomenti
Listed Company: Key MSPs
Studio Legale
1.
Election of corporate bodies
B of D

2.5% holders of share capital to present own slate

Right to elect at least one director

Election of independent directors

•
For the first time mandated by law
•
One if B of D has more than seven members
•
What does it mean to be independent?
Borsa Italiana: a leader in corporate governance
Chiomenti
Listed Company: Key MSPs
Studio Legale
B of SA

Exclusive right to elect Chairman of B of SA

Election of independent statutory auditor
•
Broadened criteria in line with changes to B of D
Chiomenti
Listed Company: Key MSPs
Studio Legale
2.
Adoption of the Code of Conduct
For the first time, the law recognised the existence and importance
of the Code

Comply or explain
•
Annual disclosure
•
Monitoring by Consob
•
Role of statutory auditors
Chiomenti
Listed Company: Key MSPs
Studio Legale
3.
Reporting irregularities to B of SA

Any holder suspecting mismanagement has the right to
report

if 2 % holder of share capital complains, B of SA has to:
•
investigate
•
report to shareholders’ meeting
Chiomenti
Listed Company: Key MSPs
Studio Legale
4.
Requesting Court intervention

5% holder of share capital suspecting serious
mismanagement that could damage the company may
request the Court to intervene and investigate

B of SA may
•
on its own initiative or
•
on basis of shareholders’ reporting irregularities to it
request the Court to intervene and investigate
Chiomenti
Listed Company: Key MSPs
Studio Legale
5.
Requesting the call of a shareholders’ meeting or
additions to its agenda

10% holder of share capital may call the meeting

2.5 % holder of share capital may request additions to
agenda
•

New MSP under IPA
Important tools for minority shareholders to be heard and
trigger discussions
Chiomenti
Studio Legale
6.
Listed Company: Key MSPs
Bringing legal action against directors
Direct action by the Company

Approved by shareholders’ meeting or resolved upon by 2/3
of the B of SA, for breach of fiduciary duties

5 years time limit from the day directors cease office

Unless opposed by 5% of share capital, company may
abandon or settle action
Chiomenti
Studio Legale
6.
Listed Company: Key MSPs
Bringing legal action against directors (cont.)
Derivative action by shareholders

2.5 % holder of share capital may bring a derivative action for
breach of fiduciary duties

5 years time limit from the day directors cease office

Unless opposed by 5% of share capital, company may
abandon or settle action

Recovery is only for the benefit of the company
Chiomenti
Listed Company: Key MSPs
Studio Legale
6.
Bringing legal action against directors (cont.)
Direct action by shareholders

Any shareholder may bring a direct action for damages on
the basis of:
•
malice, fraud or negligence

5 years time limit from the day directors cease office

Damages are awarded to shareholders
Chiomenti
Listed Company: Key MSPs
Studio Legale
7.
Challenging resolutions
Shareholders’ meeting

0.1% holder of share capital may challenge if:
•

resolutions are not in conformity with law or by-laws
Any shareholder is entitled to be awarded damages as a
result of resolutions’ non compliance with law or by-laws
Chiomenti
Listed Company: Key MSPs
Studio Legale
7.
Challenging resolutions (cont.)
B of D

Most important new MSP
•

Direct mean to scrutinise management
0.1% holder of share capital may challenge if:
•
resolutions cause damage to shareholder’s interests
Chiomenti
Studio Legale
Chiomenti
Studio Legale
Conclusions & Guidelines
 The Code of Conduct and legislation have provided
minority shareholders the necessary tools to
protect their interests
 Minority shareholders are protected by law, but
need to be proactive in a responsible and
constructive way
Chiomenti
Studio Legale
Conclusions & Guidelines
 Minority shareholders should:
 Know their rights and remedies
 Communicate to management areas of their concern
 Attend shareholders meetings
 Not be deterred by the complexity of legal issues by
reaching out to local counsel for guidance and
assistance
Chiomenti
Studio Legale
Enrico Giordano
Partner & Head of Capital Markets
[email protected]
Chadi A. Salloum
Associate
[email protected]
Via XXIV Maggio 43 - 0187 Roma
tel. +39 06 466221
fax. +39 06 46622600
[email protected]
www.chiomenti.net
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