Wise guys

With the imminent reform of Italian corporate law, Andrea Arosio and Mario Lisanti report on a step towards a more flexible and market-friendly legal framework

In an attempt to increase the flexibility of the legal framework affecting Italian enterprises, earlier this year the Italian government passed a wide-ranging reform of Italian corporate law by enacting the Legislative Decree No 6, 17 January 2003 (the decree).

The decree, which will come into force on 1 January 2004, contains major changes to the legislation concerning limited-liability companies (società a responsabilità limitata (srls)), joint stock companies (società per azioni (spAs)), corporate groups, financial statements, administration of justice, corporate restructuring and cooperatives.

Reasons for reform

The reform is in response to various factors. First, the company law rules embodied in the 1942 Civil Code are not as flexible and market-friendly as investors and other market players require.

Second, the 1998 Consolidated Financial Act, which brought about a major reform of Italian corporate governance rules for listed companies, has created a regulatory gap between listed and unlisted companies that needs to be at least partially filled.

Third, the creation of a single market and a single currency, together with the recent company law reforms in other EU member states, has increased the need to provide domestic companies with an efficient regulatory framework in order to allow them to face foreign competition on a level playing field.

New business models

SpAs will now be able to choose from three different organisational models:

– the traditional Italian model, comprising a managing body (sole director or board of directors) and a supervisory body (board of auditors), both appointed by the ordinary shareholders’ meeting.

– the dual board system, along the lines of the German model, comprising a supervisory board, which is appointed by the shareholders and which has some of the powers that in the first model are exercised by the shareholders’ meeting (eg approval of the yearly accounts) and the board of auditors (eg supervision of management’s conduct), and a management board, the members of which are appointed by the supervisory board.

– the unitary board system, along the lines of the common law model, comprising a board of directors, which is appointed by the shareholders, and an internal audit committee, composed entirely of ‘independent’ directors.

Whichever model is chosen, the company’s accounts must be audited by external auditors. Only SpAs that do not raise funds in the capital markets (so-called ‘close companies’) and that are not required to prepare consolidated accounts are allowed to derogate from this requirement by entrusting the board of auditors with auditing in addition to its management supervision tasks.

Changes for minority shareholders

Similarly to the Consolidated Financial Act, the decree improves the position of minority shareholders by reforming both the ‘exit’ and the ‘voice’ instruments.

With regard to the ‘exit’ side, the reform sets forth new cases of withdrawal rights (diritto di recesso) and allows ‘close compa

nies’ to provide for additional cases of withdrawal rights in their articles of association. Moreover, new criteria are established for the evaluation of the stake owned by the withdrawing shareholder.

As far as the ‘voice’ side is concerned, the decree contains a number of provisions aimed at facilitating the shareholders’ involvement in the company’s affairs. The percentage of share capital needed to call a shareholders’ meeting has been lowered (10 per cent or the lower threshold set forth in the articles of association). Minority shareholders above a certain threshold may bring a derivative action against the directors. Requirements to attend the shareholders’ meeting have been greatly simplified.

Fundraising options

Some of the most innovative changes in the decree are aimed at broadening the range of fundraising options open to companies.


With reference to equity-raising, SpAs will be able to issue non-voting shares as well as shares with voting rights limited to a particular matter or subject to non-subjective conditions precedent. In order to prevent an excessive separation between ownership and control, the aggregate par value of non-voting shares and shares with limited voting rights cannot exceed 50 per cent of the total share capital. Furthermore, the prohibition to issue shares with multiple voting rights has been retained.

SpAs may also issue shares that are deferred in losses, as well as shares whose cashflow rights are linked to the performance of specific businesses run by the company (so-called ‘tracking shares’). Shares within the same class have the same par or intrinsic value and grant equal rights.


As regards debt financing, previous restrictions on the issue of bonds have been removed in the case of listed bonds issued by listed companies. Restrictions have been eased for unlisted companies which, for instance, can now issue bonds of up to twice the company’s equity or with no limit if the bonds are placed with professional investors subject to prudential supervision. If the professional investors that were the initial underwriters of the bonds subsequently sell them to non-professional investers, the sellers will be liable vis-à-vis the bondholders in case of default by the issuer.

The reform explicitly allows SpAs to issue bonds whose holders are subordinated, in whole or in part, to other creditors of the company, as well as bonds whose interest component may vary in accordance with the economic performance of the company.

Moreover, for the first time Srls are allowed to issue bonds, albeit under a more restrictive regime than with SpAs.

A new way in which SpAs may now raise funds is by setting aside part of their assets as exclusive security for the lenders of a specific business project (so-called ‘dedicated estate’, or ‘patrimonio dedicato’). Any SpA that has established a dedicated estate can issue financial instruments representing a participation in the relevant business.

As an alternative technique to achieve a segregation of the company’s assets, SpAs may enter into a loan agreement whereby the revenues generated by a specific business project are, in whole or in part, dedicated to the service of the financing (so-called ‘dedicated financing’, or ‘finanziamento destinato’). The dedicated financing cannot be put in place through the issue of transferable securities, unless in the context of a securitisation.

Changes to restrictions

The decree also abolishes certain restrictions. Under the current regime, upon the insolvency of an SpA with a sole shareholder, the shareholder bears unlimited liability for all the obligations that were incurred by the company during the period in which it was the only shareholder of the company. After the entry into force of the decree, provided that certain filing requirements with the Companies Register are met, limited liability of the sole shareholder will be possible.

Moreover, the duration of the company no longer has to be indicated in the articles of association. If no duration is specified and the SpA is not listed, each shareholder has the right to withdraw from the company upon giving at least six months’ notice.

Finally, the decree sets forth for the first time rules that will govern leveraged buyout transactions where the target is an SpA.

Corporate groups

The reform allows shareholders and creditors of a subsidiary to sue the parent company for losses due to its ‘guidance’, unless the losses are offset against gains that the subsidiary receives from being part of the group.

In addition, if certain conditions are met, the claim for repayment of inter-company loans made to the subsidiary by the parent company, or by another member of the group, is subordinated to the claims of all other creditors of the subsidiary (repayment of the inter-company loan is clawed back if it occurs during the year prior to the declaration of bankruptcy of the subsidiary).

Andrea Arosio is a partner and Mario Lisanti an associate in Allen & Overy‘s Milan banking department