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Law-Decree No. 23 of 8 April 2020 has significantly extended, albeit on a temporary basis, the Government's veto and policy-making powers (“Golden Powers”) that can be exercised when "strategic" companies become the subject of acquisition or undertake extraordinary transactions.
The primary source of law governing Golden Powers is Law-Decree No. 21 of 15 March 2012[1], which identifies the scope of such powers – to be exercised on the basis of objective and non-discriminatory criteria – in the sectors of (i) defence and national security and (ii) energy, transport and communications. The implementing regulations have identified the specific activities of strategic relevance and therefore the companies that are subject to the Government's special powers at issue.
In the defence and national security sector, the Government's special powers apply, inter alia, to companies carrying out research, design and production of electronic warfare systems, remotely control aircraft, systems to counter improvised explosive devices, advanced missile systems, radar signature reduction technologies[2].
In the energy, transport and communications sectors, the Government's special powers on the other hand apply to companies holding strategic assets, such as the national natural gas transmission network, the electricity transmission network, ports or airports of national interest, national railway networks of relevance to trans-European networks, facilities used to provide access to end users of broadband and ultra-broadband services, and long-distance networks[3].
Law-Decree 21/2012, with its implementing regulations[4], governs both certain extraordinary transactions carried out by relevant companies and the acquisition of significant shareholdings in such companies by third parties.
Among the extraordinary transactions governed by the special rules are mergers or demergers, the transfer of businesses, business divisions or subsidiaries, the transfer of a company's registered office abroad, changes to the company's purpose in the bylaws, the company’s liquidation, the amendment of clauses in the by-laws limiting voting rights once certain thresholds of ownership are exceeded (possibly adopted under Article 2351, third paragraph, of the Italian Civil Code or introduced pursuant to Article 3, paragraph 1, of Legislative Decree No. 332 of 31 May 1994), the assignment of real property rights or utilization rights relating to tangible or intangible assets, or the creation of liens affecting their use.
The company involved in such transactions (and, therefore, its management body) will be required to provide the Prime Minister with full information about the resolution to be adopted or the act or transaction to be carried out. Within 45 days of such notice, the Prime Minister may:
Pending the time for the adoption of a decision by the Government, the effectiveness of the resolutions and acts will in any event remain suspended and, therefore, the company will be prohibited from implementing the same. If the prescribed period expires without the Prime Minister having notified the company of its decision to exercise the special powers, then the suspension will cease to have effect and the company will be allowed to proceed with the implementation of the transaction resolved upon.
The Government's Golden Powers extend to acquisitions, by anyone, as a result of which the purchaser ends up holding a stake exceeding the thresholds of 5% (3% in case of listed companies), 10%, 15%, 20%, 25% and 50% of the voting share capital of the company concerned. In calculating the relevant shareholding, stakes held by third parties with whom the purchaser has entered into shareholders' agreements under Article 122 of Legislative Decree No. 58 of 24 February 1998 or under Article 2341-bis of the Italian Civil Code must also be taken into account.
The purchaser will be required to notify the acquisition to the Prime Minister within 10 days, providing all necessary information, including a general description of the proposed acquisition, the purchaser and its scope of operation. Within 45 days of such notice[5], the Government may:
Pending the 10-day time period for the notification of the acquisition and the 45-day time period for the notification of a decision by the Government, the exercise of voting rights and administrative powers attached to the shareholding acquired (in the unlikely event that the parties have not stopped at signing of a conditional contract but have consummated the closing) will remain suspended. If the 45-day period expires without the Prime Minister having notified the purchaser of the decision to exercise the special powers, even in the absence of an express provision to this effect, it is reasonable to believe that the suspension ceases to have effect and that the purchaser is allowed to exercise said rights and administrative powers.
Law-Decree 21/2012 extends the Government’s special powers also to certain transactions related to broadband electronic communication services based on 5G technology, to the extent closely linked to the strategic sector of defence and national security. Such transactions include agreements regarding the acquisition, for whatever reason, of goods or services related to the design, construction, maintenance and operation of networks related to such services, or the acquisition, for whatever reason, of technology-intensive components that are functional to such construction or operation.
Any company that has entered into such transactions with entities outside the European Union will be required to notify, within 10 days, the Prime Minister, who may within 30 days impose specific requirements or conditions or prohibit their implementation.
Law-Decree 21/2012, with its implementing regulations[6], governs both certain extraordinary transactions and acquisitions of controlling shareholdings by entities outside the European Union, including EU companies controlled, directly or indirectly, by companies not having a registered office in a Member State[7].
The special rules apply to all transactions resulting in change in ownership, control, availability or destination of the strategic resources in favour of anyone, including mergers or demergers, the transfer of businesses, business divisions or subsidiaries, the transfer of a company's registered office abroad, and the other transactions referred to in paragraph 1.1.1 above.
Any company wishing to undertake any of the above-mentioned extraordinary transactions will be required to provide the Prime Minister with full information on the transaction within 10 days of the adoption of the relevant resolution, in any event before the same is implemented. Within 45 days of such notice[8], the Government may:
Pending the 10-day term for the notification of the resolution or transaction and the 45-day term for the notification of a decision of the Prime Minister, their effectiveness will in any event remain suspended and, therefore, the company will be prohibited from implementing such resolution or transaction. If the 45-day term expires without the Prime Minister having notified the company of the decision to exercise the special powers, the suspension will cease to have effect and the company will be allowed to proceed with the implementation of the transaction resolved upon.
In the case of acquisitions by entities outside the European Union of controlling interests in companies holding the above mentioned assets, the purchaser will be required to notify the Prime Minister within 10 days, also providing any information that may be useful for the general description of the acquisition project, the purchaser and its scope of operation.
If the acquisition is likely to cause serious prejudice to the public interests in the above mentioned strategic sectors, or to pose a threat to national security or the public order, the Prime Minister may, within 45 days of such notice:
Pending the 10-day period for the notification of the acquisition and the 45-day period for the notification of a decision by the Prime Minister, the exercise of voting rights and administrative powers attached to the acquired shareholding (in the unlikely event that the acquisition has already been consummated) will remain suspended. If the 45-day period expires without the Prime Minister having notified the company of its decision to exercise the special powers, even in the absence of an express provision to this effect in the Law-Decree, it is reasonable to believe the suspension ceases to have effect and the purchaser is allowed to exercise said rights and powers.
The violation of the above-mentioned provisions is sanctioned both in terms of the validity of the acts carried out and from an economic point of view.
With reference to extraordinary transactions, the violation of the veto or the requirements imposed by the Government will trigger the invalidity of the relevant resolutions or acts. Furthermore, if implementation of the underlying transaction has been commenced, the Government may require the reinstatement of the status quo ante. In addition, if the transaction has been implemented despite the suspension regime, the Government may require the reinstatement of the status quo ante in the same decision on the veto or the imposition of special implementing measures.
With regard to acquisitions of shareholdings, applicable sanctions depend on whether the Government imposed certain requirements or it absolutely prohibited the transaction. In the first case, the violation of prescribed requirements triggers (i) the invalidity of the resolutions and acts made, (ii) the automatic suspension of the voting rights and administrative powers attached to the shareholding acquired for as long as the violation continues, and (iii) the invalidity of the resolutions subsequently passed with the decisive vote of the purchaser attached to said shareholding.
On the hand, any failure to comply with the absolute prohibition to finalise the transaction will trigger the purchaser's obligation to dispose of the acquired shareholding within one year. In the event of failure to sell, the competent court will proceed with the forced sale at the request of the Prime Minister. In this case as well, the suspension of the voting rights and administrative powers attached to the acquired shareholding will apply, with consequent invalidity of the resolutions adopted with the decisive vote of the purchaser.
The violation of the above-mentioned rules will also trigger the application of monetary sanctions in the amount of twice the value of the transaction, and in any event no less than 1% of the turnover of the relevant company in the last financial year for which financial statements have been approved.
In the sector of broadband electronic communications services based on 5G technology, the monetary sanctions applicable in the event of violation of the relevant rules are instead set between 25% and 150% of the value of the transaction.
It is worth specifying that transactions carried out within the same group of companies are expressly excluded from the scope of the rules under examination, without prejudice to the obligation to comply with notification requirements.
However, such exclusion will not apply in the presence of information that there is a threat of serious prejudice to fundamental interests of defence and national security, or public interests related to the security and operation of networks and installations and the continuity of supply.
Articles 15 and 16 of Law Decree 23/2020 extend the scope of the Government’s special powers to companies operating in further strategic sectors, to prevent resources of national strategic importance from being acquired by entities taking advantage of the situation of economic and financial difficulty connected with the current health emergency.
First of all, Law-Decree 23/2020 extends the special rules governing the energy, transport and communications sectors (paragraph 1.2 above) to all acquisitions, by anyone, of shareholdings in companies holding assets and relationships in the sectors specified in Article 4, paragraph 1, of Regulation (EU) No. 452 of 19 March 2019, namely: (a) infrastructure, whether physical or virtual, and such as energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure (including in the credit and insurance sectors) as well as investments in land and real estate crucial for the use of such infrastructure; (b) critical technologies and dual use items as defined in point 1 of Article 2 of Council Regulation (EC) No 428/2009, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy (quantum and nuclear) storage technologies, as well as nanotechnologies and biotechnologies; (c) security of supply of critical production factors, including energy or raw materials, as well as food security; (d) access to sensitive information, including personal data, or the ability to control such information; (e) the freedom and pluralism of the media. Such rules will remain in force only until a subsequent decree will be issued that will specify in more detail the resources deemed of national strategic relevance.
Secondly, until 31 December 2020, the special rules governing the energy, transport and communications sectors will in any event also extend to:
It is worth noting that the mention of critical health infrastructure and technology is particularly important in light of the recommendation issued by the European Commission, in its communications dated 13 and 25 March 2020, to the governments of the Member States to utilize the special powers afforded to them under their respective legislation, in order to avoid the risk that foreign investors, taking advantage of the current health emergency, may acquire control and availability of strategic resources in the health sector.
Finally, Law-Decree 23/2020 clarifies that, even in case of failure to notify by the parties concerned, the Government may exercise its veto and policy-making powers provided for by the special rules and, therefore, prohibit such extraordinary transactions and acquisitions or impose conditions on their implementation.
This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact Piero Corigliano.
[1] Converted with amendments into Law No. 56 of 11 May 2012, as subsequently amended by Law-Decree No. 105 of 21 September 2019, converted with amendments into Law No. 133 of 18 November 2019.
[2] See Decree of the President of the Council of Ministers No. 108 of 6 June 2014.
[3] See Presidential Decree No. 85 of 25 March 2014.
[4] See Presidential Decree No. 35 of 19 February 2014.
[5] If it is necessary to request information from the purchaser or to transmit requests for preliminary investigation to third parties, the prescribed term will be suspended, only once, until the receipt of the same, which must be provided by the purchaser within 10 days or by third parties within 20 days. Any request for information and request for preliminary investigations to third parties subsequent to the first one will not suspend the running of time. For incomplete notices, the 45-day term will start to run from the receipt of additional information or details.
[6] See Presidential Decree No. 86 of 25 March 2014.
[7] Said rules also apply to companies having their registered office in a Member State, if there is evidence of their circumvention.
[8] The considerations in footnote 5 above concerning term suspension apply here, mutatis mutandis.
