Disputes concerning the withdrawal of a shareholder often require a difficult balancing act: between the minority shareholder's interest in getting rid of a shareholding that has become undesirable – on the one hand – and the majority shareholder's interest in avoiding payment (which may also be very onerous) for the liquidation of the shares – on the other.
In such a scenario, it is the legislator that has expressly provided for the cases in which a shareholder may withdraw, some of which are mandatory (Article 2437(1) of the Civil Code), and others which may be derogated from the by-laws (Article 2437(2) of the Civil Code), to which are added the cases set forth in Article 2497-quater of the Civil Code on the subject of management and coordination.
Of course, the law provisions of the cases justifying the right of withdrawal, are not sufficient, per se, to avoid disputes as to the legitimacy of its exercise and the consequent claim to the liquidation of the shareholding. This is the case, in particular, submitted to the Supreme Court and decided in a very recent judgment (Court of Cassation 27.06.2022 no. 20546). The joint-stock company (s.p.a.) Alfa was owned by Beta, with 52.13% of the share capital, and by Gamma with 47.87%. The by-laws contained a pre-emption clause, which was later amended to exclude this restriction in the event of a transfer to another company in the same group. On the basis of this amendment, Beta sold its controlling stake to another company of the same group.
Subsequently, Gamma – the minority shareholder – exercised its withdrawal by invoking:
– Article 2437, paragraph 2, letter b) of the Italian Civil Code, which provides for withdrawal in the event of the introduction or removal of restrictions on the circulation of shares, and
– Article 2497-quater, paragraph 1, letter c) of the Italian Civil Code, which provides for withdrawal in the event of the commencement and termination of management and coordination activities, if this results in an alteration of the risk conditions of the investment (and a public purchase offer is not promoted).
This gave rise to a dispute concerning both the legitimacy of the withdrawal and the determination of the amount to be liquidated. First the Court of first instance of Florence and then the Court of Appeal of Florence ruled out the existence of the prerequisite under Article 2347, paragraph 2, lett. b) of the Italian Civil Code, stating that the amendment to the by-laws would not have resulted in a substantial change to the pre-emption clause: in fact, a transfer to another company of the same group would not have resulted in a change of the company's control centre and, therefore, the exercise of withdrawal would not have been legitimate.
The Court of first instance had, on the other hand, acknowledged the legitimacy of the withdrawal on the basis of Art. 2497-quater, paragraph 1, lett. c) of the Italian Civil Code and established the amount of the liquidation, whereas the Court of Appeal reformed the judgement, completely excluding the right of withdrawal.
The Supreme Court, however, overruled this decision based on three considerations of a textual and systematic nature:
1. Article 2347, paragraph 2 letter b) of the Italian Civil Code, where it admits withdrawal in the event of the introduction or removal of restrictions on the circulation of shares, does not provide for any further requirement and, in particular, does not require that the change in the restriction be of substantial relevance;
2. on the contrary, in another hypothesis envisaged by the same article (Article 2347, paragraph 1 lett. a) of the Italian Civil Code), withdrawal is allowed in the event of a change in the corporate purpose, but only when it allows a significant change in the company's activity: this makes it clear that when the legislator has deemed it necessary for an amendment to be substantial, it has expressly provided for it. On the contrary, if no provision was made by the legislator, the Court cannot enter into an assessment of the merits of the amendment;
3. finally, Article 2355-bis, para. 4 of the Italian Civil Code provides that limitations on the transfer of shares must be apparent from the share certificate: here, too, the rule refers to any type of limitation, without any specific materiality requirement. If this applies to annotations, it must apply a fortiori to the exercise of withdrawal.
The Supreme Court's conclusions appear logical and agreeable. However, one consideration remains: the resolution that amended the pre-emption clause was dated December 2012; the withdrawal was exercised at the beginning of February 2013; almost ten years later, the Court of Cassation has definitively clarified the legitimacy of the withdrawal (overturning the outcome of the judgement for the second time). But it referred the matter back to the Court of Appeal of Florence for the determination of the amount to be liquidated with the consequent – further – protraction of the dispute.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.