Shareholders' Rights & Shareholder Activism 2024 Comparisons

The Italian legal system recognises two main types of companies: partnerships (società di persone) and corporations (società di capitali).

Partnerships do not have legal personality, but legal capacity. They revolve around individuals, with no clear distinction between the partners and the company itself, leading to unlimited and joint liability of the partners to third parties.

Corporations, conversely, have legal personality and prioritise business assets over the personal assets of the partners. They are established through capital contributions, determining each partner’s influence and (limited) liability. Italy allows the formation of the following limited liability corporations:

• società a responsabilità limitata (“Srl”) or società a responsabilità limitata semplificata (“Srls”): similar to a limited liability company and suitable for small to medium-sized businesses with flexible management structures, and with capital divided into quotas;
• società per azioni (“SpA”): equivalent to a joint-stock company or corporation, ideal for larger businesses, and with capital divided into shares; and
• società in accomandita per azioni (“SApA”): similar to a limited partnership, offering limited liability only to certain partners, and with capital divided into shares.

Foreign investors in Italy generally use SpAs once their business is fully established. This preference is due to the SpA’s structure, which offers robust governance frameworks, easier access to capital markets and a clear distinction between the company and its shareholders, also in terms of assets and liability.

During the initial phase of acquiring an Italian target, investors also often use Srls, which may be because they have lower corporate capital requirements and offer flexible management structures, making them a cost-effective and efficient option for setting up and starting operations.

In Italy, shares must have equal value, as they represent identical fractions of the nominal share capital of the company, and may be categorised as “ordinary” or “special”. Typically, shares grant the same rights and are known as ordinary shares. However, companies can issue special classes of shares (or quotas) with different rights, which can be administrative (eg, voting rights, rights to intervene or challenge resolutions), economic (eg, preferred profit distribution, liquidation rights), or a combination of both (eg, option rights, rights to grant free shares or withdrawal rights).

These special classes of shares can be established through company by-laws, articles of incorporation, subsequent amendments, and shareholders’ agreements.

While some special classes of shares are regulated by law (primarily the Italian Civil Code and special statutes), companies have significant autonomy in defining share participation rights. Special classes of shares include:

• in terms of voting rights – shares without voting rights, shares with limited voting rights (eg, limited to certain resolutions or conditional), shares with multiple voting rights, and shares without voting rights issued during capital reduction; and
• in terms of economic rights – preferred shares with preferential profit distribution and/or capital repayment upon dissolution, shares linked to company performance in specific industries, and special classes of shares granted to employees as incentives (eg, stock-option plans).

In Italy, shareholders’ rights are usually varied through the following mechanisms.

• By-laws and issuance of special classes of shares: amendments to the company’s by-laws can create special classes of shares with different rights. These changes require a shareholders’ meeting, typically needing a qualified majority vote to pass, and can trigger the right of withdrawal of the shareholders from the company.
• Resolutions of shareholders’ meetings: shareholders can approve resolutions that affect rights, such as creating or amending share classes. These decisions must follow legal requirements and procedural rules outlined in the by-laws. Additionally, it is expressly established that if there are several classes of shares, resolutions of the (general) meeting affecting the rights of one of them must also be approved by the (special) meeting of the class concerned.
• Shareholders’ agreements: private agreements among shareholders that establish specific rights and obligations. Unlike the by-laws, while not enforceable against third parties, they bind the parties involved and any breach entitles the injured party to damages.
• Legislative changes: modifications in corporate law, primarily through updates to the Italian Civil Code or special statutes or regulations, can affect shareholders’ rights and must be complied with by companies.
• Company restructuring and extraordinary events: events like mergers, acquisitions, or capital restructuring, can lead to changes in shareholders’ rights. These processes typically involve formal approval procedures and agreements.

Srls require a minimum capital contribution of EUR10,000, of which 25% is payable at the time of incorporation. If the company has only one quotaholder, the entire amount must be paid in full upon incorporation, and contributions can also be made “in kind”. By contrast, Srls’s (simplified Srls with a reduced capital requirement, introduced to encourage small-medium entrepreneurship) require a minimum capital of EUR1 and a maximum of EUR9,999.99, of which 100% is payable in cash at the time of incorporation.

For SpAs and SApAs, the minimum capital requirement is EUR50,000. The same general rules of Srls regarding capital contributions, including percentage requirements, generally apply.

In Italy, there is no required minimum or maximum number of shareholders.

Shareholders do not need to be residents in Italy, allowing both foreign and Italian shareholders residing abroad to participate. However, any individual – regardless of their nationality – wishing to act as a sole shareholder or director of an Italian company must obtain an Italian tax code for proper registration with the Italian Companies’ Register. It is important to note that non-resident shareholders are subject to a particular tax treatment, in accordance with Italian tax regulations.

While many provisions of shareholders’ agreements are increasingly being directly incorporated into companies’ by-laws, such agreements were already quite common in private companies.

Shareholders’ agreements generally include three types of covenants.

• Governance-related covenants: covering company control and management, voting syndicates, business plans, minority shareholder rights, equity or debt commitments, and non-compete obligations.
• Transfer restrictions: addressing share transfer limitations, such as lock-ups, approval requirements, rights of first offer or refusal, pre-emption rights and call options.
• Exit rights: providing mechanisms for exit, including put options, withdrawal rights, tag-along rights, drag-along rights, provisions for decision deadlock, and liquidation preferences.

Shareholders’ agreements and joint venture agreements are governed by the principle of freedom of contract. The primary limitation is that these documents must not include provisions that violate the law or contravene public policy or mandatory rules. For SpAs (but not Srls), the duration of shareholders’ agreements is capped at five years, or three years for listed companies. In agreements with indefinite durations, shareholders can withdraw with 180 days’ notice (six months for listed companies).

Unlike company by-laws, which are public and must be filed with the Italian Companies’ Register, shareholders’ agreements do not have to be disclosed unless they pertain to public listed companies. Increasingly, many terms of shareholders’ agreements are being incorporated directly into company by-laws. This approach offers several advantages: by-laws are binding on the company and enforceable against third parties, whereas shareholders’ agreements are private and only enforceable among the parties involved. For example, a voting syndicate covenant in the by-laws is enforceable, and resolutions made despite breaches can be challenged in court. Conversely, such a covenant in a shareholders’ agreement would only allow for damages, without affecting the validity of resolutions.       

Types of Meetings

Shareholders’ meetings are categorised – based on the nature of the resolutions to be discussed – into “ordinary” and “extraordinary meetings” (or, for Srls, “notarised” and “non-notarised” meetings):

• ordinary meetings address routine matters such as approving annual financial statements, appointing or removing directors and statutory auditors (and external auditors, if applicable), determining their compensation, and resolving on their liability; and
• extraordinary meetings focus on significant changes, including amendments to the by-laws, appointing or replacing liquidators, and other matters specifically assigned by law.

Mandatory Meetings

Typically, the administrative body convenes the meeting as and when needed. However, there are mandatory cases, that is:

• the annual general meeting to approve the company’s financial statements must be held within the timeframe set by the by-laws, which cannot exceed 120 days from the end of the fiscal year (this period may be extended up to 180 days for companies preparing consolidated financial statements or due to specific company needs – see Article 2364, paragraph 2 of the Italian Civil Code); and
• at the request of shareholders holding at least 10% of the share capital (5% for listed companies).

Notice of Meetings

Notices of calling the meeting – including the date, time, location and agenda – must be published in the Gazzetta Ufficiale della Repubblica at least 15 days before the meeting (company by-laws can however allow for a notice to be sent to shareholders at least eight days before by suitable means, that is, by any other means of communication that constitutes valid proof that the meeting has been validly called – see Article 2366 of the Italian Civil Code). In listed companies, the notices of calling the meeting – which are required to include additional information to ensure that shareholders are adequately informed (eg, time limits for exercising the right to ask questions before the meeting and to supplement the agenda, and the procedure for exercising proxy voting) – must be published on the company’s website at least 30 days prior to the meeting. This includes other forms and terms provided by the government authority regulating the Italian securities market (Commissione Nazionale per le Società e la Borsa – Consob) – see Article 125-bis of the Consolidated Code of Finance.

If the required formalities for convening the meeting are not met, the meeting can still be considered valid without any prior notice if the entire share capital is represented and the majority of the administrative and control bodies are present. This is known as a “totalitarian” meeting where, however, attendees may object to discussing matters if they feel inadequately informed – see Article 2366, paragraph 4 of the Italian Civil Code.

See 2.1 Types of Meeting, Notice and Calling a Meeting.

Shareholders’ meetings are generally convened by the administrative body. However, the administrative body must call a general meeting if requested by shareholders holding 10% of the share capital or a lesser percentage specified in the by-laws in the case of SpAs, one third of the corporate capital in the case of Srls, or 5% of the share capital in the case of public listed companies. If the directors fail to call the meeting, the auditors or the court may issue a decree to convene it.

Additionally, the board of statutory auditors must convene the meeting if:

• convening is mandatory and the directors have failed to do so;
• all directors or the sole director are no longer in office; and
• serious reprehensible facts that require action are detected.

As indicated above, the notice to convene a shareholders’ meeting must be sent to all shareholders, as well as to the company’s directors and statutory auditors, if appointed. The notice must include the date, time, location and the agenda of the meeting.

Shareholders must be fully informed about the matters to be discussed and must be given the opportunity to express their vote with the necessary explanations on the agenda items being given. If the shareholders, representing at least one third of the shares present at the meeting, believe they have not been adequately informed, they can (only once) request a postponement of the meeting by up to five days (see Article 2374 of the Italian Civil Code).

There is no general right for individual shareholders or minority groups to access corporate information. Shareholders may ask questions about agenda items during or before the meeting, but directors are only required to provide the information necessary to enable informed voting. Regulations have increased to ensure that shareholders are well informed on significant resolutions, such as the approval of financial statements, mergers, demergers, and exercising option rights. In this respect, directors must prepare and file detailed reports and explanatory documents in advance at the company’s registered office. In listed companies, all documents for shareholders’ meetings must also be published on the company’s website, making them accessible to everyone. Directors must also provide a report on the proposals concerning the agenda items.

In contrast, Srl quota-holders have broader rights to access company documents and information from the administrative body, regardless of their ownership percentage (see Article 2476, paragraph 2 of the Italian Civil Code).

Shareholders’ meetings are typically held in the municipality where the company’s headquarters are located, unless otherwise specified in the by-laws (see Article 2363 of the Italian Civil Code). By-laws can allow participation in meetings through telecommunication and can also enable voting by physical or online/electronic correspondence, deeming those who vote in such ways as being present at the meeting.

During the COVID-19 pandemic, Article 106 of Legislative Decree 18/2020 (known as “Decreto Cura Italia”) addressed assembly issues by permitting companies and non-commercial entities to hold corporate meetings remotely, even when not specifically allowed by the by-laws. This provision has been extended several times, most recently until 31 December 2024, by the so-called “Legge Capitali”. In any case, legal experts largely agree that private companies can conduct meetings via telecommunication, even without a specific by-law provision, as long as the principles of the collegial method are upheld and participants retain the right to attend meetings in person.

For listed companies, the procedures for participation and remote voting by correspondence are established by company by-laws, in accordance with Consob regulations (see Article 151 of the Consolidated Code of Finance).

The principle of majority consent is fundamental in corporate decision-making. The Italian system recognises two types of quorums:

• constitutive quorums – a minimum number of members is required to be present for the meeting to be considered valid; and
• deliberative quorums – a minimum number of votes is required to pass a resolution.

To prevent a decision-making deadlock, the law allows for flexible quorums – the required quorums are higher on the first call and lower on subsequent calls, facilitating decision-making and ensuring that a minority group cannot block resolutions. However, for resolutions that are crucial to the company’s operations, enhanced quorums are required to prevent these decisions from being made by a small minority, even in subsequent calls (eg, resolutions regarding transformation or early dissolution require higher quorums as per Article 2369, paragraph 5 of the Italian Civil Code).

In SpAs (see Articles 2368 and 2369 of the Italian Civil Code):

• ordinary meetings require –
1. on first call, at least half of the share capital present and a favourable vote from an absolute majority of those present, unless a higher majority is specified by the by-laws; and
2. on second call, a favourable vote from the majority of the capital represented at the meeting;
• extraordinary meetings require –
1. on first call, a favourable vote from more than half of the share capital, unless a higher majority is specified by the by-laws; and
2. on second call, at least one third of the share capital to be present, with a favourable vote from at least two thirds of the capital represented at the meeting.

In Srls (see Articles 2479 and 2479-bis of the Italian Civil Code) the quorum requirements depend on whether decisions result from a quota-holders’ meeting process:

• non-collegial decisions require a favourable vote from a majority representing at least half of the corporate capital; and
• there is no distinction between ordinary and extraordinary meetings, both of which require the presence of half of the corporate capital and a favourable vote from an absolute majority of those present, except for significant cases (eg, amendments to the by-laws or major changes to the corporate purpose or quota-holder rights, which require a favourable vote from shareholders representing at least half of the corporate capital).

Listed companies generally operate under a single-call system:

• ordinary meetings require a vote from the majority of the share capital represented at the meeting; and
• extraordinary meetings require the presence of 20% of the share capital and the resolution passes with a favourable vote from two thirds of the share capital represented at the meeting.

In addition to the deliberative quorums indicated above, by-laws can increase the required majorities for ordinary meetings on the first call and for extraordinary meetings. By-laws can also stipulate higher quorums for ordinary meetings on the second call, except in cases of approving financial statements and appointing or dismissing corporate bodies (see Article 2369, paragraph 4 of the Italian Civil Code). This provision helps to ensure the adoption of resolutions that are crucial for the company’s survival. Additionally, the by-laws may allow for additional meetings in which the same majorities required for the second call are applied.

The main matters that require mandatory shareholder approval in the “ordinary” form, with the previously mentioned quorums, include:

• approval of the annual financial statements;
• appointment or removal of directors and statutory auditors, including external auditors if applicable, as well as setting their compensation (if not specified in the by-laws); and
• resolution on liability actions against these members.

Matters that require mandatory shareholder approval in the “extraordinary” form, which must be conducted with the previously mentioned specified quorums, and before a notary public, include:

• amendments to the by-laws;
• mergers, demergers and transformation of the company; and
• appointment and replacement of liquidators, as well as the regulation of their powers.

By-laws may also authorise the administrative body to handle certain matters typically reserved for extraordinary meetings, such as capital increases for consideration, issuing convertible bonds, establishing secondary offices, and transferring the registered office.

Proxy Voting

Shareholders can attend meetings in person or by proxy, the proxy vote being assigned to another shareholder or a third party. However, by-laws may restrict or exclude this right. The proxy (vote) must be in writing, must not be left blank (ie, must include the name of the proxy), and is always revocable. In SpAs, representation cannot be granted to individuals who are directly or indirectly influenced by the company’s majority group, such as members of the administrative and controlling bodies or employees of the company or its subsidiaries. In listed companies, unless by-laws provide otherwise, companies are required to designate for each meeting a person to whom shareholders may grant a proxy with voting instructions on all or some of the proposals on the agenda.

Electronic or Correspondence Voting

By-laws may also permit participation in meetings through telecommunication or allow voting by either electronic or physical correspondence, with those voting in such ways considered present at the meeting. For listed companies, participation procedures and remote voting by correspondence are governed by their by-laws, in compliance with Consob regulations.

Method of Voting

There are no specific rules regarding the allowed voting systems. The method of voting (eg, by show of hands, ballots or acclamation) can be decided on a case-by-case basis. However, voting by secret ballot is generally not permitted.

In SpAs

In SpAs, shareholders holding at least 10% of the share capital (or 5% for listed companies) have the right to request a meeting to discuss specific matters as detailed in their request (see Article 2367 of the Italian Civil Code).

In Listed Companies

In listed companies, shareholders representing one fortieth (2.5%) of the share capital can request to add items to the agenda or propose resolutions on existing agenda items. This request must be submitted in writing within ten days of the notice of call being published (Article 126-bis of the Consolidated Code of Finance).

In Srls

In Srls, quota-holders who represent one third of the corporate capital have the authority to request the convening of a quota-holders’ meeting (see Article 2479 of the Italian Civil Code).       

In SpAs, shareholders who dissent, are absent, or abstain from voting and hold at least 5% of the voting shares can challenge a resolution passed by the general meeting, if it violates the law or the company’s by-laws (azione di annullabilità). For listed companies, this threshold is reduced to 0.1%. Company by-laws may allow for even lower or no percentage requirements for this action.

To challenge such a resolution, shareholders must file an action in the court where the company has its registered office within 90 days (or within 180 days for Consob) from the date the resolution was adopted or filed with the Italian Companies’ Register.

If a resolution is challenged on the grounds of nullity due to an impossible or unlawful objective, eg, lack of proper convocation or missing minutes (azione di annullamento), any party with a valid cause can initiate the action within three years of the resolution’s filing date.

The same terms and conditions apply to challenging resolutions in Srls.       

In Italy, institutional investors and other shareholder groups, primarily investment funds, play a crucial role in influencing and monitoring a company’s actions. Their substantial ownership stakes provide them with significant voting power and the ability to engage directly with the company’s management. There are several ways in which these groups exert influence and perform monitoring functions. For instance, they often seek representation on the company’s board of directors to directly influence corporate strategy and decision-making. They also retain the right to remove unsatisfactory management, impose limitations on the transfer of shareholdings and ensure satisfactory exit strategies when investments are profitable. These rights and mechanisms are typically established through specific provisions included either in the company’s by-laws or in separate shareholders’ agreements.       

In Italy, for shareholders who hold their shares through nominees, there are no specific corporate law provisions relating to information on matters to be voted on. Any specific rights regarding voting and relevant related information must be found in the relevant trust or fiduciary agreement executed separately with the nominee, which regulates the administration of the shares. It is also important to note that when an Italian trust company is appointed as a nominee shareholder, the trust company becomes the registered owner of the shares and holds the shares for the beneficiary.

In Srls, by-laws may permit resolutions to be adopted without holding a meeting through either written consultation (consultazione scritta) or written consent (consenso scritto). However, this method cannot be used for significant resolutions, such as amendments to the by-laws, changes to the corporate purpose or a reduction in capital due to losses. Additionally, a meeting must be held if requested by one or more directors or by quota-holders representing at least one third of the company’s capital (see Article 2479 of the Italian Civil Code).

Newly issued shares and bonds convertible into shares must be offered to shareholders on a pro-rata basis, according to the number of shares held at the time of the new issue. If convertible bonds are present, the relevant holders also have a pre-emptive right to purchase the new shares, alongside shareholders, based on the exchange ratio (see Article 2441 of the Italian Civil Code). However, there are several statutory instances in which the option right can be excluded or limited by the capital increase resolution (eg, when required by the company’s interest).

The general principle is that shares are freely transferable. However, certain restrictions can be imposed through the by-laws or by shareholders’ agreements. These may include lock-up agreements, rights of first refusal, rights of first offer, or approval rights in relation to the transfer from other shareholders. Furthermore, those who have transferred unpaid shares are jointly and severally liable with the purchasers for the amount of payments still due, for the period of three years after the transfer is recorded in the shareholders’ register (see Article 2356 of the Italian Civil Code).

In Italy, shareholders can generally grant security interests over their shares, with pledges being the most common form of security interest, often used in transactions involving financial institutions or banks. However, this must comply with specific requirements, including proper registration and adherence to any restrictions set out in the company’s by-laws. Typically, in such arrangements, voting rights transfer to the pledgee unless otherwise stipulated in the agreement.

Except for listed companies, which are subject to stringent disclosure obligations, shareholders are generally not obliged to disclose their interests in other companies unless these interests create a conflict of interest. In situations where a conflict exists, the shareholder does not have to abstain from voting. However, if a resolution is adopted with their “decisive” vote, it can be challenged if it is deemed to have harmed the company’s interests. A company does not have an automatic right to demand disclosure of a shareholder’s interests in other companies unless it has specific knowledge or reasonable grounds to believe that a conflict of interest may exist.

It is important to note that documentation relating to Srls and SpAs, which is publicly accessible through the Italian Companies’ Register (eg, the official excerpt), includes information about all significant shareholdings. Therefore, interests in other companies are publicly available.

Cancellation of shares may occur for several reasons. It often happens in the context of voluntary or compulsory capital reductions due to losses, provided that (i) the minimum capital requirements are still met and, in such instances, (ii) creditors have the right to challenge the relevant resolution within 90 days of its registration with the Italian Companies’ Register. Additionally, shares may be cancelled if they are acquired by the company in violation of legal limits (eg, if not transferred within one year of acquisition, as per Article 2357 of the Italian Civil Code). Cancellation can also occur in the event of a merger or if one or more shareholders withdraw and the shares are neither sold nor repurchased by the company, necessitating a corresponding reduction in the company’s capital.

Srls are prohibited from repurchasing their own quotas (see Article 2474 of the Italian Civil Code). Conversely, SpAs are permitted to buy back their shares, but this requires a resolution by the shareholders’ meeting and is subject to whether the company is privately or publicly held.

For privately held companies, buybacks are allowed only within the limits of distributable profits and available reserves, as detailed in the most recent approved financial statements. The shares to be repurchased must be fully paid. Shareholders’ meetings must authorise the buyback, specifying the maximum number of shares, the duration of the authorisation (which cannot exceed 18 months), and both the minimum and maximum purchase prices. Publicly held companies can repurchase up to 20% of their shares, including those held by controlled companies.

Shares purchased in violation of these provisions must be sold in a manner determined by a shareholders’ meeting within one year of purchase. If not disposed of, they must be cancelled immediately and the company’s capital reduced accordingly. Should the shareholders’ meeting fail to act, the directors and auditors must request a court order for the capital reduction.

These regulations also apply to purchases made through trust companies or intermediaries (see Article 2357 of the Italian Civil Code).

Dividends can only be distributed after the company’s financial statements have been approved. Only profits that have been realised and reported in an officially approved financial statement can be distributed as dividends. If the company has incurred losses, dividends cannot be paid until the capital has been restored or adjusted accordingly (see Article 2433 of the Italian Civil Code).

Provisions in a company’s by-laws or agreements that entirely exclude one or more shareholders from sharing in the company’s profits or losses are deemed null and void (“divieto di patto leonino”, as per Article 2265 of the Italian Civil Code). Nonetheless, special classes of shares may be created to limit the dividend rights of certain shareholders.

Interim dividends can be distributed if permitted by the by-laws and within the limits set by the Italian Civil Code, provided that there are no losses from the most recently approved financial statement (see Article 2433-bis of the Italian Civil Code). This applies to (public) companies where the financial statements have been audited by a registered auditor, and the audit results are positive.

In both Srls and SpAs, the initial directors are those appointed at the time of incorporation and listed in the articles of association (see Article 2383 of the Italian Civil Code). After incorporation, directors are appointed by an ordinary shareholder meeting, typically for a term of up to three years, with the possibility of reappointment. By-laws may also provide for the appointment of an independent board member by holders of equity instruments.

In SpAs, the shareholders’ meetings can remove directors at any time and for any reason. If removal occurs without just cause, directors are entitled to seek damages (see Article 2383 of the Italian Civil Code).

Conversely, Srls do not have specific legal provisions governing the removal and replacement of directors, and directors generally serve for an indefinite term unless otherwise specified. Despite the absence of explicit removal provisions, the right to remove a director is considered inherently linked to the right to appoint them by the quota-holders’ meeting.

Resolutions of the board of directors that are not in compliance with the law or a company’s by-laws can be challenged. This right to challenge can be exercised by absent or dissenting directors and the board of auditors (but not by the shareholders) within 90 days of the resolution. In such cases, the procedural rules for appealing shareholders’ resolutions apply, to the extent permitted. Although not explicitly provided by law, it is generally accepted that the shareholders whose rights are infringed upon must also challenge the resolution within 90 days of becoming aware of it. Additionally, if a resolution directly impacts a shareholder’s subjective rights, the shareholder has the right to initiate legal action to have the resolution annulled.

In both Srls (where the appointment of statutory auditors is mandatory only in certain instances) and SpAs, the initial statutory auditors are those appointed at the time of incorporation and listed in the articles of association (see Article 2400 of the Italian Civil Code). After incorporation, statutory auditors are appointed by an ordinary shareholders’ meeting, for a term of three years with the possibility of reappointment. The by-laws may also allow for the appointment of a statutory auditor by holders of equity instruments.

Statutory auditors can only be removed by a shareholders’ meeting for just cause. Furthermore, any resolution to remove an auditor must be approved by the appropriate court to confirm the existence of just cause and to ensure the independence of the supervisory body.

In Italy, directors are obliged to report to shareholders on various aspects of a company’s operations, including corporate governance arrangements. However, the specifics of these obligations depend on the type of company, its size, and whether it is publicly listed.

For instance, directors must prepare and present the annual financial statements for shareholder approval, which typically include information about the company’s financial performance, operations, and governance. In listed companies, directors are required to provide a detailed report on corporate governance practices as part of the annual report, in accordance with the corporate governance code applicable to listed companies, such as the Italian Corporate Governance Code. Even in non-listed companies, it is considered best practice for directors to voluntarily report on corporate governance arrangements to enhance transparency and build shareholder trust.

Shareholders have the right to access information about the company’s corporate governance arrangements. They can request details and clarifications during general meetings or through formal requests to the board.

When a controlling company exercises “direction and coordination activity” (direzione e coordinamento) over its subsidiaries, the provisions under Articles 2497 ff. of the Italian Civil Code apply. The exercise of such direction and co-ordination entails several implications, including:

• potential liability – the directing entity may be held liable to the shareholders and creditors of the directed company if it abuses its direction and co-ordination powers, violating principles of proper management;
• disclosure obligations – the directors of the directed company have specific disclosure responsibilities, such as making filings with the competent Italian Companies’ Register, indicating the details of the directing entity in corporate documents and correspondence, and including essential data about the directing company and the nature of their relationship in their financial statements; and
• duty to justify resolutions – the directors of the directed company must provide justification for corporate resolutions that are influenced by the directing entity.

When a company faces insolvency, it may need to consider one of the reorganisation procedures outlined in the new bankruptcy law, the Code of the Crisis of Enterprises (Codice della Crisi dell’Impresa – Law Decree No 83/2022), which focuses on protecting the interests of the company’s creditors and, where feasible, ensuring the continuation of the business.

The new legal framework also provides companies with various reorganisation plans aimed at avoiding bankruptcy, a term now renamed “judicial liquidation”, emphasising a shift in focus towards business recovery and continuity.

One significant change is the introduction of the Composizione Negoziata della Crisi di Impresa, which allows an insolvent debtor to propose a settlement with the assistance of a mediator. The mediator can negotiate with creditors to reach a settlement that serves the debtor’s interests.

Another noteworthy aspect is the new “alert” system, where banks, tax authorities, and social security bodies can warn companies about impending financial difficulties. This is intended to help prevent an irreversible crisis by allowing the company to address issues before they escalate. However, to take advantage of these alerts, a company must have implemented “adequate measures” to avert a crisis.

As indicated above, one of the most significant rights shareholders possess, aside from the ability to challenge shareholders’ resolutions, is to file a claim under Article 2409 of the Italian Civil Code. This claim addresses the existence or suspicion of “serious irregularities” committed by the board of directors. If the court deems the claim credible, it can appoint a trusted individual to conduct an investigation. If the investigation confirms these irregularities, the court has the authority to remove the directors and appoint a commissioner to take their place.

Additionally, shareholders have the right of withdrawal, known as diritto di recesso. This right, outlined in Article 2437 of the Italian Civil Code for SpAs and Article 2473 for Srls, allows shareholders to exit the company under certain conditions and receive a specific consideration for their shares.

Directors can be held civilly liable for their actions to the company, to corporate creditors and to individual shareholders or third parties. Specifically, in relation to liability towards individual shareholders, Article 2395 of the Italian Civil Code provides the right to seek compensation for damages if an individual shareholder is directly harmed by the fraudulent or negligent acts of directors, without prejudice to any liability actions initiated by the company and/or creditors.

To bring an action against directors, the following prerequisites must be met:

• unlawful act – the directors must have performed an unlawful act either in the exercise or in the course of their office; and
• direct damage – there must be direct damage to the assets of the individual shareholder (and the shareholder must prove the causal link between the wrongful act and the damage suffered).

The action must be initiated within five years of the act that caused harm to the shareholder.

Actions against wrongdoings committed against the company are typically initiated by a shareholders’ meeting. However, minority shareholders holding at least 20% of the company’s share capital (or 2.5% in listed companies) can also bring such actions. In the case of Srls, any action against directors can be initiated by a single quota-holder.

Key regulatory provisions include the following:

• The Italian Civil Code (Royal Decree No 262/1942) governs shareholder meetings, adjournments, resolution cancellations, director liability, statutory auditors’ reports, alleged mismanagement, withdrawal actions, judicial commissioner appointments and management information rights.
• The Consolidated Code of Finance (Legislative Decree No 58/1998) lowers thresholds for calling shareholders’ meetings in public companies and increases quorum requirements for extraordinary meetings.
• Legislative Decree No 6/2003 (Riforma del diritto societario) introduces comprehensive regulation of private companies, including improvements of rights for minority shareholders (eg, right to withdraw and right to access company information).
• Provisions for the protection of savings and the regulation of financial markets (Law No 262/2005) introduces slate voting for directors and mandates board seats for minority shareholders in listed companies.
• Legislative Decree No 27/2010 implements the Shareholder Rights Directive, enhancing transparency and shareholder participation.
• Directive (EU) 2017/828/EU amends the Shareholder Rights Directive, boosting long-term shareholder engagement and transparency.
• Law No 116/2014 (Legge di conversione del Decreto Competitività) introduces multiple voting shares for non-listed companies and increased voting rights for listed companies.
• Law Decree No 148/2017 enhances transparency in extraordinary transactions, requiring disclosures from shareholders who acquire significant stakes, about their plans, financial terms and intentions regarding company control and board composition.
• Law No 21/2024 (Legge Capitali) regulates the governance of listed companies, welcoming measures and provisions relating to the board list, conduct of meetings through appointed representatives, multiple voting and increased voting.

Key Objectives

Activist shareholders generally pursue the following key objectives, which may be achieved through dialogue with management, proposing resolutions or public campaigns:

• to impact strategy and M&A, influencing the company’s strategic decisions, including pushing towards or opposing specific mergers and acquisitions;
• to boost performance by pushing for changes to enhance financial performance and profitability;
• to improve governance and address management issues by advocating for stronger corporate governance, including better board practices and executive accountability, and to challenge and seek to improve underperforming management, also by means of direct participation in decisions on appointment, revocation and compensation of the board;
• to increase value by seeking to raise shareholder value through measures such as dividends or share repurchases, also in light of potential exit strategies;
• to drive ESG initiatives by promoting environmental, social and governance improvements; and
• to enhance transparency by demanding better financial and operational disclosures.

Achieving these goals requires more than just informing shareholders as to how they can make informed decisions beneficial to the company, themselves, and the market. The legal system must also provide shareholders with adequate voting rights and, most importantly, shareholders need to actively exercise these rights by participating in meetings and voting.

Generally, Italian corporate regulations offer limited support for shareholder activism. Majority shareholders hold substantial control, leaving minority shareholders with restricted involvement in corporate governance and shareholders’ meetings, except in specific cases (eg, where such control has been included under by-laws or a separate shareholders’ agreement).

Legislative Changes

However, recent legislative changes have encouraged greater shareholder activism. The European community has also promoted efforts to leverage new systems and tools to facilitate voting and active participation in corporate management. For example, several legislative measures have been introduced to enhance transparency, corporate governance and minority shareholder rights, including:

• Legislative Decree No 58/1998 and Legislative Decree No 27/2010 – enhancing transparency and corporate governance information while expanding rights for minority shareholders in listed companies;
• Legislative Decree No 6/2003 – improving rights for minority shareholders in private companies, including the right to withdraw and access company information; and
• Law No 21/2024 – introducing measures and provisions relating to board lists, minority board representation, conducting meetings through appointed representatives, and multiple voting.

Thus, it appears clear that legislators have made considerable efforts to design a comprehensive regulatory framework which recognises a wide range of information and technological means to accommodate every form of assembly participation – ranging from passive observation to exercising voting rights and engaging, either directly or indirectly, in assembly debates.

In Italy, activist shareholders typically use their minority rights to influence company management through dialogue rather than aggressive tactics. Shareholders seeking board representation often collaborate with institutional investors, submitting their candidate lists only after securing broader shareholder support. Activist funds usually prefer to start with behind-the-scenes negotiations with the target’s directors, and their campaigns typically unfold in stages.

Initially, they engage in private negotiations with management. If these efforts fail, activists may resort to public measures and utilise legal tools to enhance their voting power and gather additional support from other shareholders. These measures can include requesting to supplement the agenda of existing meetings, calling a new shareholders’ meeting, presenting a minority list when renewing the board of directors, and organising a solicitation of voting proxies.

Typically, these actions are preceded by press releases and the publication of a “white paper” that outlines the weaknesses of the issuer’s current management and suggests measures to increase the market value of the shares.

In general, activists argue that “the company belongs to the shareholders”, who entrust the board with implementing strategies that create shareholder value. Therefore, the board should avoid strategies that detract from shareholders’ interests, such as inefficient management, dilutive transactions, and missed market opportunities that lead to inadequate shareholder returns. They prioritise continuously verifying this alignment of interests throughout the company’s life. This commitment often motivates campaigns to remove directors who pursue agendas that deviate from shareholders’ priorities.

Italy is clearly at an early phase in the development of activism, with most of the large companies being targeted.

In any case, there has been a general growing emphasis on environmental, social and governance (ESG) issues, with activist shareholders increasingly advocating for ESG-related changes across different industries. This trend mirrors the wider societal and investor demand for sustainability and ethical practices. Additionally, there is a noticeable focus on technology and innovation, with activists targeting tech companies to drive strategic adjustments and operational enhancements.

Overall, these trends in activist shareholder behaviour highlight a broader shift in market dynamics, driven by the pursuit of growth, improved corporate governance, and adaptation to evolving economic and social factors.

Hedge funds play a significant role in terms of activism, often targeting companies with management issues or substantial cash reserves. In these cases, the hedge fund’s goal is to acquire a stake in the company, enhance its value, and eventually sell the investment for a profit once the hedge fund’s objectives are met.

Initiatives by activist funds are increasing globally. Public reports, such as those by Lazard, show that in the first half of 2024, activist fund campaigns rose to 147, marking a 29% increase compared to the historical five-year average. This makes it the busiest half-year on record.

In 2024, new players entered the activist fund market alongside traditional players, who accounted for 36% of the campaigns. Among the goals of activist shareholders, who aim to maximise company value, often by changing governance, is the appointment of their own representatives to the boards of target companies. In the first six months of 2024, activists secured 74 board seats, with the majority (65) in North America.

To safeguard themselves against activist shareholders while protecting their governance structure, companies should consider incorporating protective measures in their by-laws, in addition to creating a team responsible for understanding the interests of, and interacting with, investors and for engaging with institutional investors.

Protective measures may include:

• multiple voting shares, issuing shares with enhanced voting rights to support long-term shareholders and counter short-term activist investors;
• special classes of shares, introducing shares with restricted or conditional voting rights to adjust ownership and control dynamics; and
• voting right limits, implementing statutory limits on the number of votes a single shareholder can cast to manage shareholder influence.