ITALY Law and Practice Contributed by: Roberto Bonsignore, Paolo Rainelli, Gerolamo da Passano and Nicole Puppieni, Cleary Gottlieb Steen & Hamilton LLP
9.3 Common Defensive Measures Because of the “passivity rule” outlined in 9.2 Direc- tors’ Use of Defensive Measures , defensive strat- egies such as poison pills, dilutive share issuances or the selling of valuable assets (often referred to as “crown jewels”) are not prevalent in Italian takeover bids. 9.4 Directors’ Duties As mentioned in 9.2 Directors’ Use of Defensive Measures , according to the “passivity rule”, the authority to approve defensive measures lies with the shareholders of the target company rather than with the board of directors. This means that the board of directors cannot implement such measures without obtaining prior approval from the target company’s shareholders’ meeting. 9.5 Directors’ Ability to “Just Say No” When a tender offer is launched, the board of direc - tors of the target company is required to provide its opinion on the fairness of the offer consideration and other terms of the offer. However, the decision as to whether or not to tender shares is ultimately left to the discretion of the company’s shareholders. It is important to note that directors are not permitted to enact defensive measures against an announced takeover offer without first obtaining approval from the target company’s shareholders. Conversely, when the board is approached directly (eg, with proposals of business combinations through mergers or asset deals), directors may “just say no” if they deem that the proposed transaction is not in the interest of the company.
tion mechanisms (such as arbitration and mediation) in M&A disputes. 10.2 Stage of Deal Pre-closing litigation often revolves around liability arising from interim arrangements like letters of intent, memoranda of understanding or term sheets. Deter - mining the binding nature of such documents typi - cally involves a detailed analysis of the facts. Express statements declaring their non-binding nature may not definitively influence the case’s outcome, particularly if the parties have progressed significantly in negotia - tions, justifying pre-contractual or even contractual liability, provided that the transaction’s essential ele - ments had been agreed upon. Post-closing disputes commonly stem from breaches of representations and warranties or special indem - nities provided by the seller to safeguard the buyer against specific events. Breaches of representations and warranties constitute the most frequent source of M&A litigation. In public M&A deals, shareholders may bring claims against the bidder after the transaction’s completion (such as regarding the determination of the minimum price of the mandatory tender offer) or, less commonly, against directors for breaching their duties. 10.3 “Broken-Deal” Disputes The COVID-19 pandemic brought a number of new and old issues to the attention of Italian courts relating to the possible suspension or termination of contrac - tual obligations based on various grounds, such as: • statutory force majeure; • termination for supervening impossibility; • the right to obtain a revision of obligations or to withdraw from the agreement for partial impossibil - ity; • termination of the agreement for supervening hard - ship; and • the application of contractual clauses conditioning the buyer’s obligation to complete the transaction on the absence of a “material adverse change” or a “material adverse effect” (MAC/MAE) occurring between signing and satisfaction of all the other conditions precedent to closing.
10. Litigation 10.1 Frequency of Litigation
M&A-related disputes in Italy have traditionally been frequent, but there seems to have been a decrease in the number of new disputes in recent years. Most cas - es involve small and medium-sized M&A deals, pos - sibly because transaction documents in smaller deals are often less sophisticated. There is also a growing trend towards the use of alternative dispute resolu -
665 CHAMBERS.COM
Powered by FlippingBook