«They say things are happening at the border, but nobody knows which border» (Mark Strand)
by Raffaele Lener
Abstract: Following the reform of 2003, the Italian company law system is very open and flexible and is one of the most modern in Europe. Indeed, the Italian legislator envisages, on the one hand, shareholders that play no part in the management of the corporation and, on the other, non-shareholders that are instead granted administrative rights. While the assignment of administrative rights, including the right to vote, to non-shareholders is a frequent (indeed, almost common) occurrence in common law systems, it is considerably less so in continental Europe and, when it is allowed, there is an effort to restrict the non-shareholders’ weight in the management of the corporation. The author tries to illustrate the new categories of financial instruments that an Italian corporation can issue, the corporate rights attached to these new instruments and the role that non-shareholders can now play in the governance of large Italian joint-stock corporations.
Summary: 1. Introduction. The società per azioni as an open business structure. – 2. Different categories of shareholders. – 3. Non-shareholders with management powers. – 4. Holders of participating instruments. – 5. Meaning of the prohibition on voting in general shareholders’ meetings. – 6. The “external” member of the management board. – 7. Attending the shareholders’ meeting. – 8. Hybridisation of participating instruments: “quasi debt instruments” and financial instruments “for participating in the transaction” – 9. Brief conclusions.
1. Giorgio Oppo’s well-known comment, which provides the starting point for these brief notes, is that the modern società per azioni (SPA) may be described as an “open business structure” with a variable organisation. An organisation in which shareholders and non-shareholders may co-exist, there may or may not be the “profit-sharing purpose” envisaged by article 2247 Italian Civil Code and persons other than the shareholders may share the profits.
Although the flexible model of SPA introduced by the 2003 reform maintains certain “contractual” aspects, it would appear to be the result of a (more or less conscious) legislative choice to interpret the corporation as an institution.
The new relationship between shareholders and non-shareholders, the administrative rights that may be assigned to the latter and the possible reduction of the former’s administrative rights without a necessary economic “readjustment” create a certain distance between the organisation and the contractual model.
Following the reform, the Italian system is very open and flexible and is one of the most modern in Europe. Indeed, as we shall see, the Italian legislator envisages, on the one hand, shareholders that play no part in the management of the corporation and, on the other, non-shareholders that are instead granted administrative rights.
In fact, the assignment of administrative rights, including the right to vote, to non-shareholders is a frequent (indeed, almost common) occurrence in common law systems. It is considerably less so in continental Europe and, when it is allowed, there is an effort to restrict the non-shareholders’ importance in the management of the corporation.
There are principally two, potentially alternative (in light of the experience in other countries), reasons for assigning non-shareholders such rights: either to allow stakeholders to play a part, where possible, in the management of the corporation or to grant them administrative rights as a way of protecting their investment. Both reasons apply in Italy and the law virtually gives articles of association carte blanche with regard to regulation. Articles 2346 and 2351 Italian Civil Code only reveal an intention to maintain the shareholders’ primacy in the management of the corporation. However, as we shall see, the limits are not always clear.
2. We know that the articles of association are free to create any categories of shares and to attach different rights to them. The law provides no parameters and even the “limits” within which the articles are allowed to operate (pursuant to article 2348, paragraph 2, Italian Civil Code) are uncertain and not readily apparent.
Thus, categories of shares may be freely created. It is not, instead, possible to assign individual shareholders particular rights relating to the management of the corporation or the distribution of profits (as in limited liability companies). I would say that particular rights in SPAs must still be assigned on an objective and not individual basis. This is the manner in which the concept of “category” must be interpreted, even though the articles of association have an almost unlimited power to establish its boundaries.
As regards the “limits” imposed by law, there is a quantitative limit on the issue of non-voting shares, limited-voting shares (where the right to vote is restricted “to particular matters”) or shares whose voting rights are conditional upon the occurrence of certain future events. The overall value of such shares may not exceed one-half of the share capital (article 2351, paragraph 2, Italian Civil Code).
Even the traditional prohibition on issuing shares with multiple voting rights (article 2351, paragraph 4, Italian Civil Code, prior to the reform) has recently been transformed into a limit – although this decision was adopted, with no careful consideration of the matter, under the emotive pressure of the government’s emergency measures for the “growth of the country”. Corporations may now issue shares carrying more than one vote, with a limit of three votes per share. However, listed corporations may not issue multiple voting shares (the prohibition still applies in this case), but they may, through their articles of association, increase the number of votes to a maximum of two per share for shareholders that have continuously held their shares for at least two years (new article 127-quinquies, Consolidated Law on Finance, introduced by the “growth” Decree, Decreto Legge no. 91 of 24 June 2014, converted into Law no. 116/14).
It is difficult to ascertain whether the system envisages additional limits or prohibitions.
Scholars (still) tend to rule out any possibility of shares with particular rights to appoint (outside the shareholders’ meeting) corporate bodies, based – it would appear – on the assumption that votes expressed in the shareholders’ meeting constitute the “typical and exclusive” way in which shareholders contribute to the management of the corporation’s affairs.
There is also a debate on whether it is possible to issue categories of shares carrying the right to veto certain shareholders’ resolutions. Those who argue against this do so based on the principles which may be inferred from the prohibition on multiple voting shares and the restrictions on the issue of limited voting shares, which, they say, imply that the system wishes to prevent a situation in which control is given to a category of shares representing a minority quota of the share capital. However, this argument is not entirely convincing. If – as the more “liberal” scholars accept and as appears entirely reasonable – it is possible to issue shares with the right to vote on the authorisation of management decisions pursuant to article 2364, paragraph 1, no. 5, Italian Civil Code, there is no reason why it should not also be possible to issue shares with veto rights on the same matter. At most, categories of shares having the right to authorise, or veto, the directors’ management decisions could be equated to categories of shares with limited or conditional voting rights so that they would be subject to the overall limit of one-half of the share capital.
Article 145, paragraph 1, Consolidated Law on Finance does not appear to envisage any further limits on the creation of categories. This provision only allows the issue of non-voting shares (“azioni di risparmio”) if the corporation has ordinary listed shares (on regulated markets, including in other EU countries) and provided that the lack of voting rights is compensated by economic benefits, although the law provides no criteria to define such benefits, leaving this task to the articles of association (article 145, paragraph 2, Consolidated Law on Finance). In effect, this article – which undoubtedly goes against the current trend – compensates for the rights which are taken away from shareholders (voting and associated rights) by giving them something in addition to the rights assigned to them by law (economic rights) and is, as such, an “old-style” provision that appears to have ignored the 2003 reform.
Indeed, the question is whether, in light of the new article 2351, paragraph 2, Italian Civil Code, categories of non-voting shares can be created without any form of economic compensation and without any requirement that the ordinary shares be listed. The answer must now be affirmative: “azioni di risparmio” do not account for all the categories of shares which may in theory be defined as not carrying voting rights. One could merely have the foresight to give them a different name: “azioni senza voto”, “azioni non amministrative” and so on. This would eliminate the listing requirement and the obligation to provide economic compensation, leaving only the quantitative cap envisaged by article 2351, paragraph 2. In other words, only shares named “azioni di risparmio” are protected to avoid confusion.
Finally, a “systemic” limit may be inferred from the prohibition on leonine agreements pursuant to article 2265 Italian Civil Code (i.e. the exclusion from participating in profits or liabilities), on which case law has recently placed new emphasis (e.g. Court of Milan, 30 December 2011, in Le società, 2012, p.1158). However, it should be noted that article 2348, paragraph 2, Italian Civil Code allows different rights to be granted “including with regard to the impact of losses”, so much so that there is an increasingly frequent use of subordination. Probably, the only practical consequence of the prohibition is probably that is possible to issue categories of shares which are entirely excluded from profit sharing.
It is clear, then, that there are very few “statutory limits” on the creation of categories. As a consequence, the principle, envisaged by article 2348, paragraph one, Italian Civil Code, that all shares are equal – which has been downgraded to equality within the category – ultimately has very little meaning. Indeed, it could even be removed entirely were it not for the fact that the market still requires that shares with the same content belong to a category with a certain name.
In conclusion, there may undoubtedly be shareholders who contribute to the capital, but have no administrative rights in the management of the corporation and do not necessarily receive enhanced economic rights to offset this loss.
As a result, it is increasingly difficult to think of shareholders – only or mainly – as parties to a corporate contract. Indeed, from a contractual perspective, although there is no requirement for the shareholders to be absolute equal, there would have to be a causal justification for any inequality and, thus, a reasonable equilibrium between the shareholders which in return for the sacrifice of certain individual rights envisages the enhancement of other rights. This “need for equilibrium” is no longer recognised by the system that currently governs SPAs.
The final reason for allowing such contractual imbalances most probably lies in the legislator’s desire to guarantee that corporations have access to as many sources of funding as possible, so that they are no longer exclusively dependent on funding from banks.
Corporations need funding and they are allowed to raise funds even by issuing shares with no administrative rights, just as they are also permitted to issue financial instruments other than shares which, as such, do not represent equity interests, but which may carry administrative rights.
Ultimately, the market will be the final judge. It is clear that there will be no market for an imbalanced category of shares, i.e. one in which the administrative penalisation is not offset by an adequate economic benefit – which, as mentioned, is permitted by law regardless of the reaffirmation of the principle of equality – and so it will not enable issuers to raise funds. Moreover, the protection offered by the special shareholders’ meeting envisaged by article 2376 Italian Civil Code will not apply since this remedy only operates against the worsening of the terms of issue and is ineffective against inherent penalisations of the category.
These considerations appear to confirm that the general rationale behind the reform of 2003 is that (small) shareholders are viewed as investors, who use their savings to fund businesses managed by others. As a result, the emphasis is on the financial aspect of the contribution in light of the SPAs’ natural vocation to raise funds on the risk capital market. Moreover, from this perspective, it is of no interest to the legislator whether an investment is defined as a contribution (conferimento) or as a consideration (apporto), or whether an investor is defined as a shareholder (although not a controlling shareholder, of course) or a creditor with a (limited) voice.
3. The contractual rights of shareholders are further reduced by the presence of third-party rights, i.e. held by non-shareholders, with management powers.
Article 2346, paragraph 6, Italian Civil Code allows corporations to issue financial instruments that carry economic “or also administrative rights, excluding the right to vote in the shareholders’ meeting” against consideration, by shareholders or third parties in general, in the form of work or services. Such consideration “does not constitute a contribution and does not contribute to or increase the corporation’s equity”. The articles of association regulate the procedure for their issue and their contents and, if transferrable, also the relevant law.
This provision opens the way to a panoply of cases, which are perhaps in some respects even more numerous or, in any case, more flexible than the categories of shares, whose limits do not apply to the instruments which we shall call “participating instruments”.
There is no mention of categories of (participating) financial instruments, which suggests that it may be possible to issue individual securities.
Notwithstanding the great uncertainty arising from the meagre provisions of the Italian Civil Code, it would appear that individual issues are possible. Indeed, the rules on special meetings set forth by article 2376 Italian Civil Code also mention participating financial instruments, but the provision states: “if there are different categories of [shares or] financial instruments that carry administrative rights”. Thus, it is reasonable to assume that, where a category of participating financial instruments exists, there must also be a (special) meeting of the category. However, if individual securities are issued, there will clearly be no meeting of the category. In this case, the (only) remedies available to individual financial instrument holders who are damaged by a corporation’s decision will be the general remedies envisaged by statutory law.
4. It is not easy to identify the administrative rights that can be assigned to the holders of such instruments.
There can be no doubt that participating instruments may carry information rights; for example, the right to consult the corporation’s books, request information, postpone meetings due to insufficient information and also the powers envisaged by article 2408 Italian Civil Code. From this perspective, holders may perhaps be allowed to attend but not intervene in shareholders’ meetings, but this raises issues of compatibility not so much with article 2346 as with the new version of article 2370 Italian Civil Code and the apparently necessary connection between attendance and voting.
The issue of rights of participation is more complex.
In fact, as mentioned, the provision allows the generic assignment of administrative rights, which will be determined by the articles of the corporation, with the sole limit that such rights will not include the right to “vote in the general shareholders’ meeting”. It must be said that “administrative right” is merely an “a contrario” definition: any right that cannot (exclusively) be classified as an “economic right” will be defined as an administrative right. Actually, the law even fails to define the concept of general shareholders’ meeting, but, once again, the definition can be inferred a contrario from article 2376 Italian Civil Code: a general shareholders’ meeting is a meeting not intended for individual categories.
Financial instruments may be assigned administrative rights and economic rights, or even just administrative rights. The phrase used by the legislator is not particularly clear [“carrying economic rights or even administrative rights”] and suggests that such instruments must always assign economic rights and may, exceptionally, also assign administrative rights. However, I can see no systematic reasons for ruling out instruments that only assign administrative rights. In a case such as this – which is probably destined to remain in the realms of theory – it should be possible to transfer the financial instruments so that the holder can (at least) make a profit from their sale.
5. The prohibition on voting in general shareholders’ meetings is not easy to interpret in light of article 2351, paragraph 5; indeed, there appears to be a clear lack of coordination between the two.
Article 2351, paragraph 5 provides that participating financial instruments may carry the right to vote on specifically indicated matters and, in particular, they may be assigned the right to appoint an independent member of the board of directors or supervisory board or a statutory auditor.
In effect, these provisions are irreconcilable without partially emptying the prohibition contained in article 2346 of technical meaning and transforming it, within the limits that we shall see, into a general statement of principle.
Indeed, any interpretation of article 2351 that limits the voting rights of financial instrument holders to special meetings is unacceptable. When the law mentions “vote” without further specification, there can be no doubt that it is necessarily referring to the (general) shareholders’ meeting. Moreover, there would be no reason to expressly assign the right to vote in the special meeting given the provision of article 2376 Italian Civil Code. Furthermore, since the right to vote in the special meeting serves to protect the rights of the category, there is no way it could be limited to “specifically indicated matters”.
Similarly, voting cannot be reduced to a mere declaration of an opinion. If the intention had been to provide for consultation of the financial instrument holders, the legislator should not have used the word “vote”.
Nor would it make any more sense to interpret the provision as if it referred to the appointment outside the shareholders’ meeting of members of the corporation boards: article 2351 envisages the assignment of the right to vote, which is a right that is typically exercised at the shareholders’ meeting.
Moreover, the fact that the holders of these instruments are not prohibited from taking part in the “general” shareholders’ meeting is demonstrated by a – better-worded – provision which expressly states that even cooperatives may issue participating instruments. Indeed, article 2526, paragraph 2, Italian Civil Code provides that “financial instrument holders may not, in any case, be assigned more than one-third of the votes granted to the total number of shareholders present or represented at each general meeting”.
As for the specific matters on which these persons may be entitled to vote, all that can be said at present is that such matters must fall within the competence of the shareholders’ meeting and not within the remit of the directors.
Instead, it is correct to assume that the scope of the “specific matters” on which participating instrument holders may vote must not be such as to encroach in general on the voting rights which are reserved in principle to the shareholders (which is the real meaning that should be attributed to the provision of article 2346, paragraph 6): thus, it is not so much a prohibition on voting in the – general – shareholders’ meeting as a prohibition on attributing a general scope to the voting rights of the participating financial instrument holders.
Therefore, the exclusion of voting rights in the “general shareholders’ meeting” should be interpreted not with reference to the body, but to the general nature of its areas of competence, which is replaced by the specific indication of particular matters.
Lastly, it should be emphasised that the law does not introduce a rule of proportion with the vote of shareholders, so that where there are both voting rights attached to shares and voting rights attached to financial instruments during a “general” meeting, the articles of the corporation will have to adjust the “weight” that each carries (with criteria that are, however, difficult to establish since, as we have seen, the contribution of works or services is also freely permitted).
6. The member of the management or supervisory board who may be appointed by the holders of participating instruments must be regarded as having full powers and not as being a “quasi director” or “quasi auditor”. The only provision is that he or she be “independent”, i.e. meet the statutory requirements of independence (those envisaged by article 2399 Italian Civil Code or any others applicable), but we also cannot rule out that she or he may have “executive” powers. At least, this is the case in the traditional and in the one-tier system, since the two-tier system does not envisage the appointment of a member of the management board. Once again, there is a certain lack of refinement on the part of the legislator.
The provision does not even clarify whether, if there are several categories of financial instruments, the articles may assign each of them the power to appoint an independent director or auditor; nor does it clarify whether, in such case, there is still a cap on members not elected by the shareholders. Again, a legislative gap of no little importance.
It is clear that the interpretation whereby the majority of the members of the corporation boards must necessarily be chosen by the shareholders is not fully convincing with regard to a flexible organisational model such as that of “modern” SPAs. Besides, it would not be easy to find a legal basis.
The only argument that may, perhaps, be used to define the scope of the power to appoint corporation bodies that may be attributed to financial instrument holders is the formal argument that may be inferred from a strict interpretation of article 2351, paragraph 5, where it provides that “the appointment of an independent member may be reserved to them, in accordance with procedures established by the articles of association, (…)”. This would imply that the total number of such independent representatives could not exceed one, with the consequent need to establish unitary election mechanisms in cases in which there are several categories of financial instruments. However, any argument based on a literal interpretation is undoubtedly somewhat weak when the provisions in question are so unclear and incomplete.
7. As mentioned, another issue is whether the financial instruments may be attributed the right to attend the shareholders’ meeting, since article 2346 Italian Civil Code only excludes – in the manner specified – their right to vote. If this were the case, there would be a conflict with article 2370, paragraph 1, Italian Civil Code, which provides that only “those who are entitled to vote” may attend the shareholders’ meeting. The issue is, naturally, of general relevance. However, in this case, one could even adopt the broadest interpretation, given the importance – from the perspective of their information rights – of the financial instrument holders’ attendance.
There is also an issue as to whether the participating financial instrument holders are entitled to challenge resolutions, naturally only regarding matters on which they are entitled to vote. In fact, article 2377 only refers to challenges by shareholders, but one could perhaps try to overcome this formal limit based on the logical connection between vote and challenge. However, I believe that, in general terms, this suggestion should be rejected due to the insurmountable technical problems that would arise: if nothing else, just consider the practical impossibility of applying the minimum shareholding requirement envisaged by the third paragraph of article 2377.
Therefore, it is reasonable to assume that, where there is no provision in the articles, a financial instrument’s voting right does not imply, by default, a right to challenge. However, there is no reason why the articles should not envisage such a right – indeed, the articles may certainly derogate from the aforementioned quantitative limit – and, in this case, regulate the relevant procedure and, in particular, the entitlement criteria.
8. In addition to the general provision of article 2346, paragraph 6, Italian Civil Code, which has, as we have seen, an open content, Italian company law envisages other – what we might call – special participating financial instruments with a partially predetermined content.
I should specify that the financial instruments assigned to workers, envisaged by article 2349 Italian Civil Code cannot be considered special, as the only thing that differentiates them from the general type of financial instruments is that they are issued to employees of the corporation. Nor should financial instruments issued by cooperatives, pursuant to the aforementioned article 2526 Italian Civil Code, be considered special for our purposes, since they also fall within the general provision (which are expressly referred to in the first paragraph of article 2526), with the only specific provision being the withdrawal right of holders of instruments carrying voting rights, in accordance with the procedure envisaged by article 2437 Italian Civil Code (article 2526, paragraph 3).
There are two genuinely “special” types of special participating financial instruments.
The first is that envisaged by article 2411, paragraph 3, Italian Civil Code, which extends the rules on bonds “to financial instruments, howsoever named, which make the timing and extent of the repayment of the capital to the economic performance of the corporation”. In this case, the provision clearly envisages quasi debt instruments and not “corporate” instruments.
The second special type is envisaged by article 2447-ter, paragraph 1, letter (e), which refers to financial instruments for “participating in the transaction”, which the corporation may issue when it resolves to set up a dedicated fund, with a “with a specific indication of the rights conferred by such instruments”. It appears that the articles of association may only assign supervisory powers to such instruments and not – at least, in principle –administrative rights: holders should not be able to play a role in the management of the transaction (based on article 2477-ter, paragraph 1, letter (d) and article 2477-octies, paragraph 1, no. 1, Italian Civil Code). Even the special meeting envisaged by article 2477-octies is not that referred to in article 2376 Italian Civil Code, but is equivalent to the bondholders’ meeting envisaged by article 2415 Italian Civil Code (the rules of which are expressly referred to).
The relationship between the general and special participating financial instruments is ambiguous. In particular, there is debate as to whether such instruments may also carry administrative rights. The simplest solution is that they may not, since the relationship between the two sets of rules is one of mutual exclusion and not complementarity (that of article 2411 and those of article 2346 and article 2477-ter). As we shall see, this is true in part.
There can be no doubt that “quasi debt instruments” have their own set of rules, which is that applicable to bonds, and this distinguishes them from the “general” participating financial instruments envisaged by article 2346 Italian Civil Code. The specific rules regard three aspects: (i) the quantitative limit on their issue (i.e. double the share capital pursuant to article 2412 Italian Civil Code), which only applies to quasi debt instruments; (ii) the procedure for their issue: a board of directors’ resolution is sufficient for quasi debt instruments (pursuant to articles 2410 and 2411, paragraph 3 Italian Civil Code), while article 2346 requires provision in the articles of association, with no need for a subsequent shareholders’ resolution if the articles already provide all the details (procedure, conditions, issue, content of the rights, specific provisions for non-fulfilment and, if transferrable, also the relevant law); the articles could certainly delegate such matters to the shareholders’ meeting or the board of directors, but the source would still be the articles themselves; (iii) the rules on special meetings, which are regulated by article 2415, and not by article 2376 Italian Civil Code
Notwithstanding these specific rules, it makes no sense to state that such instruments cannot in any case be assigned administrative rights. It makes no sense because article 2346 permits the creation of “hybrid” instruments.
In other words, the articles could envisage the issue of participating financial instruments against a cash contribution, which carry administrative rights (with the broad freedom permitted by article 2346) and economic rights essentially equivalent to those specified in article 2411, paragraph 3 (i.e. with total or partial repayment upon expiry, commensurate with the performance of the corporation’s business). What must be avoided in a case such as this is the risk that the law may be easily evaded; as a result, the quantitative limits envisaged by article 2412 on the issue of such instruments must in any case apply.
In reality, the problem should be approached from a different perspective: the issue is not so much whether a certain administrative right can be assigned to financial instruments similar to bonds, but rather whether the bond issue limits should be imposed on hybrid financial instruments, issued under article 2346, which envisage either total or partial repayment of the capital contributed, even where i) such instruments in some way share the business risk, with the measure of the repayment being linked to the corporation’s financial results and ii) they carry administrative rights. The hybridisation of quasi debt instruments cannot exempt them from the provisions that limit their issue.
Instead, I can see no problem with regard to the body responsible for deciding their issue or the organisation that protects the rights of the holders of such hybrid instruments. Indeed, article 2411, paragraph 3, Italian Civil Code generally provides that the rules contained in Section VII (on bonds) apply to all the financial instruments that we have defined “quasi debt instruments”. However, this is only true for instruments without administrative rights, while for hybrid instruments (including participating instruments) there would clearly be problems of compatibility between the two sets of rules (as regards the body that may decide their issue – management board or articles/extraordinary shareholders’ meeting – and as regards the holders’ organisation – bondholders’ organisation or participating instrument holders’ organisation -). Indeed, in the case at hand, the “hybrid” financial instrument is part of the corporate organisation and (potentially) interferes with the shareholders’ prerogatives. Moreover, the limited protection afforded to bondholders would make little sense in light of the powers of “self-protection” that the assignment of administrative rights provides for holders.
Thus, it must be concluded that the rules on bonds only apply in their entirety to para-debt instruments not carrying administrative rights, while such rules only apply in part (i.e. exclusively with regard to the quantitative limits on their issue) to instruments that carry administrative rights.
Although an intermediate solution – i.e. a case-by-case analysis of such hybrid instruments to ascertain the level of “contamination” by participating instruments – has been proposed in an intelligent manner by scholars, it is not wholly convincing. In effect, it would require the interpreter to verify whether the administrative rights assigned to the holder are sufficient to attribute an “organisational value within the corporation” to these financial instruments and only in this case would the rules on bonds be set aside. This interpretation is not acceptable because the parameter is too vague and uncertain.
In reality, it is a delicate issue of “establishing the boundaries”, for which a clear solution would be preferable so as to prevent a race by financial engineers to create hybrid instruments, the logical conclusion of which would be that only the assignment of minor administrative rights would be compatible with the rules on debt instruments. What would such “minor” rights be?? The power to inspect the corporation’s books? Taking part but not voting in the shareholders’ meeting (setting aside the often cited problem constituted by article 2370 Italian Civil Code, which means that it is now difficult to imagine a situation in which attendance and vote are separated)? “Atypical” generic powers of oversight/supervision? Moreover, the sole purpose of this effort would essentially be to ensure that it is the management board that issues the instruments. It would be much better to state categorically that if administrative rights are also assigned, the rules set forth in article 2346 and not those in articles 2411 et seq. will apply, subject to the quantitative limits envisaged by article 2412, which are – it must be repeated – applicable wherever there is a right to the repayment of the consideration, even if this is (in part) dependent upon the financial results.
Instead, financial instruments for participating in the transaction pose fewer regulatory problems: there are, in fact, fewer overlaps with the category of participating financial instruments in the case of hybridisation of the model envisaged by the Italian Civil Code. Here, as mentioned, the holder would, in principle, only have supervisory powers and not powers to “participate in the management”. Therefore, additional rights – of supervision and information – could be assigned to him without resorting to instruments not envisaged by article 2447-ter Italian Civil Code
However, even in this case the hybridisation of the instrument would be possible, with the consequent application of the rules contained in article 2346 Italian Civil Code, including with regard to the special meeting, if one were to assign administrative rights that are not limited to management control. There would, however, be no mandatory provisions – as in the aforementioned case of the quantitative cap on the issue of bonds and similar instruments – except, perhaps, for article 2447-sexies, single paragraph, second sentence, which envisages an obligation to keep the book of financial instruments for participating in the transaction issued in a nominative form, which would be necessary in any case.
9. In conclusion, the holders of participating financial instruments may be assigned an extremely wide range of administrative rights. Despite the restrictions which must be recognised, sometimes even by “forcing” the new legislative provisions, the power to participate in the management of the corporation that may be assigned to third parties is considerable.
Nonetheless, although such third parties may be assigned greater administrative rights than those attributed to minority shareholders, they do not become parties to the corporate agreement.
In fact, participating instrument holders provide consideration, they do not make a contribution, and this gives rise to a different relationship to that of the corporate agreement. However, rather than a credit relationship – as in the case of corporate bonds – it would be preferable to define it as an associative relationship which may be equated to a partnership (associazione in partecipazione).
The consideration provided for financial instruments is in this case merely a loan to a business that continues to belong to others, regardless of which administrative powers are assigned to them. In essence, it would appear that, in this case, the legislator – which is not always clear in its choice of expressions – has purposely used the concept of “consideration” as a distinguishing feature.
This explains why the substantive limit on the issue participating financial instruments is that the issuer must not become an SPA in the hands of non-shareholders. However, since no quantitative criteria or strict, clear limits have been introduced (as they have in other legal systems), one can only evaluate the articles as a whole to check that an abnormal corporation, institutionally controlled by non-shareholders, has not been created.
 See Oppo, Le grandi opzioni della riforma e la società per azioni, in Scritti giuridici, VII, Vario diritto, Padova, 2005, p. 298.
 See Oppo, Quesiti in tema di azioni e strumenti finanziari, in Scritti giuridici, VIII, Ultimi scritti, Padova, 2013, p. 67.
 See in the US EASTERBROOK-FISCHEL, Voting in Corporate Law, in The Journal of Law and Economics, XXVI (1983), p. 399; in UK cfr. Davies, Gower and Davies’ Principles of Modern Company Law, VII ed., London, 2003, p. 806; cfr. also Van Ryn, Securities and Securities Holders, in Int. Enc. of Comp. Law, XIII, 5, Tübingen, 1990, n. 181, 116.
 See Tombari, Le categorie speciali di azioni nella società quotata, in Riv. soc., 2007, p. 972.
 See Tucci, La costituzione e i quorum, in Lener-Tucci, L’assemblea delle società per azioni, Torino, 2012, p. 142 ss.
 See Angelici, La riforma delle società di capitali. Lezioni di diritto commerciale, Padova, 2006, p. 71.
 See Pomelli, Rischio di impresa e potere di voto nella società per azioni: principio di proporzionalità e categorie azionarie, in Giur. Comm., 2008, I, p. 530 ss.
 See Notari, Le categorie speciali di azioni, in Il nuovo diritto delle società. Liber amicorum Gian Franco Campobasso, I, Torino, 2006, p. 603.
 The prohibition on leonine agreements is, however, “too little” to limit the inequalities between categories of shareholders.
 See Oppo, Spunti problematici sulla riforma delle società per azioni, in Scritti giuridici, VII, cit., p. 275.
 See Oppo, Sull’impatto sistematico della riforma del diritto societario, in Scritti giuridici, VII, cit. p. 303 s.
 See the considerations in Oppo, Principi (di diritto commerciale), in Scritti giuridici, VII, cit., p. 163.
 See Oppo, Patto sociale, patti collaterali e qualità di socio nella società per azioni riformata, in Scritti giuridici, VII, cit., p. 322.
 See Lener, L’intervento in assemblea, in Lener-Tucci, L’assemblea, cit., p. 97 ss.
 See Desana, Le categorie di azioni e gli strumenti finanziari non azionari, in La riforma delle società, profili della nuova disciplina, Torino, 2003, p. 124 ss.
 Cfr. Cian, Strumenti finanziari partecipativi e poteri di voice, Milano, 2006, p. 107 ss.; in the US see Williamson, Corporate Governance, in Yale Law Journal, 93 (1984), p. 1206 ss.
 With the consequence that the management board will increasingly become a place of confrontation and discussion, including with the non-shareholders’ representatives, and not just of management decisions.
 See Cian, Strumenti finanziari partecipativi e poteri di voice, cit., p. 105 ss.; Cossu, Società aperte e interesse sociale, Torino, 2006, p. 207 ss.; Lamandini, Autonomia negoziale e vincoli di sistema nella emissione di strumenti finanziari da parte delle società per azioni e delle cooperative per azioni, in Banca, borsa, 2003, I, p. 536. Cfr. also Pennington, Company Law, VIII ed., London, 2001, p. 648 s.; Davies, Gower and Davies’ Principles, cit., p. 307; in Germany cfr. Schmidt, Gesellschaftsrecht, IV ed., Köln-Berlin, 2002, § 28, III, p. 832; for a different solution in Switzerland see § 709 OR.
 See Valzer, Gli strumenti finanziari partecipativi e non partecipativi nelle società per azioni, Torino, p. 306 ss.
 See Valzer, op. cit., p. 353 ss.; Dentamaro, Le obbligazioni, in Il nuovo diritto societario nella dottrina e nella giurisprudenza, Bologna, 2009, p. 250 ss.; Giannelli, sub Art. 2411, in Commentario, directed by Marchetti, Bianchi, Ghezzi and Notari, Milano, 2006, p. 61 ss.
 See Cian, Strumenti finanziari partecipativi, cit.
 Under German Law see Hüffer, Aktiengesetz, VI ed., München, 2004, § 221, p. 1072; Lutter, in Kölner Kommentar zum Aktiengesetz, Bd 5/1, II ed., Köln-Berlin, 1995, § 221, Rn 220, 584.
 See Oppo, Patto sociale, cit., p. 324.
 On the different meaning of apporto (consideration) of the contractual view and of the institutional views of SPAs, see Oppo, Le grandi opzioni, cit., p. 287.
Raffaele Lener is Full professor of Financial Markets Law and Private Comparative Law in the Department of Law at the University of Rome Tor Vergata. He’s also Lecturer in Commercial Law in the Department of Business and Management at the LUISS University. He is a partner at Freshfields Bruckhaus Deringer since 1998. He is member of the Italian banking A.D.R. “Arbitro Bancario Finanziario”. He is a member of the Scientific Committee of AIPP-Italian Association of Payment Institutions and of UFI-Italian Union of Financial Intermediaries. He has been a member of the European Commission’s Legal Certainty Group since 2005. He is also a member of the jury of Assogestioni (Italian Association of investment funds managers) and Assoreti (Italian Association of investment firms). He is the author of numerous publications (monographs, essays, articles, encyclopedia entries, commentaries) on securities regulation, company law, banks, financial markets, insolvency law and contracts in general. He is a founder member of the Associazione Disiano Preite. Editor of the Economic Law series, published by Giappichelli. Member of the editorial or scientific boards of the journals: Analisi giuridica dell’economia, Banca, borsa e titoli di credito, Il Foro Italiano, Rivista bancaria, International Banking Law and Regulations.