Shareholders’ meetings of listed companies at the time of the Covid-19 between new solutions and critical issues
The Cura Italia Law Decree provides for specific instruments to allow the shareholders' meeting of listed companies, including companies whose shares are traded on multilateral trading facilities, in the context of the Coronavirus emergency. In particular, in order to avoid physical attendance in the meeting, companies are authorized to use remote voting methods, such as voting by correspondence or electronic voting, and provided that all shareholders have the right to be represented at the meeting by one designated representative. What critical issues can arise from this new way of holding meetings?
Article 106 of the Italian Law Decree No. 18 of March 17, 2020 (the so-called “Cura Italia” Law Decree) provides for a specific discipline for listed companies in order to avoid physical attendance at the shareholders’ meetings by any person having the right to be present and express votes in such meetings. In particular, all companies, although not expressly provided in their by-laws for, are allowed to use remote vote methods, such as the vote by correspondence or the electronic vote.
Although the by-laws provide otherwise, companies with listed shares may provide that all shareholders have the right to be represented at the meeting by one designated representative – pursuant to Article 135-undecies of Italian Consolidated Law on Finance (“CLF”) – to whom the shareholders may grant a proxy with voting instructions on all or some items on the agenda. In addition, such companies may also establish in the notice of call that the attendance at the meeting and the relative vote on the items are allowed exclusively through the above mentioned representative. The designated representative may also be granted with proxies or sub-proxies according to Article 135-novies of CLF. As expressly provided by Article 106, par. 5, of Cura Italia Law Decree, all such provisions apply also to companies whose shares are traded on a multilateral trading facility.
In light of the new measures introduced by the Cura Italia Law Decree, Consob (the Italian Agency that regulates the financial markets), through communication No. 3/2020 of April 10, 2020, stated that companies with shares listed on regulated markets should ensure at least one of the above said participation and remote voting means set forth by the Law Decree, given the provisions on circulation restriction and epidemic containment imposed by the Italian Government due to the public health emergency.
One of the main issues relating to the holding of the shareholders’ meetings of listed companies concerns the identification of shareholders, which could not be guaranteed by simple telecommunication system, especially considering that the company is required to verify the legitimate attendance and exercise of the right to vote of each shareholder by, inter alia, assessing the communication received by the relevant financial intermediary confirming shares’ ownership on behalf of each shareholder. Such communication is made by the above-mentioned intermediary on the basis of evidence of shares’ ownership at the end of the accounting day on the seventh trading day prior to the date provided for the shareholders’ meeting (the so called “record date”).
At this regard, the mechanism of participation through the designated representative for all shareholders may be deemed as the most suitable and effective solution. Indeed, the shareholders’ identification activities to be carried out by the company, including the assessment of the above mentioned communication, may turn out to be smoother and simpler, bearing in mind that such representative already collects all information regarding the shareholders – e.g. personal data, securities account number, bank code of the depositary, copy of the financial intermediary’s communication – by means of the proxies received. It should also be noted that, according to statement No. 188 of the Notary Public Board of Milan (Consiglio Notarile di Milano), the company may allow both the means – i.e. attendance via telematic systems and through the designated representative – set forth by the Cura Italia Law Decree.
However some practical issues may remain unresolved, as the attendance through the designated representative in these cases could fail to provide for adequate solutions. This applies, for example, to the right of submitting draft resolutions directly at the meeting pursuant to Article 126-bis of CLF. In such event a solution could be found in allowing the submission of draft resolutions on the items on the agenda before the meeting thus enabling all shareholders to grant the relevant voting instructions within the issued proxies.
In a context characterized by several regulations enforcing social distancing and circulation restrictions, it is also worth considering which consequences may arise if the notice of call of the shareholders’ meeting, despite Consob’s communication, does not expressly provide for the right to intervene and vote at the meeting by means of the instruments described earlier. It should be remembered that many companies, in particular the small and medium-sized ones, including companies with shares traded on multilateral trading facilities, such as AIM Italia (Consob’s communication is formally addressed to companies listed on regulated markets only), do not have telematic systems ensuring the remote voting (the vote by correspondence or the electronic vote) and probably do not even have corporate structures allowing them to prepare such measures in a short period of time, also taking into account that some notices of call of the meetings had already been published or were going to be publish at the time the Cura Italia Law Decree came into force. Moreover, the concentration of voting rights in the hands of a single representative appointed by the company may imply, beside from additional costs, the risk that, in case of her/his impediment, the meeting may not be regularly held.
Nevertheless, the instruments provided by the Cura Italia Law Decree should be taken into account in the drafting of the notices of call of the meeting. The small and medium-sized companies listed on multilateral trading facilities should also be required to ensure attendance through the previously described means, in order to rule out any form of irregularity of the meetings and the consequent risk of invalidity of the resolutions adopted. In such cases, whereas a shareholder requires to intervene at the meeting through the instruments provided by the new provisions for and the company does not consider to implement them, the notice of call should clearly specify the reasons why the attendance by way of such means cannot be granted, in order to exclude any case of abuse affecting the validity of the resolution adopted.