Legal Framework


Communication n. 6/2020 of 10 June 2020

COVID-19 - Guidelines on the subsistence of "company's crisis " situations for the use of the exemption for cases of urgency provided for by Regulation no. 17221/2010 in the event of related party transactions under the responsibility of the shareholders' meeting or that have to be authorized by it

1. The Regulation approved with Consob Resolution no. 17221 of 12 March 2010, as subsequently modified and integrated, in the matter of related party transactions ("RPT Regulation") regulates the procedures and conditions which, in derogation from the discipline provided generally by the Regulation itself, must be followed in the event that companies with listed shares or with shares widely distributed among the public intend to make use of the exemption option for related party transactions carried out in cases of urgency1. As is known, the use of the aforementioned exemptions must be provided for in the procedures and, due to the extent of the procedural derogations that it makes possible, it requires a specific statutory provision. With the resolution adopted today, Consob suspended until 30 June 2021, the provisions of the RPT Regulation under which, to avail of the exemption option for cases of urgency, this option must be provided for in the issuer's statute and procedures2.

2. With particular reference to related party transactions in the scope of authority of the shareholders' meeting or to be authorized by it, Article no. 11, paragraph 5 of the RPT Regulation3 provides that said operations can benefit from the exemption only if the urgency is "linked to company's crisis situations". In such cases, the explanatory report prepared by the directors, in view of the meeting called to approve the transactions, must bear analytical and adequate reasons for the reasons of the urgency and the board of internal auditors must provide the shareholders with its assessment regarding the existence of such reasons. If the board of internal auditors has expressed a negative opinion on the subsistence of the reasons for urgency of a transaction of greater relevance with related parties, the special resolution mechanisms so-called of whitewash provided for by Article no. 11, paragraph 3, of the RPT Regulation4 apply; in other cases, however it must be provided information to the public, within the day following the day of the meeting, about the results of the vote, with particular regard to the vote expressed by the "unrelated" shareholders.

3. As represented in the paragraph no. 18 of Communication no. 10078683 of 24 September 2010 ("Indications and guidelines for the application of the Regulation on transactions with related parties adopted with Resolution no. 17221 of 12 March 2020 as subsequently amended"), the choice to limit the exemption, in case of operations in the scope of authority of the shareholders' meeting, to cases where urgency is connected to situations of corporate crisis is motivated by the fact that these transactions "are the ones that can most directly affect the structure of a company". The same Communication also specifies that, for the purposes of the RPT Regulation, "the expression ‘company's crisis' means to refer not only to situations of clear crisis but also to situations of financial strain. In particular, we intend to refer not only to cases of significant losses pursuant to articles no. 2446 and 2447 of the Civil Code, to situations in which the company is subject to bankruptcy procedures or, again, to situations in which there are uncertainties about the continuity of the company, as expressed by the company or its auditor, but also in situations of financial suffering destined to result in a short time in a decrease of the relevant capital within the meaning of the aforementioned articles no. 2446 and 2447 or of rapid deterioration of the equity ratios of supervision in of particular stress conditions on the financial markets".

4. Having said that, until 30 June 2021, the need to deal with the cases of emergency related to the COVID-19 pandemic configures, for the purpose of adopting the exemption provided by Article no. 11, paragraph 5, of the RPT Regulation, a case of urgency connected to corporate crises such as defined in paragraph no. 18 of the aforementioned Communication.

PRESIDENT
Paolo Savona

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(1) See Article no. 11, paragraph 5, about the operations within the competence of the shareholders' meeting or to be authorized by it and Article no. 13, paragraph 6, about the operations of competence of the administrative body or of delegated bodies.

(2)  In particular, in order to facilitate, in this emergency from COVID-19 pandemic, the use of exemption for cases of urgency for carrying out capital strengthening operations with related parties, Consob suspended until 30 June 2021 the application of the provisions of the RPT Regulation pursuant to which, for the purposes of resort to the aforementioned option of exemption, the latter must be contemplated both in the procedures adopted pursuant to of Article no. 4, paragraph 1, of the same RPT Regulation and in the statute.

(3) The Article no. 11, paragraph 5, of the RPT Regulation ("Shareholders' transactions") provides that: "Where expressly permitted by the articles of association, the procedures may provide that, in the event of urgency connected to situations of corporate crisis, without prejudice to the provisions of Article no. 5, where applicable, transactions with related parties are concluded in derogation of the provisions of paragraphs no. 1, 2 and 3, provided that apply to the shareholders' meeting called to resolve the provisions of Article no. 13, paragraph 6, letters c) and d). If the assessments of the control body pursuant to Article no. 13, paragraph 6, letter c), are negative, the shareholders' meeting resolves in the manner referred to in paragraph 3; otherwise applies the article no. 13, paragraph 6, letter e)".

(4) Based on the so-called whitewash, without prejudice to the applicability of the provisions of the Civil Code regarding shareholders' meetings required majorities, the procedures provide for rules aimed at preventing the completion of the transaction in the case non-related voting shareholders vote against it. The procedures may also provide the functioning of such a mechanism only in the presence of a minimum participation of non-related shareholders to the meeting, that the procedures themselves may establish as an amount not exceeding 10 per cent of the share capital.