Legal Framework


Communication no. 3/2020 of 10 April 2020

Subject: COVID-19 - Decree Law no. 18 of 17 March 2020 - Communication on shareholders' meetings of companies with listed shares

1. Through Decree Law no. 18 of 17 March 2020 ("Cura Italia Decree" or "Decree") containing “Measures to strengthen the National Health Service and economic support for families, workers and businesses connected with the epidemiological emergency caused by COVID-19”, specific provisions were laid down in relation to the conducting of ordinary and extraordinary shareholders' meetings[1], including with the aim of reconciling the right of shareholders to participate and vote at shareholders' meetings with the safety measures imposed in relation to the COVID-19 epidemic. To this end, the provisions introduce exceptions to the current rules, by removing regulatory and statutory limits

the use of instruments for remote participation in meetings.

2. This being the case, during the period in which the COVID-19 containment measures are in force, issuers with listed shares, as defined by Article 119 of Legislative Decree no. 58/98 (the “Consolidated Law on Finance”), should take steps to make use of at least one of the remote participation and voting instruments provided for by Article 106 of the Cura Italia Decree, allowing shareholders to exercise their right to vote at shareholders' meetings, in consideration of the limitations imposed by measures to protect public health.

3. The use of remote participation and voting instruments pursuant to Article 106 of the Cura Italia Decree requires compliance with the relevant provisions and the adoption of appropriate operational measures.

4. In particular, with regard to the remote participation and voting instruments, the rules set forth in Article 127 of the Consolidated Law on Finance ("Voting by correspondence or by electronic means"), Article 135-undecies of the Consolidated Law on Finance and the relative implementing rules contained in Consob Regulation no. 11971 of 14 May 1999 ("Issuers' Regulation") for: (i) the casting of votes by correspondence[2]; (ii) the recourse to one or more forms of participation in the shareholders' meeting by electronic means[3]; (iii) the casting of votes before the shareholders' meeting by electronic means[4]; (iv) employing a representative appointed pursuant to Article 135-undecies of the Consolidated Law on Finance[5].

In particular, the attention of issuers is drawn to the provisions that require the secrecy of voting until the counting begins at the shareholders' meeting, both with regard to votes exercised by correspondence and those cast before the shareholders' meeting pursuant to Article 143-ter of the Issuers' Regulation, and with regard to proxies with voting instructions given by shareholders to the representative designated by the company.

In this context, special mention is made of the provisions:

- under which the Chairman of the Board of Statutory Auditors and any employees and auxiliaries of the latter are responsible, until the vote at the shareholders' meeting, for the safekeeping and confidentiality of the voting papers and statements of revocation, in the case of voting by correspondence, or for the confidentiality of data relating to votes (and any revocations), in the case of voting by electronic means prior to the shareholders' meeting; as well as those which stipulate, with reference to the issuing of proxies to the representative designated by the company, the latter's responsibility to ensure the confidentiality of voting instructions until the beginning of the vote at the shareholders' meeting, without prejudice to the possibility of communicating such information to any employees and auxiliaries subject to the same duty of confidentiality.

In addition, with regard to the identification of persons entitled to participate and vote at the shareholders' meeting, attention is drawn to the following:

- Article 106, paragraph 2 of the Cura Italia Decree, which stipulates that companies may exclusively use telecommunication means as long as identification of the persons participating in the meeting through such means is guaranteed;

- the requirements established by the companies for the identification of the persons entitled to vote in the case of voting by correspondence or participation in the shareholders' meeting by electronic means in accordance, respectively, with Article 140, paragraph 1, and Article 143-bis, paragraph 2 of the Issuers' Regulation.

5. In the event that companies provide for participation in the shareholders' meeting exclusively through the representative appointed pursuant to Article 135-undecies of the Consolidated Law on Finance, all proposals for resolutions on each item on the agenda will need to be published before the shareholders' meeting itself, in sufficient time to allow shareholders to exercise their voting rights through the proxy to the designated representative (ensuring there is time for any adjustments to the relevant proxy form).

Therefore, attention is drawn:

- to the importance of drawing up the agenda in an analytical manner, to allow shareholders to vote through the granting of proxies to the designated representative on each of the items on which a shareholders' meeting decision is required. This aspect, which is always relevant for listed companies, since most shareholders vote through a proxy and do not participate directly in shareholders' meetings, is extremely necessary in the current phase in which shareholders' meetings are scheduled where shareholders may cast their vote exclusively through the designated representative;

- Article 125-ter of the Consolidated Law on Finance, which requires directors to submit an explanatory report on each item on the agenda, if not already provided for by other laws. As far as possible, these reports should contain proposals from the administrative body on each of the items on the agenda.

However, the reports pursuant to Article 125-ter of the Consolidated Law on Finance do not always contain proposals on each item on the agenda with regard to certain choices that the law or articles of association stipulate are to be made by the shareholders' meeting[6], since, inter alia, some resolution proposals are submitted in practice directly to the shareholders' meeting (usually by majority vote). Therefore, in situations where the direct participation of shareholders in the meeting is excluded, in order to allow the collection of voting proxies on each item on the agenda, attention is drawn to the following:

- the need for majority shareholders who intend to submit their own proposals for resolutions to send such proposals to the company well in advance of the date of the shareholders' meeting or in accordance with the provisions of Article 126-bis of the Consolidated Law on Finance for shareholders with qualified shareholdings or at the time of submission of lists, for matters related to the renewal of corporate bodies, or within the deadline indicated by the company in the notice of call for the submission of individual proposals for resolutions (see paragraph 6 below);

- the importance that, with specific regard to shareholders' meetings for the renewal of corporate bodies, those who submit lists of candidates for the appointment of directors and/or statutory auditors indicate the candidate they intend to propose to the shareholders' meeting as chairman of the administrative body, in the event that the articles of association require this choice to be made by the shareholders' meeting, and/or the candidate they intend to propose as chairman of the board of statutory auditors if the list should turn out to be a 'minority list' (unless the articles of association contain clauses for the automatic identification of the chairman of the board of statutory auditors[7]).

6. With specific reference to the submission at the shareholders' meeting of individual proposals for resolutions on the items on the agenda, pursuant to Article 126-bis, paragraph 1, third sentence of the Consolidated Law on Finance, in cases where it is envisaged that participation will take place exclusively through the representative appointed pursuant to the Cura Italia Decree, attention is drawn to the following:

- the fact that it is not possible to submit individual proposals directly to the shareholders' meeting through the same designated representative;

- the fact that, in the current phase in which, for health reasons, the physical participation of shareholders in shareholders' meetings may be forbidden, companies may establish an adequate deadline in the notice of call for the submission of individual proposals for resolutions on the items on the agenda by those who have the right to vote, to be published on the company's website; this deadline must be stipulated in such a way as to allow shareholders to vote by proxy through the designated representative on each published resolution proposal[8].

7. With reference to the representative appointed by the company pursuant to Article 135-undecies of the Consolidated Law on Finance, Article 106, paragraph 4, of the Cura Italia Decree states that the latter may be granted proxies and sub-delegations pursuant to Article 135-novies of the Consolidated Law on Finance, by way of derogation to paragraph 4 of Article 135-undecies of the Consolidated Law on Finance and, therefore, without the need to fill in and sign the proxy forms the content of which is defined by the Consob Issuers' Regulation[9].

However, it should be noted that the representative appointed by the company may only be given proxies with voting instructions on the individual items on the agenda to be voted on, and that proxies or sub-delegations pursuant to Article 135-novies of the Consolidated Law on Finance granted to the designated representative must also contain voting instructions in order to be considered effective.

8. With specific regard to the right to ask questions prior to the Shareholders' Meeting, pursuant to Article 127-ter of the Consolidated Law on Finance, it should be noted that the aforementioned provision, as last amended by Decree no. 49/2019[10], provides for two different and alternative deadlines for the submission of applications by those who have the right to vote (i.e. shareholders who are also shareholders on the record date indicated by Article 83-sexies, paragraph 2 of the Consolidated Law on Finance). The choice between the two terms is left to the issuers and must be indicated in the notice of call of the shareholders' meeting, pursuant to Article 127-ter of the Consolidated Law on Finance, to ensure shareholders are informed.

Having stated this, should companies opt for the casting of votes exclusively through the designated representative or by postal voting, i.e. without the physical participation of the shareholders in the meeting, the attention of the companies is drawn to the following aspects:

- the right to submit questions before the shareholders' meeting on the items on the agenda, in implementation of the Shareholders' Rights Directive[11], is intended to enable qualified persons to vote in an informed and aware manner;

- in the absence of a shareholders' meeting with the participation of the shareholders, the answers given during the course of the said meeting could not benefit any shareholder. Moreover, while in the ordinary course of business the choice not to physically participate in the meeting is left to individual members who use, for example, voting proxies, in this case participation would be closed to each member by virtue of rules adopted as a matter of urgency to protect the priority right to health.

In situations such as that caused by the current health emergency, one of the possible options for reconciling the company's interest in having sufficient time to answer questions with that of the shareholders to know the answers before the expiry of the deadline for granting or revoking proxies to/from the designated representative, would be that already chosen by several companies, i.e. to enable the submission of questions within seven trading days before the shareholders' meeting, as provided for by Article 127-ter, paragraph 1-bis of the Consolidated Law on Finance, while considering the possibility of reducing, even if only slightly, the deadline available to the company to answer (at least two days before the shareholders' meeting pursuant to Article 127-ter, paragraph 1-bis of the Consolidated Law on Finance), so as to provide such answers before the expiry of the aforementioned deadline for granting or revoking the proxy.

9. We also stress the importance of compliance with the rules governing the solicitation of voting proxies pursuant to Articles 136 et seq. of the Consolidated Law on Finance, as implemented by Articles 135 et seq. of the Issuers' Regulation, which will remain unchanged even in the event that the companies should decide to allow participation in the shareholders' meeting exclusively through the designated representative.

With regard to the provisions of Article 138 of the Consolidated Law on Finance, it should be noted that:

- pursuant to Article 138, paragraph 1 of the Issuers' Regulation, the proxy form relating to the solicitation must be sent to the promoter. Therefore, even in cases where the right to vote is exercised exclusively through the designated representative, the solicitation may not take place by sending the proxy forms relating to said solicitation directly to the latter;

- in the event that, in line with the provisions of Article 106, paragraph 4 of the Cura Italia Decree, the right to vote can be exercised exclusively through the designated representative, without prejudice to the promoter's responsibility for also verifying the completeness of the proxy forms collected[12], for the casting of votes at the shareholders' meeting, the proxies collected as part of the solicitation must be conferred by the promoter on the representative designated by the company by way of sub-delegation, pursuant to Article 135-novies of the Consolidated Law on Finance;

- in the hypothesis in question, whereby sub-delegation to the designated representative is provided for, the provisions that allow the promoter - in the cases indicated by Articles 137, paragraph 3 and 138, paragraph 4 of the Issuers' Regulation - to cast their vote in a manner different from that proposed, if expressly authorised by the solicited party, in the event that significant circumstances arise, unknown at the time of issuing the proxy and that cannot be communicated to the latter, such as to make it reasonable to believe that the promoter, had he known them, would have given his approval.

In order to ensure the completeness of the information for shareholders solicited pursuant to Article 143 of the Consolidated Law on Finance, in cases where the company has made provision for participation in the shareholders' meeting exclusively through the designated representative, attention is drawn to the need to clarify the specific procedures for the solicitation of proxies in the notice required by Article 136, paragraph 1, of the Issuers' Regulation, as well as in the prospectus published pursuant to paragraph 3 of the same article.

10. Finally, due to the restrictive measures adopted by the Government in relation to the COVID-19 epidemic, intermediaries may encounter difficulties and, therefore, be delayed in transmitting communications to issuers necessary for them to be entitled to attend the shareholders' meeting and exercise their voting rights. Therefore, the attention of the companies is drawn to the provision contained in Article 83-sexies, paragraph 4 of the Consolidated Law on Finance, according to which “... This is without prejudice to the right to participate and vote if the communications are received by the issuer after the deadlines indicated in this paragraph, provided that they are received by the start of the shareholders' meeting convened on single call.”.

THE CHAIRMAN
Paolo Savona


[1] See Article 106 (“Rules for the conducting of company meetings”) of the Cura Italia Decree.

[2] See Articles 140 et seq. of the Issuers' Regulation.

[3] See Article 143-bis of the Issuers' Regulation.

[4] See Article 143-ter of the Issuers' Regulation.

[5] See Article 134 of the Issuers' Regulation.

[6] For example, determining the number of directors when the articles of association stipulate a minimum and maximum number (see Article 2380-bis, paragraph 4 of the Italian Civil Code); term of office of directors (see Article 2383, paragraph 2 of the Italian Civil Code); appointment of the Chairman of the Board of Directors by the shareholders' meeting when provided for by the articles of association (see Article 2380-bis, paragraph 5 of the Italian Civil Code); appointment by the shareholders' meeting of the Chairman of the Board of Statutory Auditors, in the traditional system, and of the Chairman of the Management Control Committee, in the one-tier system, from among the members elected from the minority list (see Article 148, paragraphs 2-bis and 4-ter of the Consolidated Law on Finance); determining the fixed remuneration of the members of the corporate bodies (see Article 2364, paragraph 1 of the Italian Civil Code).

[7] Some articles of association stipulate, for example, that the candidate indicated in first place on the list that comes first among the minority lists, if any, shall be appointed chairman of the board of statutory auditors.

[8] In this regard, it should be noted that some companies have set 15 days prior to the date of the shareholders' meeting as the appropriate deadline for the submission of individual proposals for resolutions on the items on the agenda, a deadline taken from that provided by Article 126-bis, paragraph 2 of the Consolidated Law on Finance for the publication of proposals for resolutions on the items on the agenda submitted by qualified minorities holding at least one fortieth of the share capital.

[9] See Article 134, paragraph 1 of the Issuers' Regulation.

[10] Refer in particular to Legislative Decree no. 49 of 10 May 2019 (“Implementation of Directive 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards encouraging long-term shareholder commitment”).

[11] See Directive 2007/36/EC on the exercising of certain rights of shareholders in listed companies.

[12] Pursuant to Article 143 of the Consolidated Law on Finance (“Liability”) and in accordance with Article 137 of the Issuers' Regulation (“Conduct Obligations”).