ITALY Law and Practice Contributed by: Roberto Bonsignore, Paolo Rainelli, Gerolamo da Passano and Nicole Puppieni, Cleary Gottlieb Steen & Hamilton LLP
8.3 Business Judgement Rule Over the years, Italian courts have grown more hesi - tant to question directors’ decisions or to intervene to assess their merits. Consequently, Italian courts typi - cally refrain from analysing the substance of decisions made by directors in takeover situations. Instead, they focus on reviewing the directors’ conduct and scru - tinising the decision-making process to determine if the directors acted diligently in the interest of the company and its shareholders (as discussed in 8.1 Principal Directors’ Duties ) and based on sufficient information. 8.4 Independent Outside Advice In the case of a tender offer, the board of directors of the target company is required to provide a com - prehensive and well-reasoned opinion regarding the offer and the fairness of the offer consideration. If the offer is made by an insider (such as the controlling shareholder, a director or an executive officer of the target company) or individuals acting in concert with an insider, the board’s opinion must be preceded by a similarly well-reasoned opinion from the target com - pany’s independent directors who have no affiliations with the bidder. Both the full board and the independ - ent directors typically seek legal counsel and engage independent financial advisers to obtain one or more fairness opinions. In related-party transactions (as discussed in 8.2 Special or Ad Hoc Committees ), the committee of independent and unrelated direc - tors typically also seeks support from independent experts and legal counsel when issuing opinions on the transaction’s terms. 8.5 Conflicts of Interest Any director with a vested interest in a transaction (including an M&A transaction) must promptly dis - close this interest to the other directors and the board of statutory auditors. An interested director holding the position of chief executive officer ( amministratore delegato ) must abstain from executing the transac - tion and refer it to the entire board. In such cases, upon disclosing the interest, the board resolution must clearly state the reasons why the transaction is still beneficial to the company. Other directors (and the statutory auditors) have the right to challenge the resolution if the interested director(s) failed to disclose their interest or if the resolution, approved with the
decisive vote of the interested director, was detrimen - tal to the company. Breaches of these duties may render the director personally liable for any resulting losses suffered by the company. Shareholders’ resolutions passed with the decisive vote of conflicted shareholders can also be legally challenged if they are detrimental to the company. If advisers participate despite a conflict of interest or lack of independence, they may be disqualified, and their opinions rendered irrelevant. Depending on the circumstances, such advisers could also be exposed to liability. As most Italian listed companies are controlled by a single shareholder or group of shareholders, a bidder intending to acquire control of a listed company usu - ally begins negotiations with the target’s controlling shareholder(s) before engaging the target’s board of directors, to potentially gain access to selected due diligence materials. Should the negotiations (and the due diligence exercise, if any) yield favourable out - comes, the bidder can proceed to launch a friendly tender offer. 9.2 Directors’ Use of Defensive Measures Under the “passivity rule”, any defensive measure adopted by the target company necessitates share - holder approval. While the target company’s by-laws may grant the board of directors the authority to implement defensive measures without shareholder approval, this practice is highly uncommon for Italian listed companies. Exceptions to this rule include actions carried out in accordance with pre-existing decisions that were already partially or entirely implemented prior to the bid announcement, as well as activities conducted in the ordinary course of business. Efforts to explore alternative bids are not classified as defensive meas - ures requiring shareholder approval. 9. Defensive Measures 9.1 Hostile Tender Offers
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