The Liquidity Decree strengthens CONSOB’s powers to impose stricter reporting requirements of relevant shareholdings in Italian-listed issuers.

By Antonio Coletti and Isabella Porchia

The Italian government has adopted Law Decree n. 23/2020 (the Liquidity Decree), in force form 9 April 2020, providing urgent measures supporting access to liquidity and financings for Italian companies facing challenges during the COVID-19 outbreak and increasing the government’s golden power rules.

Among other measures, the Liquidity Decree (article 17) amends the Italian law provisions on disclosure of reporting obligations of relevant shareholdings in Italian-listed issuers (article 120 of Legislative Decree 58/1998) and strengthens the relevant powers granted to the Italian Securities Commission (CONSOB).

In detail:

CONSOB is empowered to lower the thresholds of relevant shareholdings in Italian equity-listed issuers to be reported to the public, the issuer, and CONSOB (crossing above or under 3% (5% for SMEs), 10%, 15%, 20%, 25%, 30%, 50%, 66.6%, and 90%) for a limited period of time due to the need to protect investors and market transparency and efficiency (paragraph 2-bis of Article 120). Before the adoption of the Liquidity Decree, such power could have been exercised for holdings in Italian issuers having a high current market value or a spread ownership structure. CONSOB already used this power last month, lowering the entry thresholds of relevant shareholdings to be reported for 38 Italian-listed issuers selected taking into account their high capitalization and the spread ownership structure (see CONSOB Imposes Stricter Reporting Requirements of Relevant Shareholdings in Certain Italian-listed Issuers).

Considering the current high volatility of the markets and the difficulty to determine a fair and correct current market value of Italian-listed issuers, the Liquidity Decree has deleted such a requirement. As a consequence, CONSOB is entitled to lower the thresholds considering the spread ownership structure of Italian issuers needing more protection during the COVID-19 outbreak.

Anyone acquiring a share capital stake in an Italian equity-listed issuer higher than 10%, 20%, or 25%, in addition to the reporting of the relevant shareholding, is required to disclose to the public, the relevant issuer, and CONSOB some key information to unveil any takeover plan (e.g., if it intends to continue purchases and take control of the issuer or a stake capable of influencing the management and strategy of the issuer, if it intends to propose the appointment of new directors or the revocation of those on office, any intention to enter into shareholders’ agreements, if it is acting in concert, and how it has financed the acquisition) (paragraph 4-bis of Article 120).

This provision was adopted by the government in 2017 with the aim of improving protection of Italian investors and integrity of the Italian market in case of takeover rides. To strengthen such protections in the circumstances, considering the low market prices and high volatility due to the COVID-19 outbreak, the Liquidity Decree has added a provision empowering CONSOB to impose for a limited period of time an entry reporting threshold of 5% instead of 10%.

Latham & Watkins will continue to monitor and report on developments in this area.