NCTM

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NCTM for legislative action on transfer of shares and businesses

The vitality of an economic system is also measured by its dynamism in mergers and acquisitions (M&A), which means by the number and value of transactions involving transfers of shareholdings and businesses. The transfer of shares, equity interests and businesses is therefore one of the fundamental elements on which the competitiveness of a country is based. It is clear, however, that in the absence of adequate protections for the purchaser, such element may become an obstacle to, rather than a stimulator of, economic growth.

However, the Italian legislative landscape evidences a grey area specifically with respect to purchaser protections. Indeed, a present purchaser of a shareholding or business unit in Italy risks, after one year of completing the purchase, no longer being able to seek indemnification from the seller for any inconsistencies between the seller’s warranties and the actual financial standing of the target, even where the purchase agreement includes a specific warranty for a longer period.

This at least seems to be still the prevailing case law, which, rejecting the conclusions reached for some time now by both legal commentators and arbitral tribunals, continues to equate misrepresentations with imperfections in property sold or failure to satisfy promised quality standards and, consequently, to apply the one-year statute of limitations relating to warranties under Article 1495 of the Italian Civil Code…

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Jurisdiction: Italy