Source: https://iclg.com/practice-areas/corporate-governance/corporate-governance-2017/italy
Timestamp: 2018-05-22 17:33:49
Document Index: 539533209

Matched Legal Cases: ['art. 2422', 'art. 2388', 'art. 2476', 'art. 2468', 'art. 2479', 'art. 111', 'art. 120', 'art. 2386']

Corporate Governance 2017 | Laws and Regulations | Italy | ICLG
Corporate Governance 2017 | Italy
Corporate governance applies to joint stock companies (Società per Azioni – SpA), companies limited by shares (Società in accomandita per Azioni – SapA), limited liability companies (Società a responsabilità limitata – Srl) and cooperatives.
This chapter will mainly focus on SpAs, since this is widely the most common form for listed companies; also Srls will be taken into consideration since, even though such kind of company may not be listed, it represents the most common company type adopted in Italy.
The main corporate governance source for Italian companies is the Italian civil code (“ICC”). Furthermore, upon incorporation any company must adopt its by-laws, which set forth the main rules regarding, inter alia, the management body, its composition, its role and its functioning.
As per listed companies, in addition to the foregoing, the following sources shall also apply: Legislative Decree no. 58/1998 (Testo Unico della Finanza – “TUF”), regulatory provisions issued by Commissione Nazionale per le Società e la Borsa – “Consob” (the Italian authority which is responsible for the supervision of the Italian securities market) or by Borsa Italiana S.p.A. (the company managing the Italian stock exchange), and related secondary regulations.
After the crisis of the recent years, one of the major challenges in corporate governance is to place priority on creating value for the shareholders over a medium-long term period.
Gender diversity is seen as another key challenge: since 2012 the number of women on boards has increased significantly and has now have reached approximately 30%.
The remuneration of executive directors and management, and in particular of the state-owned public companies, is also a topic that has been the subject of a political debate.
Even though the management of a company is reserved for the management body, shareholders have certain rights which can influence and impact the operation and management of corporate entities, such as: approval of the yearly financial statements; allocation of profits; resolutions on input into any extraordinary transactions (mergers, de-mergers, winding-up, reorganisation and dissolution of the company); and resolutions on increasing or decreasing of the corporate capital.
Furthermore, in SpAs, shareholders have the right to inspect corporate books and make copies of them (art. 2422 ICC) and to challenge the resolutions of the management body that infringe and cause damage to the shareholders’ rights (art. 2388, section 4, ICC).
As to Srls, quotaholders who do not manage the company are entitled to receive information on the company’s business and consult corporate books and documents relating to the management (art. 2476, section 2, ICC). Moreover, by-laws can empower specific quotaholders with management powers (art. 2468, section 3, ICC). Finally, directors can request that the quotaholders resolve on specific issues that are usually reserved to the management body (art. 2479 ICC).
There is no specific responsibility for shareholders regarding corporate governance; consequently, they cannot be held responsible in terms of corporate governance.
Nevertheless, the Code recommends that the management body takes initiatives aimed at promoting the broadest participation possible of the shareholders in the shareholders’ meetings and makes the exercise of their rights as easy as possible in order to develop a continuing dialogue with the shareholders.
In SpAs, a shareholders’ meeting may be ordinary or extraordinary.
Meetings are called by the directors; shareholders representing 10% of the capital (5% for listed companies) also have the right to request that directors call a meeting or add specific items to the agenda.
Ordinary meetings must be held at least once a year and no later than 120 days after the end of the previous fiscal year. By-laws may extend this term to 180 days in case of specific needs based on the structure or the activity of the company.
Among others, the following resolutions are reserved for the ordinary meeting:
■ approving the yearly financial statements and distribution of profits;
■ appointing and revoking directors and auditors and, if appointed, the external auditors; and
■ determining directors’ and auditors’ remuneration.
Ordinary meetings are duly constituted with the presence of as many shareholders as representing at least half of the corporate capital; resolutions are taken with as many votes as those representing the absolute majority of those in attendance (unless otherwise indicated in the by-laws).
Among others, the following resolutions are reserved for the extraordinary meeting:
■ amending the by-laws;
■ appointing, replacing and defining the powers of the liquidators;
■ issuing debentures convertible into shares; and
■ carrying out mergers, de-mergers, winding-up and reorganisation.
Extraordinary meetings are duly constituted and lawfully adopt resolutions with the presence and the favourable vote of as many shareholders representing more than half of the corporate capital. In case of listed companies, resolutions are taken with as many votes as those representing 2/3 of the corporate capital.
In Srls, among others, the following resolutions are reserved for the shareholders:
■ approving the annual financial statements and distribution of profits;
■ appointing directors;
■ appointing auditors, if any;
■ amending the by-laws; and
■ entering into transactions which cause a substantial change to the corporate object or to the rights of the quotaholders.
Resolutions are taken with the favourable vote of as many quotaholders representing more than half of the corporate capital (unless otherwise indicated in the by-laws).
As a general rule, shareholders cannot be liable for acts or omissions of the company: only directors have general and specific duties and responsibilities with respect to corporate governance activities.
As a partial derogation as to Srls, quotaholders may be held liable jointly with directors, should these quotaholders have intentionally voted or approved activities which damaged other quotaholders, third parties or the company itself.
Shareholders may be disenfranchised in case of a pledge or usufruct: unless otherwise agreed by the parties, the right to vote is exercised by the pledgee or the usufructuary creditor. In case of seizure of the shares, the voting right is exercised by the keeper.
In case of capital increase, the disenfranchisement is extended also to the new shares due to the shareholder.
Furthermore, shareholders that have not made their capital contribution in time cannot attend the shareholders’ meetings (and consequently they cannot vote).
In addition, as to listed companies, should a bidder buy at least 95% of the shares in the framework of a takeover bid, the remaining 5% may be compulsorily purchased by that bidder within three months of the expiry of the deadline for bid acceptance (so-called “squeeze-out”: art. 111 TUF).
In case of listed companies, shareholders that hold, either indirectly, more than 3% of the capital (5% in case of small-medium sized company) shall notify the company and the Consob (art. 120 TUF). A notification shall also be made when the thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 50%, 66.6% and 90% are reached, and when the investment falls below such thresholds.
Among the listed companies, the traditional system is largely prevalent; in 2015 only two adopted the monistic board system and four the dualistic system.
The board of directors is appointed by the shareholders’ meeting.
The shareholders’ meeting appoints the supervisory board, which must be comprised of least three members.
Members of one board may not be members of the other.
The board of directors is appointed by the shareholders’ meeting. At least 1/3 of the members must be independent.
The board appoints the supervisory committee from its members. Such committee, in the case of listed companies, must be comprised of at least three members. Members of the committee must be independent and must meet the requirements of honourableness and professionalism, as provided for by the by-laws. Furthermore, they cannot be empowered with any delegated authorities by the board, nor in general carry out any management activity of the company.
At least one member of the committee must be an auditor (revisore legale dei conti).
In case of Srls, directors are appointed by the shareholders’ meeting.
The term of the office in SpAs shall not exceed three fiscal years. In Srls there is no limit for the term of the office; the appointment may be also for an indefinite term.
In case of listed companies, by-laws must provide that directors are appointed on the basis of the list of candidates and define the minimum participation share required for their presentation (which must not be higher than 1/40 of the share capital). At least one of the directors shall be chosen from the minority list.
Furthermore, at least 1 of the directors must satisfy the independence requirements.
In listed companies, by-laws must provide for mechanisms which assure that the less-represented gender obtains at least 1/3 of the appointed directors.
Should during a fiscal year one or more directors cease their office, the others provide for a replacement by resolution approved by the board of statutory auditors, provided that the majority is always represented by directors appointed by the shareholders’ meeting (art. 2386 ICC). The directors so appointed remain in office until the next shareholders’ meeting. Should the majority of the directors cease their office, those who remain in office shall call a meeting to appoint the new directors.
In listed companies meetings must be held at least on a quarterly basis. In any case, according to common practice, their frequency is significantly higher (approx. 8–10 meetings per year).
In addition to the general duty of care, the ICC provides certain specific duties such as: duty to be informed about the running of the business and, in turn, duty of the managing director(s) to inform other directors; duty to keep the corporate books in a correct way; duty not to compete with the company, unless in case of express authorisation from the shareholders’ meeting; and duty to notify any conflict of interests. In addition, directors are required to ensure the company complies with obligations under health and safety legislation, employment legislation and insolvency law.
The management body is responsible for executing any ordinary and extraordinary management powers.
■ setting the strategic aims, values and standards of the company;
■ preparing the financial statements of the company;
■ providing strategic guidance and evaluation on the overall adequacy of the internal control and risk management system;
■ instigating initiatives aimed at promoting the broadest participation of the shareholders in the shareholders’ meetings and make easier the exercise of the shareholders’ rights; and
■ developing an effective dialogue with the shareholders based on the understanding of their reciprocal roles.
As to the challenges, a particular focus is put upon risk management: the recent projects of reformation of the insolvency law (still in discussion) tend to provide for mechanisms aimed at identifying any material adverse changes to the economic and financial positions of the company at an early stage. To this end, a major role will be reserved for the management body.
Italian companies are required to prepare a management report, attached to the yearly financial statements, whereby the directors describe the situation of the company and the trend of the operations. No specific information is required as to the management body practices.
Additionally, listed companies are required to insert in such management report a section named: “Report on corporate governance and ownership structures”, which shall provide, inter alia, detailed information on:
Very recently the EU Directive on non-financial information and diversity information by large companies and groups (2014/95/EU) has been implemented in Italy (Legislative decree 254/2016). Large companies (and in particular: listed companies, banks, insurance companies) are required to make disclosures on non-financial matters such as environmental, social and employee-related matters, anti-corruption and bribery issues, respect for human rights and diversity.
Italian companies are subject to disclosure and transparency duties, and are obliged to report certain information (see the answer to question 5.2) to the companies’ register. Such information may be accessed by the public. Listed companies must also disclose information to Consob and to Borsa Italiana S.p.A.
■ financial statements and minutes of any related shareholders’ meetings, management reports and statutory auditors’ reports;
■ shareholders’ agreements;
■ direct and indirect holdings;
■ securities and restrictions on the transfer of holdings (including those held by directors);
■ details of the company’s capital structure;
■ details of the composition and duties of the management and control bodies;
■ details of management delegated powers;
■ details of the adoption of a corporate governance code of conduct;
■ agreements between the company and directors, internal or external auditors that envisage indemnities in the event of resignation or dismissal without just cause or termination of their agreements upon a takeover bid;
■ any agreement resulting in a change of control or the termination of a change of control situation;
■ details of the holders of securities with special control rights;
■ compensation agreements detailing financial instruments in favour of directors, managers, employees or external collaborators linked to the company, parent company or subsidiaries; and
■ shareholdings exceeding the thresholds fixed by Consob (see the answer to question 2.7).
Whilst in an SpA shareholders’ meeting a board of statutory auditors must be appointed, in Srls the appointment shall be mandatory only when certain requirements are met (in terms of assets, turnover and number of employees).
The authors would like to acknowledge the collaboration of Alessandra Bellani, trainee of the firm, in the preparation of this chapter. Alessandra works mainly on litigation and non-contentious matters.