Introduction
Mandatory, potentially appropriate and optional amendments
Main amendments
On January 27 2010 a legislative decree to implement the EU Shareholders’ Rights Directive (2007/36/EC) amended certain provisions of the Civil Code and the Consolidated Finance Law (Legislative Decree 58/98). The revised rules have applied to shareholders’ meetings called since October 31 2010.
The aim of the reform is to encourage investment in listed companies by allowing for greater participation in shareholders’ meetings by minority shareholders and non-resident investors. It makes a minority shareholding a more attractive opportunity, especially for certain investors, such as investments funds, which generally prefer not to assume the risks of company management.
This update summarises the main amendments that affect listed companies’ bylaws and regulations on shareholders’ meetings.
Compulsory, potentially necessary and optional amendments
Companies should be aware of the distinction between optional amendments and compulsory amendments, the latter including amendments that may be deemed necessary in order to comply with the new provisions.
The only strictly compulsory provision requires a company to nominate at least one means of electronic communication whereby a shareholder can nominate a proxy for a shareholders’ meeting (pursuant to Article 135(9) of the law).
The amendments that may be deemed necessary in order to comply with certain new provisions relate to:
The optional amendments affect:
Timing and content of call notice
As provided for in Article 125(2) of the law, new time limits have been set for the call notice, depending on the agenda of the shareholders’ meeting:
In addition to the date, time and place of the meeting and an indication of the items to be discussed, the call notice must include:
In order to ensure faster access to relevant information without discrimination between shareholders, the call notice and any additional information and documents that may be useful (eg, a proxy form) must be published on the company’s website.
New shareholder rights
According to the amended Article 2367 of the code, shareholders representing at least 5% of the company’s corporate capital may require the directors to call a shareholders’ meeting. Furthermore, shareholders can ask questions before the shareholders’ meeting about items on the agenda, unless the ‘frequently asked questions’ section of the company website already provides clarification on the issue.
The amended Article 126(2) of the law relates to the right of shareholders that represent at least 2.5% of the corporate capital to ask for an item to be added to the agenda. They must present a written request, supported by their own report, within 10 days of the meeting being called. This period is halved for matters relating to the reduction of capital due to losses, the reduction of capital below the legal minimum and the appointment or removal of liquidators.
Representation
The amendments to Article 2372 of the code have removed a number of prohibitions and limitations on listed companies. The changes mean that:
Furthermore, in order to encourage shareholder involvement, listed companies must indicate in their bylaws at least one method whereby shareholders may submit details of proxy representation electronically.
Article 135(11) of the law states that unless the bylaws provide otherwise, a listed company’s call notice must indicate a person appointed by the company who can act as a proxy. Instructions may be given on the exercise of the shareholder’s voting rights, even if such instructions relate specifically to certain items on the agenda. The law also provides that proxy status must be conferred at least two trading days before the meeting by completing an online form (the required contents of which are set out in CONSOB regulations). Articles 134(2) and (3) of CONSOB Regulation 11971/1999 (as updated in January 2011) state that in certain circumstances the representative may vote against his or her instructions if important new information comes to light in the course of the meeting.
Record date
Article 83(6) of the law introduced the record date to identify shareholders that are entitled to attend a shareholders’ meeting and vote on items on the agenda. The intermediary must indicate such shareholders by means of the required communication according to the data available at the end of the seventh trading day before the date of the meeting.
Therefore, if shares are transferred between the record date and the date of the meeting, this does not affect the assignor’s right to vote in the meeting, whereas the assignee may seek to revoke the assembly resolution and exercise its right of withdrawal.
Appointing directors
Article 147(3)(1)(2) of the law requires that lists for appointments to the board of directors be deposited at the company’s registered office at least 25 days before the shareholders’ meeting. Such lists must be made available at the registered office and on the company’s website at least 21 days before the meeting and must comply with the formalities set out in CONSOB regulations.
Shareholder identification
The company’s bylaws may provide a mechanism for identifying its shareholders, as set forth by Article 83(12) of the law, as long as a certain proportion of shareholders (ie, shareholders representing at least one-half of the number of shares prescribed by CONSOB in order to nominate directors) may ask – at any time – for information about the identity of shareholders and the size of their holding.
Article 83(11) requires the company to update the shareholder ledger within 30 days of receipt of communications and reports from financial intermediaries.
Approval of financial statements
Article 154(3) of the law previously required listed companies to publish annual draft financial statements, approved by the management body, within 120 days of the end of the fiscal year. Listed companies have now been given 180 days to approve their financial statements, pursuant to Article 2364 of the code. Such statements must be made available at the registered office, on the company’s website and by any other means stipulated by CONSOB in other regulations.
Electronic voting
The new Article 2370 of the code allows listed and unlisted companies to provide for electronic voting in compliance with CONSOB regulations.
Single call and relevant quorum
A new provision in Article 2369 allows listed joint stock companies with an appropriate provision in their bylaws to issue a single call for a shareholders’ meeting and to prohibit further calls. In such cases the applicable quorum is as follows:
Increased dividends for certain categories of share
In order to encourage shareholder involvement in a company’s business and in the supervision of its management, incentives have been introduced in favour of minority shareholders.
Shareholders that own less than 0.5% of the corporate capital (or a lower percentage indicated in the company’s bylaws) are entitled to receive a higher percentage of profits, to within 10% of the profit distributed to the other categories of shareholder. This incentive does not create a special category of shares for the purpose of Article 2348 of the Civil Code and the relevant shareholders are not required to attend a special meeting. Shares in this category may not be granted to shareholders that exercise a controlling influence over the company, whether directly or jointly with other shareholders pursuant to a specific shareholders’ agreement.
However, some commentators argued that this provision may be unconstitutional. It arguably represents an exercise of power beyond governmental remit under Article 76 of the Constitution, as Parliament delegated the government to implement the directive, which does not include provisions that affect shareholders’ financial rights, profits or dividends. Moreover, the provision may contradict Article 3, as the right to increase dividends in relation to certain shares is granted to listed companies only – it could be argued that it is unconstitutional to grant a right that does not also apply to other stock companies. Moreover, the incorporation of the controversial provision into a listed company’s bylaws could raise questions in relation to the right of withdrawal of shareholders that object to such a provision.
For further information on this topic please contact Barbara Corsetti or Luca Gambini at Portolano Colella Cavallo Studio Legale by telephone (+39 06 696 661), fax (+39 06 696 665 44) or email (bcorsetti@portolano.it or lgambini@portolano.it).