The Supreme Court of Cassation has set out important principles regarding the duties of chairs and deputy chairs of company boards of directors. In particularly, chairs' duties are of an organisational nature and must be fulfilled in a neutral way with the aim of coordinating the board as an impartial body. The court also ruled on directors' right to be indemnified in the event of their revocation without cause before the expiration of their appointment.
A recent Court of Cassation decision concerned the amendment of a company's articles of association to considerably increase the percentage of legal reserve and extraordinary statutory reserve before dividends were distributed in favour of shareholders. The question before the court was whether the amendment was grounds for a shareholders' withdrawal on the basis that it was an amendment of articles of association with regard to shareholders' voting rights or their participation.
Article 2497 of the Civil Code sets out that companies which provide direction to coordinate their subsidiaries are directly liable to the subsidiaries' minority shareholders for any damages caused to profitability and shareholding value by a violation of fair management principles. In this context, a recent Supreme Court of Cassation decision examined how to assess whether a corporate group exists and the scope of controlling entities' direction and coordination activities.
The Supreme Court of Cassation recently held that the postponement of loan reimbursements to company partners or shareholders applies not only in cases of court-assessed insolvency, but also if a company experiences temporary financial difficulties. The court also found that company management must refuse to reimburse loans to partners or shareholders if the company was experiencing financial difficulties when the loan was granted or the reimbursement was requested.
In a recent decision, the Supreme Court of Cassation stated that the revocation of members of a controlled company's board of directors due to the transfer of the majority shareholdings to a third party does not constitute just cause for a director's revocation. Consequently, a change in control of a holding company does not breach the duty of trust between the company and its board members.
Italian corporate law establishes the liability of members of the board of directors of joint stock companies depending on whether they are chief executive officers or executive directors or independent and non-executive directors. Recent Supreme Court of Cassation and Milan Court of Appeal decisions focused on the liability of non-executive directors by affirming that they must be proactive and fulfil their duty to be as informed as possible to ensure a suitable standard of corporate governance.
The Civil Code sets out specific rules which apply in the event that a chief executive officer (CEO) or director has extra-company interests. In the event that such a conflict of interests affects the position of a managing director, they cannot vote in the relevant board of director's resolution on the subject of the conflict. A recent Supreme Court of Cassation Decision has emphasised the duties of transparency and fairness to which company directors and CEOs in Italy must adhere.
The Supreme Court of Cassation recently examined the admissibility of a put option clause in a shareholders' agreement of a joint stock company by which one shareholder was committed to indemnify the other shareholders from any losses arising from payments to the company for stock capital contributions or other payments having a similar effect. The court's decision confirms that Italian company law admits shareholder agreement clauses in line with the international principles of lex mercatoria.
The rules concerning the corporate governance of limited liability companies were recently amended. The changes are twofold: some directly affect the bylaws of limited liability companies, while others affect the requirements for appointing professionals who perform auditing and supervisory duties for such companies. The new provisions must be adopted immediately by newly formed companies, whereas pre-existing companies must update their bylaws by 16 December 2019.
Italian company law contains specific provisions for shareholders' agreements relating to listed or non-listed companies. Two recent court decisions provide clarity in this regard and confirm that the existing legal framework broadly recognises the admissibility of shareholders' agreements in order to govern the rights and obligations of company shareholders, particularly for joint ventures in the financial, trade and industrial fields.
Italian corporate legislation does not stipulate a rule on the share premium for ordinary corporate capital increases when the option right is not excluded. As such, there is a real risk that gaps in legislation may jeopardise the interests of minority shareholders.
The government has approved economic liberalisation measures that make it easier for consumers to bring class actions. The new decree also grants the Competition Authority additional powers in respect of standard business-to-consumer contracts and extends the application of certain consumer protection provisions to microenterprises.
An Italian court has sentenced a company's chief executive officer (CEO) to 16 years' imprisonment for an offence related to the death of seven of the company's workers. This is the first case in Italy in which a CEO has been found guilty of homicide, rather than manslaughter.
Reforms to Italian company law have aimed to facilitate investment in listed companies by allowing for greater participation in shareholders' meetings by minority shareholders and investors residing outside Italy. This makes a minority participation a more attractive opportunity, especially for investors such as investments funds.
The courts are increasingly required to consider disputes under agency agreements between a principal from a non-EU state and an Italian agent operating in Italy. Where agreements include a forum-shopping clause, such disputes raise the question of how and where an Italian agent can claim against the principal.
An Italian joint stock company may issue shares that track the results of a specific line of business or a subsidiary. The value of tracking stocks depends on the return of assets by the division or subsidiary in question, but remains affected by the company's overall performance. Therefore, the company's bylaws and any shareholders’ agreements should provide for adequate regulation.
The extensive corporate reform introduced by Decree-Law 6/2003 has largely achieved its aim: the limited liability company is now distinct from the joint stock company, less expensive and more suitable for smaller corporations. However, numerous gaps in the legislative framework still present problems for parties intending to establish business entities in Italy.
Shareholders' agreements are subject to a five-year maximum statutory duration. Parties may not set a longer duration or contract for automatic compulsory renewal. This update considers when an arrangement is deemed to be a 'shareholders' agreement', reviews the issues arising from such definition in the context of different contractual and corporate structures and considers alternative mechanisms.
A European Court of Justice decision confirms that a provision in the Civil Code that allows public entities directly to appoint directors to companies in which they hold shares is incompatible with EU principles of free movement of capital and freedom of establishment.
Including: Corporate Forms; Incorporation; Company Names; Amendment of Bylaws; Shares and Shareholders; Corporate Governance; Auditors; Dissolution and Winding Up.