The Simplification Decree (Decreto Semplificazioni) follows and puts into effect the earlier attempt of the Italian cabinet to facilitate capital increases.

By Antonio Coletti, Isabella Porchia, and Marta Negro

Law no. 120/2020 converting Law Decree no. 76/2020 (Decreto Semplificazioni), which entered into force today (Law no. 120/2020), introduces certain measures (see Article 44) facilitating capital increases by Italian private and listed companies needing to raise equity financing and counter liquidity shortage due to the COVID-19 pandemic.

In particular, until June 30, 2021, shareholders’ resolutions concerning the following may be passed with the favorable vote of the majority of the share capital represented at the shareholders’ meeting (instead of the higher 2/3 majority of the share capital represented required by applicable law or any higher majority required by the bylaws), provided that at least half of the share capital is represented:

• Capital increases made in cash or through in-kind contributions or receivables (articles 2439, 2440, and 2441 of the Italian Civil Code)
• Bylaw amendments delegating to the board of directors the power to resolve share capital increases until June 30, 2021 (article 2443 of the Italian Civil Code)

These provisions shall apply to both limited liability (società a responsabilità limitata) and joint stock companies (società per azioni).

Additionally, until June 30, 2021, companies listed on regulated markets or multilateral trading facilities can implement capital increases with the exclusion of pre-emption rights for up to 20% of the outstanding share capital instead of the 10% threshold and despite the absence of an express provision in the bylaws, thus derogating the ordinary regime (article 2441, para. 4 of the Italian Civil Code).

Law no. 120/2020 also includes certain general and permanent modifications of the provisions regulating the option rights offer (article 2441 of the Italian Civil Code) and, in particular:

• Amends the provisions regulating the option rights offer by:

– Reducing the duration of the option rights offering period (from 15 days to 14 days) that is the minimum term imposed by Directive (EU) 2017/1132 (article 2441, para. 2 of the Italian Civil Code)

– Reducing the number of mandatory trading sessions (from five sessions to two sessions) for companies with equity listed on regulated markets or — as introduced by Law no. 120/2020 — multilateral trading facilities to offer on the Italian Stock Exchange any unexercised option rights at the end of the option rights offer (article 2441, para. 3 of the Italian Civil Code)

• Extends the provision permitting the implementation of capital increases with the exclusion of pre-emption rights for up to 10% of the outstanding share capital to companies with equity listed on multilateral trading facilities (article 2441, para. 3 of the Italian Civil Code) and introduces the obligation for directors to publish a report explaining the rationale for excluding or limiting shareholders’ option rights within the term to call the shareholders’ meeting, thus aligning 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

Latham & Watkins will continue to monitor and report on related developments.