Shareholders' Agreement for companies in Italy
The rules governing the so-called Patto Parasociale
Rules, limits and kinds of agreements between shareholders out of company statute
The Shareholders’ agreements are optional agreements between shareholders who, in general, are signed at the moment of the stipulation of the articles of association (while remaining independent and separate from it), they have the purpose of regulating the behavior of the shareholders within of society.
It is an agreement in writing, precisely, it is a private agreement which, for reasons of confidentiality, is almost never authenticated by a notary public; usually a single original is signed and deposited with a trusted lawyer chosen by the partners, who can issue a copy at the request of an interested partner.
Shareholders' agreements are effective only between the contracting parties.
It may happen that the contracting partner of the shareholders' agreement does not subsequently fulfill the obligations deriving from it, for example:
a) at the shareholders 'meeting, a contracting partner votes in a way contrary to what was established in the shareholders' agreement; in this case, the other shareholder couldn’t appeal the decision of the shareholders' meeting in court;
b) a contracting partner sells the shares to third parties and not to the other members of the shareholders' agreement to whom he should have offered them in pre-emption; in this case, the other shareholder will not be able to invalidate the transfer of the shares which occurred in violation of the pre-emption agreement and will not be able to prevent the company from registering the name of the third-party buyer in the register of shareholders.
Therefore, failure to comply with the obligations deriving from the shareholders' agreement are not likely to find execution by a court decision.
The violation of the shareholders' agreements will give rise only to the obligation of the defaulting party to compensate the damages possibly caused to the other members participating in the agreement, provided that the damaged members prove and quantify in front of the judge the damage suffered due to the others violation of the covenant.
In order to remedy this inconvenience and to give greater strength to the shareholders' agreement, the stipulation of a penalty is frequent, consisting of a predetermined sum of money that the defaulting party undertakes to pay in favor of the other party in case of violation of the agreement, regardless of proof of the damage suffered and in the absence of a civil judgment.
- they cannot last longer than 5 years;
- are understood to be stipulated for a duration of 5 years even if the parties have provided for a longer term;
- in the event that no term of duration is established, each member can withdraw by giving 180 days' notice.
With regard to the shareholders' agreements signed in the context of s.r.l. or partnerships there are no duration limits.
For companies with shares listed on the stock exchange and those that control them, the law provides that the shareholders' agreements in any form stipulated, to be valid, must:
- be communicated to Consob (Commissione Nazionae per la Società e la Borsa, it is the public body aimed at protecting investors and transparency of the Italian securities market, it is an independent administrative authority with full operational autonomy);
- be filed with the business register;
- be published in extract in the daily press and communicated to companies with listed shares.
In the event of non-compliance with these obligations, these agreements are void.
The main regulatory sources that regulate the shareholders' agreements are the articles 2341bis and 2341ter of the civil code, which concern in particular the s.p.a. listed on the stock exchange.
In particular, the art. 2341bis specifies the scope of application of the shareholders' agreements:
a) they have as object the exercise of the right to vote in joint-stock companies and in the companies that control them (so-called voting agreements);
b) they set limits on the transfer of the related shares or of the investments in companies that control them (so-called block agreements);
c) they have the object or effect, even jointly, to perform a dominant influence over a joint-stock company (so-called control agreements).
The article 2341ter states that in the s.p.a. listed on the stock exchange, the shareholders' agreements must:
- be communicated to the company (if such communication is not made, it will still have to be made at the next meeting);
- declared at the opening of each shareholders meeting;
- this declaration must then be transcribed in the minutes of the meeting which must be filed with the company registry office; if this is not fulfilled, the right to vote is prevented from the holders of the shares to which the shareholders' agreement refers; if, subsequently, the right to vote is still exercised and proves to have been decisive for the adoption of the resolution, the same will be appealed pursuant to art. 2377.
Types of pacts:
- control agreements: it is the agreement stipulated between some shareholders who agree on how to exercise their dominant influence in the company, in order to condition their economic and managerial choices;
- agreement relating to the financing of the company: it is the agreement with which some shareholders undertake, in presence of documented financing needs, to offer a loan to the company;
- agreement modifying the liability of some shareholders: these are agreements by which some shareholders undertake to respond in an unlimited (or limited) way to the company's present and future obligations.
- agreement relating to profits and losses: it is the agreement with which the parties want to distribute the profits and / or losses in a different way from those established in the articles of association or in the company statute; this type of agreement complies with the Civil Code which allows the attribution of equity investments in a proportion not proportional to the contributions made by the shareholders (Articles 2346 and 2468 of the Italian Civil Code);
- profit guarantee agreement: this guarantees the distribution of a minimum profit to one or more shareholders; this type of agreement appears contrary to the law which establishes the prohibition of so-called Leonine pact (patto Leonino) pursuant to art. 2265 of the Italian Civil Code which provides for the nullity of the "agreement with which one or more shareholders are excluded from any participation in profits or losses";
- voting pact: it occurs with the vote in the shareholders' meeting in execution of what is established by the majority of the shareholders who adhere to the pact; these agreements cannot violate the general principles of the proper functioning of the company and protection of the interests of creditors; these kind of shareholders' agreements are in fact invalid:
when they oblige members not to vote for liability actions against directors who have caused damage to the company;
when they take off to shareholders meeting the power to revoke directors;
when are signed between shareholders and directors for the aim to liquidate the company's assets at prices significantly lower than market prices in favor of third parties;
- consultation agreement: agreement whereby the shareholders simply undertake to discuss together the matters to be voted on in the subsequent shareholders' meeting, without first deciding how to vote;
- freeze agreement: it is the agreement that imposes limits and restrictions on the free transfer of shares or quotas;
- non-alienation pact: this is an agreement that establishes the prohibition to alienate the participation for a specified time (this pact can under certain conditions be considered contrary to the law);
- pre-emption agreement: the pre-emption agreement establishes that, in the event of the sale of shares in the company, each shareholder is obliged to offer it to the others, before selling it to third parties, under the same contractual conditions;
- agreement of approval: provides that each shareholder is obliged to request and obtain prior approval (an authorization), by the person invested with this power, in order to be able to sell its participation to third parties;
- tag-along agreement: it serves to protect the minority shareholder, who is granted the right to sell the shares together with the majority shareholder, if the latter decides to sell their own, taking advantage of the same contractual conditions agreed with the third-party buyer and, in any case, at a price not lower than a certain value;
- drag-along agreement: has the purpose of protecting the majority shareholder who, if he decides to sell his shares, has the right to sell also the shareholding held by the minority shareholder under the same contractual conditions reserved for him and, in any case, for a price not lower than a certain value.