The Recovery Decree aims to rapidly raise equity financing and counter liquidity shortage.
By Antonio Coletti, Isabella Porchia, and Guido Bartolomei
Law Decree, approved on 13 May 2020 (Recovery Decree) introduces provisions facilitating capital increases by Italian private and listed companies to rapidly raise equity financing and to counter liquidity shortage.
In particular, article 45-bis of the Recovery Decree (in the draft available pending publication in the Official Gazette) provides:
- Emergency and temporary (until 31 December 2020) amendments to the majority required for the approval by the extraordinary general meeting of:
– Capital increases through contributions in kind or receivables (articles 2440 and 2441, fourth paragraph, first part, of the Italian Civil Code)
– Amendments to the bylaws to exclude the pre-emption rights of shareholders up to 10% of the outstanding share capital (raised to 20% for listed companies, see below) (article 2441, fourth paragraph, second part, of the Italian Civil Code)
– Amendments to the bylaws to delegate to the board of directors the power to increase the share capital by excluding or limiting shareholders’ pre-emption rights (article 2443 of the Italian Civil Code)
Such resolutions may be passed with the favourable vote of the majority of the share capital represented at the extraordinary general meeting (instead of 2/3 majority of the share capital represented at the extraordinary general meeting required by article 2368, second paragraph, second part, and article 2369, third and seventh paragraphs, of the Italian Civil Code), provided that at least half of the share capital is represented.
- Extension of the provision now permitting companies listed on regulated markets only to carry out capital increases, with the exclusion of pre-emption rights up to 10% of the outstanding share capital (article 2441, fourth paragraph, second part, of the Italian Civil Code). In this respect, the Recovery Decree:
On one hand, provides the following emergency and temporary (until 31 December 2020) amendments to this provision:
– Increases the threshold from 10% to 20%, adding that, if shares have no nominal value, the threshold refers to the number of outstanding shares
– Extends the scope to companies with equity admitted to trading on multilateral trading facilities (such as AIM Italia)
– Extends the faculty to benefit from this type of capital increase, despite the absence of a specific provision in the bylaws
– Halves the notice period to call the extraordinary general meeting to approve such capital increase
On the other hand, provides the following general and permanent amendments to this provision:
– Extends the scope to companies with equity admitted to trading on multilateral trading facilities
– Confirms the 10% threshold referred to the outstanding capital or, if shares have no nominal value, to the number of outstanding shares
– Introduces the obligation for directors to publish within the call of the shareholders’ meeting a report explaining the rational for the exclusion or limitation of the shareholders’ option rights, to align the corporate disclosure regime that is applicable to companies admitted to trading on multilateral facilities to the regime applicable to companies listed on regulated markets.
- General and permanent modification of the provisions regulating the option rights offer (article 2441, paragraph 3, of the Italian Civil Code). In particular, the Recovery Decree:
– Reduces the duration of the option rights offer from 15 days to 14 days
– Removes the obligation for Italian companies with equity listed on a regulated market to offer on such market only the option rights that remain unexercised at the end of the option rights offer within the following month and for at least five stock exchange sessions, unless they are all sold on the market before this deadline
– Extends to Italian companies with equity listed on a regulated market or multilateral trading systems the pre-emption rights mechanism now applicable to capital increases by private companies and adopted by other European jurisdictions (such as Spain). Listed companies will be entitled to require their shareholders to exercise pre-emption rights on shares that remain unsubscribed, together with their option rights, indicating the maximum number of shares they intend to subscribe (so-called oversubscription)
In addition to these measures, the Recovery Decree includes a provision (article 30) authorising Cassa Depositi e Prestiti S.p.A. (CDP) to set up a segregated assets pool (patrimonio destinato), called “Patrimonio Rilancio”. The Ministry of Economy and Finance will provide this segregated assets pool, which may be divided into sub-sectors and the resources will be used to support and relaunch the Italian economy, in compliance with the EU rules on state aid, adopted by the European Commission and last amended on 8 May 2020. Investments will be made in (i) Italian joint-stock companies, including companies with shares listed on regulated markets, including those established as cooperatives, (ii) that have their registered office in Italy, (iii) do not operate in the banking, financial, or insurance sector, and (iv) have annual revenues higher than €50 million.
The detailed requirements will be set out in a Decree (DPCM). CDP may use the segregated assets pool for any form of investment, in any case of a temporary nature, including (i) the granting of loans and guarantees, (ii) the subscription of financial instruments, and (iii) the acquisition of equity investments on the primary and secondary market, on a preferential basis through the subscription of convertible bonds, subscription of capital increases, and the purchase of shares listed on the secondary market in case of strategic transactions. Financing of the investments made by the segregated assets pool will be raised through the issuance of bonds or other debt financial instruments also derogating from the general provisions on bond offerings laid down in articles 2410 to 2420 of the Italian Civil Code.
Latham & Watkins will continue to monitor and report on developments in this area.
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